Weather Forecast

Close

Business

A healthy orange hangs on a tree at the Peterson Groves in Vero Beach, Fla., on Nov. 11, 2015. Mark Elias / Bloomberg

Orange farmers wish you were drinking up their huge crop

Orange farmers in the U.S. and Brazil are recovering from a deadly disease that decimated fruit farms across the Americas over the past decade. But there's a catch: With production on the rise, prices are falling.

In their battle against citrus-greening disease, growers are reinvesting in more-resistant tree varieties, strengthening existing trees with nutrients and making sure young trees are disease-free for at least two years. The result: Bigger fruit and a rebound in the number of oranges produced.

But the larger crop has undercut the price of orange juice. Futures have lost 38% in the past year, the worst performance among 34 major commodities tracked by Bloomberg. Meanwhile, the battle with citrus-greening disease is costly, and demand for the juice that PepsiCo's Tropicana says puts the "good in morning" has been sliding.

At current prices for futures, "nobody in the world is making money," said Thomas Spreen, a retired agricultural economist at the University of Florida in Gainesville, who has worked for the Florida Department of Citrus.

Dan Richey, a third-generation Florida grower with 400 acres of oranges, isn't optimistic about the short-term outlook. The battle against greening disease continues to be challenging and costly, he said by telephone.

"We don't have a silver bullet, but there are some solutions," he said.

Overproduction is becoming a major issue. "Brazil has a very large crop and global inventories are building up," Richey said.

The amount of orange juice produced worldwide in the 2018-2019 season, ending Sept. 30, is forecast to rise 36% year-on-year to 2.17 million metric tons, the highest level in eight years, according to the U.S. Department of Agriculture.

From October through July 22, U.S. retail sales fell 5.8% from a year earlier to 307.3 million gallons, the Florida Department of Citrus said in a report last month. That follows an 18-year period in which demand fell by almost half as calorie-counting baby boomers and millennials turned to a growing number of beverage options.

There's "a challenging scenario for orange-juice futures in this year's second half," said Andres Padilla, analyst for Banco Rabobank International in Sao Paulo, by telephone. "Brazil's harvest has already started with the outlook of being a big and good quality crop, but demand figures continue to be disappointing."

Even with greening disease still at issue in Brazil groves, the nation's farmers are improving yields amid investments in technology. The 2019-20 crop is set to reap 36% more fruit than a year earlier while it will be 21% above the 10-year average output, according to industry foundation Fundecitrus.

For example, Emerson Fachini has kept the incidence of greening steady at less than 1% over the past decade on his 111 acres (45 hectares) in the Palestina municipality of Sao Paulo state, while tripling yields using irrigation and planting more trees.

"We also use irrigation to fertilize trees — it boosts the grove's health," he said. "We see less fruit drop even from the trees affected by greening."

In Florida, the second-largest regional juice producer after Brazil, farmers harvested 59% more oranges than in the previous season, when they faced damages from Hurricane Irma. The increase, though, is coming at a high cost, said Ray Royce, executive director of the Highlands County Citrus Growers Association.

"The deal with greening is that we have seen a tremendous escalation in production costs," Royce said by telephone.

The grower's association, which produces as much as 14% of the state's crop, collected between 9 million to 9.5 million 90-pound boxes this season, and should replicate the output in the season starting Oct. 1, if not "a little better," Royce said. Last year, the group collected about 6 million boxes.

In the past two weeks, Florida's groves got enough rain, and as of right now, trees "are in very good shape," said Donald Keeney, senior agricultural meteorologist at Maxar, a U.S.-based weather consultant. "As long as they don't get a hurricane, more ample rain forecast for the next two weeks should improve conditions even further."

The USDA will release its initial Florida crop forecast of the 2019-20 season on Oct. 10.

This is article was written by Marvin G. Perez and Fabiana Batista, reporters for The Washington Post.