orange juice

International OJ Market Sees Some Positives

Tacy CalliesGlobal Perspectives

By Marcos Fava Neves


Marcos Fava Neves

The third Fundecitrus estimate of the season for the Brazilian orange crop on Feb. 11 was just shy of 400 million boxes. It is 3.13 percent larger than the last estimate in December, and 9 percent larger than the initial estimate published in May.

Fruits are bigger and heavier, reaching 247 fruits per box. This is attributed to more rain improving late varieties and better treatment of the orchards. The droppage rate, now at 17.2 percent, has decreased 1 percent from original projections.

Almost 97 percent of Brazil’s orange crop has already been harvested, so the final number for the season will be very close to the current estimate of 397.7 million boxes.

Farmers are hiring back people in Brazil. In 2017, 51,500 citrus workers helped move the economies of the small cities forward.

Big output with reasonable prices is likely bringing one of the highest incomes to Brazil’s citrus growers, making it possible for them to pay debts and improve orchard conditions. However, I don’t see movement for expansion since it is commonly believed that this situation is unique. Growers are aware of the problems that the orange juice chain faces on the consumption side, and they are facing cost increases due to diseases.

Current production levels are expected to take frozen concentrated orange juice (FCOJ) inventories owned by the three Brazilian companies to almost 255,000 tons by June 30, 2018, which is almost 140 percent higher than the previous year. This volume considers inventories in Brazil and importing countries.

Even with this growth, the inventory will be one of the smallest since the numbers were made public. It is only enough for 12 weeks of consumption, so the situation is still far from comfortable. The inventory is less than one-third of what it was in 2013. In the United States, supply is 20 percent lower than it was in the previous season.

Exports from Brazil for the period of July 2017 to January 2018 were 651,000 tons — almost 20 percent higher than the previous year. Most is going to help the U.S. supply after Hurricane Irma reduced Florida’s citrus production. Exports to the United States are 34 percent higher.

According to CitrusBR, the yields are now estimated at 282.5 boxes (40.8 kilograms each) for a ton of FCOJ. The average figure for the last five years was 279.2 boxes. Markets are stable, and this higher Brazilian production doesn’t give reasons for price decline since there are a lot of uncertainties of what will come next.

On the consumption side, we’ve seen a reversal in the United States, with an increase of 1 percent in January. The uptick may be due to the bad flu season and beliefs among consumers about orange juice’s health benefits, including vitamin C. While there is a lot of controversy on this subject among nutritionists and media influencers, some consumers are returning to orange juice, showing confidence in the beverage. This may give insights for marketing.

In the international economy, the news is good. Global gross domestic product is expected to increase by 4 percent. This will help to drive food and juice consumption up. There is more confidence in consumers and businesses, and a better economic period is beginning.

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).

Share this Post