Orange supply, price squeeze set for relief?

Up until 2004, prices for Florida bulk frozen orange juice were hovering around the $1 per pound mark. In 2005-2006, prices rose to $1.52, and the current season to date price has shot up further to $2.15.

The price squeeze has also been felt by consumers, who have seen prices per gallon increase by around 17 percent in the past year alone, to reach around $5.21 in December.

Such widespread price hikes are indicative of a distinct shift in supply, with a recent oversupply situation suddenly overturned during the past three years. The industry was particularly hard hit by the hurricanes in the 2004-2005 season, which not only immediately reduced crop yields, but also resulted in the spread of diseases, such as citrus canker.

Canker eradication efforts - involving the destruction of large areas of trees - further contributed to reducing production. And acres were also lost to development in Florida, which is the nation's largest citrus-producing state, but also a fast growing area.

Production was also impacted after a previous oversupply situation led to lower prices and slowed down planting. In addition, Brazil - a major player in US orange supplies - also experienced a tightened supply situation, resulting in fewer imports.

These factors combined led to total Florida orange production falling from 242 million 90-pound boxes in 2003-2004 to 150 million boxes in 2004-2005 and 148 million boxes in 2005-2006. Production forecasts for the current season are lower still: 140 million boxes. Prior to this period, orange production was set at an average of around 220 million boxes.

But despite a tight market and an uncertain future, Florida retains a good production potential, according to some industry sources.

"Although our production will not be as big as we're used to, we're still capable of producing a fair sized crop," said Dr Mark Brown, an economist with the Florida Department of Citrus.

"It is very likely that in the coming year we will see some moderate supply increases, which would moderate prices. But it will take a while to get things straightened out. We're coming out of a tight supply situation - we won't be seeing supplies up overnight," he told FoodNavigator-USA.com.

According to Brown, the situation remains difficult to predict, as everything depends on next year's production. But even with a bigger crop, prices will still remain "strong", he said.

So far, price increases have largely been passed on to consumers, who have born the brunt of an $0.85 cent increase in FOB prices experienced last year. If prices continue to go up - which may well not happen - consumers would again likely bear the burden. So far, higher prices and lower supplies have together contributed to a dip in sales of orange juice at retail level.

But Andrew Meadows with the Florida Department of Citrus said the industry is currently "in rebound".

"It's no secret that prices for orange juice have been rising over the past few years. I don't know when that will plateau… maybe sometime next year. But I've heard that the crop could get up to 170 million boxes next year," he told FoodNavigator-USA.com.

For more information on the citrus production forecasts, click here​.