What Will Come from Brazil?

Tacy CalliesCitrus, Global Perspectives

By Marcos Fava Neves

On the supply side, Florida expects 77 million boxes of oranges this season. Valencias account for 46 million boxes, while non-Valencia represent 31 million boxes. With reports of smaller fruit, these figures may drop before the end of the processing season.

Global Perspectives
Marcos Fava Neves

In general, the Florida weather has been favorable this season, allowing for a good recovery from last year’s small crop. Due to the recovery, Brazilian shipments of frozen concentrated orange juice (FCOJ) to the United States dropped almost 30 percent during the first six months of the current season.

In Brazil, weather was also a factor after some drought in January. The current crop is estimated to finish at 284.88 million boxes (3.3 percent larger than the last forecast and 28.5 percent smaller than the 2017–18 season). Brazil’s first estimate of the 2019–20 season will be announced on May 10. This figure will steer decisions for the upcoming season.

As of February, the orange juice futures market was at around $1.20 to $1.30 per liber, falling 10 percent from the previous month and down 15 percent from this time last year. In Europe, FCOJ was around $2,200 per ton.

CitrusBR expects carryover juice inventories in Brazilian companies to be approximately 200,567 tons by June 30. In June of 2017, the amount was much higher at 342,000 tons.

The U.S. Department of Agriculture (USDA) announced its estimate for Brazil for the 2019–20 crop will be 330 million tons (290 million tons processed, 40 million tons fresh). Of the 290 million tons for processing, 215 million tons would be for FCOJ and 74 million tons for not-from-concentrate (NFC). The amount of 1,135 million tons of juice would be produced, including 843,000 tons of FCOJ and 292,000 tons of NFC. USDA expects Brazil to increase its exports by 11 percent.

Zenith announced some numbers about juice consumption in 86 markets that it follows. In 2018, there was growth of 0.9 percent, reaching 38.5 billion liters. From 2013 to 2018, it fell 0.1 percent per year.

However, the global juice market is expected to grow 1.1 percent per year from 2018 to 2023 in value and 1.3 percent in volume. The market is predicted to reach 41 billion liters in 2023. It is important to note that all juices are included in these figures. So it does not necessarily mean that orange juice consumption will grow. Orange juice growth has not been seen in other research that annually looks at the 40 most relevant markets.

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For orange juice, there has been decline in mature markets but growth in emerging markets. As an example, Brazil saw its exports of juice to China grow 33 percent in one year, amounting to 40,000 tons valued at $80 million. There is a tax barrier linked to temperature that Brazil will try to eliminate. Exports are still being transported in drums with higher logistical costs than vessels. Continued growth in exports to China could help Brazil’s citrus industry.

Marcos Fava Neves is a professor of business in Brazil at the University of São Paulo and the Fundação Getulio Vargas São Paulo School of Business Administration.