Despite smaller crop, juice-type orange prices seen weaker

by Ron Sterk
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KANSAS CITY — Lower production of all types of oranges in 2008-09 is expected to support fresh orange prices, but prices paid to growers for juice-type oranges still are forecast to decline.

In its latest Fruit and Tree Nuts Outlook, the U.S. Department of Agriculture forecast stronger prices for fresh oranges because of sharply lower production in California but limited, if any, increase in juice-type orange prices because of continued weak demand.

In October the U.S.D.A. initially forecast 2008-09 (October-September) Florida orange production at 166 million 90-lb boxes, down 2% from 2007-08 but up 29% from the hurricane-reduced 2006-07 crop. When broken down by type, production of Valencia oranges, the main variety used for juice, was forecast at 78 million boxes, down 10% from 2007-08.

At the same time, orange juice yield was forecast by the U.S.D.A. at 1.59 gallons per box, the lowest in three years.

"While this generally would indicate a greater demand by processors for oranges to make enough juice to meet their needs, very high juice stocks coming into the new season, along with sluggish demand for orange juice by U.S. consumers, may result in weak demand for Florida’s oranges and could put downward pressure on grower prices," the U.S.D.A. said. About 95% of Florida’s orange crop is processed into juice on average.

The U.S.D.A. forecast 2008-09 (October-September) domestic orange juice consumption at 4 gallons per person, up 5% from 3.8 gallons last year. Still, the forecast amount trails average annual juice intake of 4.66 gallons the previous eight years by 14% and the average for the 1990s of 5.31 gallons by 22%. The slight bump in consumption was forecast on the possibility processors might reduce retail prices, the U.S.D.A. said.

Orange juice imports in 2008-09, mainly from Brazil, are forecast at 285 million gallons, down 31% from 2007-08 and the least since 223 million gallons in 2003-04.

Meanwhile, frozen concentrated orange juice stocks were at multi-year highs. In its latest Cold Storage report, the U.S.D.A. estimated supply on Oct. 31 at 1,085 million lbs (equal to 110 million gallons), up 86% from a year earlier. Total orange juice supply in 2008-09 is forecast by the U.S.D.A. at 1,980 million gallons, a four-year high, despite lower juice yield per box and lower juice imports.

Frozen concentrated orange juice futures prices in New York sank to new four-year lows last week, pressured in part by ideas that the weak economy would further erode already declining orange juice consumption, which has suffered in recent years from high prices and negative consumer perceptions because of high carbohydrates.

After reaching its highest point of 2008 in September, the index of prices received by fruit and tree nut growers declined 2% in October as new season crops entered the market, the U.S.D.A. said. Prices for all types of oranges averaged $4.22 a box in October, down $1.49, or 26%, from September and down 56% from $9.60 in October 2007. The average price paid for fresh oranges in October was $10.12 a box, down only 10c from September and down 31% from $14.59 a year earlier.

Prices for oranges sold fresh, mostly grown in California, are expected to be supported by sharply lower production in 2008-09. Total orange outturn in the state was forecast in October at 44 million 75-lb boxes, down 32% from last year and the smallest crop in a decade. By type, production of navel oranges, the primary variety sold fresh, was forecast by the U.S.D.A. at 32 million boxes, down 34% from 2007-08. And fruit per tree was expected to be the lowest in 20 years.

"As the major U.S. producer of oranges for fresh use, California’s smaller crop will mean tighter supplies at retail markets this season," the U.S.D.A. said. "Demand should be strong for the 1.2 million tons of navel oranges expected to be produced in California. That should translate into higher prices for growers and at the retail level."

The U.S.D.A. will update 2008-09 production forecasts for oranges and other citrus products in its Dec. 11 Crop Production report.

This article can also be found in the digital edition of Food Business News, December 9, 2008, starting on Page 28. Click here to search that archive.

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