By Marcos Fava Neves
An annual report on global orange juice consumption was recently completed. This report is based on data from CitrusBR (Brazilian Orange Juice Exporters Association), Tetra Pak, Euromonitor International, Planet Retail, the U.S. Department of Agriculture (USDA) and others. The report was first published in 2004. Decline in orange juice demand has been seen since then.
The report looks at the 40 largest markets that are responsible for almost 100 percent of juice consumption. All data are converted to frozen concentrated orange juice (FCOJ) equivalent, to make comparisons easier.
MORE LOSSES THAN GAINS
In 2018, the 40 markets consumed a total of 1.85 million tons of juice. This represents a loss of around 550,000 tons of consumption since the report was first published in 2004. However, what provided some hope is that in comparing the 2018 figure to the 2017 figure, the decline was 0.81 percent. This is a smaller rate of decline than what has occurred over the last five years.
The largest decline since the report was first published 15 years ago was seen in the United States. Consumption went from 1 million tons to 576,000 tons, representing a loss of 42 percent. Another major orange juice consumer that contributed to the decline was Germany, falling almost 45 percent from 250,000 tons to 136,000 tons. Consumption in France, the third largest market, had a much smaller decline of 15 percent, dropping from 152,000 tons to 130,000 tons. The consumption declines in the United States, Germany and France total almost 560,000 tons.
In the emerging markets, China grew from 46,000 tons consumed to almost 130,000 tons, making the country the world’s fourth largest orange juice consumer. Brazil went from 40,000 to 80,000 tons, but the growth in emerging markets did not compensate for the huge drop in developed markets.
On the supply side, a recent USDA report shows that 2018–19 world production of oranges will reach 54.3 million tons, mostly justified by increases in Brazil and in Florida after Hurricane Irma recovery. Brazil will produce 20.2 million tons, a growth of 26 percent thanks to better climate conditions. China will produce 7.2 million tons, Mexico 4.6 million, Egypt 3.4 million, Turkey 1.8 million and South Africa 1.6 million.
The USDA expects that around 2.2 million tons of FCOJ equivalent juice will be produced, which is 36 percent higher than the previous season. Brazil will produce 1.4 million tons, Florida 327,000 tons and the European Union 106,000 tons. This will bring orange juice stocks to a higher level, since consumption is around 1.8 million tons.
Since the level of inventories after the 2018–19 crop got lower in Brazil, probably part of this excess juice will be held by Brazilian industries. Other contributing factors are much lower interest rates in Brazil and the expectation for a smaller crop in 2020–21 due to the biannual cycle of orange production.
Two subjects that have been in the media recently, which I will discuss in my next column, are the European Union-Mercosur trade agreement and a possible U.S.-Brazil trade agreement. Both will affect juice trade. By my next article, there will be a clearer vision of these trade agreements, their speed and possible impacts. Stay tuned for more.
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.