Orange Juice would hardly seem to be an important subject for a blog. However, the fact that concentrate orange-juice futures in New York, which soft-drink producers use to hedge against price swings, have quadrupled since 2021, means something serious is going on. On September 9, 2024, the concentrate hit $5.80 a pound, which was the fifth record high in a week.
What the hell is going on?
The problem is that the market for oranges to make the concentrate is very concentrated. (Even if that is bad English, it is also bad news for the industry). Growth of the fruit in Florida, once the world’s second biggest producer, has diminished by 92% in the past twenty years; pests, hurricanes and rising costs are mainly to blame. Mexico and Spain, two of the four major world producers, largely supply the fresh fruit market and that leaves Brazil, which currently accounts for 70% of the world’s production, and has a similar share of the world’s exports.
2024 brought another disastrous harvest in Florida – the worst since before World War II – and the Brazilian producers announced that an ultra-hot flowering season would reduce this year’s crop by 24% compared to last year. In addition, Brazilian farmers face a resurgence of “citrous greening”, an untreatable bacterial disease that turns oranges sour before killing the trees.
Currently, the Sao Paulo plantations have seen no rain for four months, and the drought seems to be getting worse. “Citrous greening” is out of control, with some two-thirds of the trees infected in some areas. Large producers can use insecticides and nets to try and curtail the spread of the disease, but smaller farmers can only afford to root out potentially diseased trees.
In many areas this year’s harvest is already doomed, with little prospect of improvement in the coming few years. New trees take four years to bear fruit but, but even the new trees will be susceptible to the greening disease. The future of the orange market looks dim. Many small farmers have resorted to changing crops, growing sugar cane instead, which further exacerbates the orange concentrate supply problem.
The world’s appetite for oranges, and orange concentrate, show no signs of abating any time soon. In fact, the demand is growing, even though the supply problems have already meant higher prices for your “mojito”. That price increase will only get worse in the coming months and, possibly, years. The richer countries, and richer consumers, will be able to absorb worldwide shortages in the short term, because concentrate producers will continue to supply their more profitable markets first. However, it is difficult to see how the crisis in the supply chain won’t affect even those markets in the near future.
The situation reminds me a little of the blog I wrote recently on the gradual demise of the world’s coffee bean crop, due to climate change. We are fighting two different, but related issues at the same time with both coffee and oranges, along with many other agricultural products; climate change and increasing demand. We seem to be somewhat oblivious to the consequences of ignoring the relationship between these two issues.
It seems like we are facing the very real possibility of no more oranges and no more coffee. I somehow don’t think my mojito will taste quite the same if it is made with apple juice!
Coffee growers have anticipated their supply issue a little quicker than orange growers, although their job has not been made harder by a virulent disease. Coffee growers are developing crops that can thrive in warmer climates, and they are moving some production to higher altitudes as the planet warms. Orange growers seem to be behind in this adaptive trend. However, as I said, we may soon be faced with no coffee and no mojitos.
