USDA OJ Purchases Set Precedent

Ernie NeffOrange Juice

OJ

Marisa Zansler, economist for the Florida Department of Citrus, recently gave the Florida Citrus Commission an update on U.S. Department of Agriculture (USDA) Section 32 purchases of orange juice (OJ). A summary of her report follows.

The purpose of USDA Section 32 purchases is to help alleviate depressed markets for domestically produced agriculture products. The USDA Agricultural Marketing Service also put trade mitigation programs in place to support agriculture products impacted by unjustified retaliation by foreign nations. Uncertainty in the wake of Hurricane Irma in 2017 led to surplus inventories, and these purchases would help that.

In August 2019, Florida Citrus Mutual petitioned to include not-from-concentrate (NFC) OJ in a trade mitigation and Section 32 purchase for the first time. This resulted in $126 million in USDA purchases of OJ awarded to relieve almost 29 million pounds solids of domestic single-strength OJ and frozen concentrated OJ (FCOJ) inventories. It is the largest in recent history and sets a precedent.

Total dollar amounts for 2019 and 2020 purchases were $81.9 million in trade mitigation purchases and $44.2 million in Section 32 purchases. These are scheduled for delivery between July 2020 and February 2021. Of these purchases, at least 53 percent is NFC only and 30 percent are NFC and FCOJ combined.

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About 33 percent of USDA purchases were directly sourced and bottled by Florida processors. Indirect USDA purchases were packaged by out-of-state facilities, though the concentrated juice source may be Florida processors.

When Florida Citrus Mutual sought these purchases, pre-COVID-19 pandemic, Florida inventories exceeded demand. The purchases were initially projected to support producer prices by as much as 10 percent with a lag effect. While increased consumer demand during the pandemic served to stabilize NFC inventories, the purchases provided short-term relief. See a report about recent strong OJ sales.

Source: Florida Department of Citrus

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