By Marcos Fava Neves
In May, the U.S. Department of Agriculture (USDA) estimated the Florida orange crop at only 68 million boxes. The final number for the Brazilian 2016–17 crop was released by Fundecitrus on April 10 and was 245.31 million boxes.
It is relevant to note an important point for the orange juice chain participants in Florida and São Paulo, the two major states of production. This is the second year of the joint effort between Fundecitrus, Markestrat and two public universities (University of São Paulo and Universidade Estadual Paulista) to have transparency and rationality in providing one crop estimate for Brazil. The first announcement of the Brazilian 2016–17 crop was made live on May 10 of last year, with information available in Portuguese and English for all interested parties.
ESTIMATE PROVED ACCURATE
The initial number (May 10 estimate) was only 0.17 percent different from the final number, almost one year later. The estimation process is gaining confidence and is a valuable source of information for American citrus producers and communities. Brazil is proud to be involved and to have the methodological and institutional coordination of this effort. The citrus chain is much more transparent, since there are now two numbers (USDA and Fundecitrus) to follow.
The very small joint crop (Florida and São Paulo) was confirmed, with less than 314 million boxes. This puts a lot of pressure on the supply side and lowers the stock levels, as I anticipated in my last column. This supply-and-demand situation kept prices in Europe around U.S. $2,700 to 2,800 per ton (a high level), which I assume will continue.
With the lack of supply, Brazilian exports are shrinking. Comparing March of 2017 to the same month of 2016, exports dropped from U.S. $163.9 to U.S. $112.4 million (31.4 percent less). Looking at the performance of the first three months of 2017, exports came down around 30 percent, from 671 to 471 thousand tons. Value also went down from U.S. $570 to U.S. $383 million. There is definitely a smaller amount of cash entering the Brazilian orange juice chain.
Even if Brazil has a larger 2017–18 crop, it will not be able to recover stock levels, and global supplies will be tight for the coming years.
I am intrigued by another announcement of demand decline in the United States coming from Nielsen. Consumption data shows a 7 percent decline in March 2017 when compared to the same period in 2016. Prices went up by 4.7 percent, reaching approximately U.S. $1.81/liter. But industry sales came down, from U.S. $245.99 million to U.S. $239.17 million.
Why is consumption declining so fast? We need some further hypotheses to investigate the consumption decline. Since economic indicators are better, the launching of new beverages’ effect should be the same. Some research is coming out to alleviate the issue of juice consumption and obesity, and we didn’t have a price increase (removing inflation) that would scare consumers.
So, we come to one of the top questions in our business: What else is destroying orange juice consumption?
Marcos Fava Neves is a professor at the University of São Paulo (Brazil), international adjunct professor at Purdue University (Indiana) and author of “The Future of Food Business” (World Scientific, 2014).
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