Orange squeeze - Dip in Florida crop puts strain on juice market

Published: Friday | October 20, 2006 Comments 0

Susan Gordon, Business Reporter

Peter McConnell of Tradewinds Citrus Ltd. stands in a field of sorrel.

Jamaica's citrus producers have warned consumers of a likely sharp spike in the price of the orange juice and drinks they process in face of a slump in Florida's orange crop that is driving up the price for the imported frozen concentrate that forms the base of their product.

"There's a pull factor on prices - sugar, electricity and a lot of the ingredients have gone up," said Paul Williams, chairman of Citrus Association of Jamaica.

"There's a jump in concentrate and it would have an effect on the domestic market because Jamaica doesn't satisfy its own need."

The failure of Jamaican orange orchards to rapidly recover from the deadly citrus Tristeza disease, which hit the island several years ago or for farmers to replant dormant fields is not helping the local industry, processors and agricultural officials say.

"We've been advised by Belize .... that we can expect a 25 per cent increase in the cost of concentrate," said Peter McConnell, CEO of Tradewinds Citrus Ltd, a major grower and one of two large processors of orange juice here.

"It is going to cause prices to go up for citrus products," he added.

The warning by Belizean suppliers of frozen orange juice concentrate of the imminent price movement came after the U.S. Department of Agriculture last week forecast that Florida's orange production for the 2006-2007 season, a 135 million, would be down nine per cent on the previous year and the lowers since 1990.

Said Williams: "A Belize movement in prices will affect prices of fruit drink", but he did not elaborate on the likely pass through effect on shelf prices.

Initial forecast for the entire U.S. orange crop was projected a 7.89 million tonnes, a dip of 11 per cent in the previous season.

In the the case of Florida, the crop estimate is 44 per cent lower that the final take-off for the 2003-2004, the last year the state had a 'normal' crop, before its orange groves were badly-hit by hurricane.

In the face of the uncertainty, frozen orange juice futures for November delivery climbed a week ago by 27.5 U.S. cents or approximately 17 per cent, to close at US$1.923 a pound on the New York Board of Trade.

"1990 was the last time we've seen prices this high," said McConnell, whose products are sold under the Tru-Juice brand. "The negative is that higher price for citrus you can expect the prices of orange juice to go up."

Jamaica's own citrus production has been on the decline for several years, dipping in 2005 by 4.4 per cent 125, 635 tonnes, with exports falling to 2,375 from nearly 8000 tonnes at the start of the decade. Most of the Jamaica's export is in the form of fresh fruit.

With declining production Jamaica has imports between 540,000 gallons and 650,000 gallons of frozen orange juice concentrate annually from its CARICOM partner Belize, the the free trade bloc's biggest grower of citrus.

With production down in Florida and prices rising the Belizeans are signalling that their concentrate, which land here at between US$11.50 and US$13 a gallon will have to rise.

Part of the problem facing the Jamaican industry is that the country has not aggressively redeveloped in fields after it was hit by the Tristeza virus.

For instance, in 2004 Jamaica had a little over 20,000 acres of operating citrus groves, plus approximately 1,700 acres of unproductive fields, while a major government-sponsored replanting project has lagged, mostly because of the inability of farmers to to find the collateral to back loans and to meet an initial interest rate of 11 per cent, which was subsequently lowered by two percentage points.

In fact, by the end of 2005 when a five-year project to replant nearly 7,000 acres of citrus should have been completed, farmers had managed to replant only 2,000 acres.

This government spearheaded project was to have been financed primarily from a US$9.9 million loan from the Barbados-based Caribbean Development Bank. But a portion of the loan has since been cancelled.

"At 2004 we saw the cancellation of US$3 million because we were paying interest on funds not been utilised," said Dr. Florence Young, who oversees the replanting programme at the island's agriculture ministry.

Under the revised replanting target, the government now hopes to have about 3,800 acres of renewed groves by the end of next March.

Tradewinds' McConnell, however, was one of the few operators has been aggressive in replanting its citrus fields, long anticipating the possibility of price hikes for imported frozen concentrates and wanting to have as much of its own production as possible.

"We originally had 27,000 acres of citrus," McConnell said. "We have replanted 24,000 acres at a time when no-one else was planting because prices were low. I had predicted that the pendulum would swing, and now it has."


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