October 2022 Update on Orange Juice

USA

The USDA is expected to release the first official forecast on production from the forthcoming 2022/23 orange crop in Florida on 12 October. (forecast update below)

Hurricane Ian

Conditions in Florida have changed significantly since hurricane Ian hit Florida on 28 September.?Even before the category 4 storm made landfall, Florida had been receiving excessive rainfall and all of the rivers, lakes, and reservoirs were full. Hurricane Ian then delivered a further 20 inches of rain in the north which left the water with nowhere to go. As a result, there has been unprecedented flooding across the state. Not all the groves are flooded, but areas in the immediate vicinity of lakes and rivers are underwater.

This will mainly impact NFC production, because only limited volumes of FCOJ are produced in Florida these days, and this will cause greater demand from both Mexico and Brazil

Production expectations

Before the hurricane, the industry was expecting the USDA to release a figure of around 40 million boxes. “We are hearing anywhere from the low 20s (Confirmed on the update image above) to low 30s (million boxes) at the moment, but it’s just too early to get a good idea,” commented one US analyst. “Cleaning up and assessing will take time.” By mid-September, the fruit was well set and fruit per tree was also good in most areas. The fruit count was slightly lower in the areas affected by the freeze event in February and the very dry weather that followed.

Futures

The frozen concentrated orange juice (FCOJ) futures market has climbed over the past three weeks, and this has been for a number of reasons. Firstly, CitrusBR’s announcement that Brazil would not add to next year’s inventories with the production from the current crop was reported as “a shot across the bows” for the market and encouraged traders to take a closer look at all global inventories. Florida stock levels have come down considerably, as well as total US inventory. But demand is lower too, so when looking at stocks/use, they are not as dire. Following this, there were reports on the global citrus outlook at the ICBC conference in September. The report from Mexico stated that their orange crop could be 20% lower due to drought and that processors will have to compete with the fresh market for the remaining fruit - possibly leading to a further reduction in processing numbers, percentage-wise.

Mexico

The 2022/23 orange harvest in Mexico will begin at the end of October. Local producers reiterate the sentiment from analysts in the US that there will be an undersupply of juice this season. This is not good news for the global market given that Mexico is a good source of high-ratio produce, which most end-users are short of. Current FCOJ stocks are committed and there is no additional availability until the new processing season begins. Demand is strong and this is expected to continue into the forthcoming season.

Brazil

UPDATE ON PRODUCTION FROM BRAZIL’S 2022/23 ORANGE CROP

Fundecitrus has released a new forecast on production from the current 2022/23 orange crop in Brazil. The projection is now at 314.09 million boxes, down 0.9% or 2.86 million boxes from the 316.95 million boxes projected in May this year. The reason for the reduction is the low rainfall over the past few months. While the current scenario is better than last year, the average rainfall in the citrus belt between May and August 2022 was 84 millimeters, which is 48% below the climatological normal (1981-2010). The lower rainfall has affected fruit growth/sizing and Fundecitrus estimates that it would now take 261 oranges to fill a box (40.8kg), compared with the initial projection in May of 258 oranges to fill a box. The average projected fruit drop rate for all varieties has been lowered to 19.8% from 20.0%. The survey notes that the 2022/23 harvest started later this season due to the higher concentration of fruit from the second bloom. The next forecast from Fundecitrus will be released on 12 December 2022, then 10 February 2023, and a final estimate will be made on 10 April 2023.

Ratios are still very low, with the Pera variety registering at around 8-10 ratio in the south and 14-17 ratio in the northern growing regions. While the crop is around six weeks behind usual due to a late bloom last year, the lack of high-ratio supplies is still seen as a problem and is likely to still be a problem at the end of the crop. This would mean there will be only limited volumes of high-ratio supplies to blend with the early production from the 2023/24 crop.

Brazil Pricing

Producers are likely to be keen to increase price levels further due to rising energy costs. Nevertheless, analysts suggest that uptake on the global market has returned to pre-Covid levels, after spiking during the pandemic. The latest A C Nielsen report shows that consumption in the US in the four weeks to 10 September is down 10% on last year. In addition, analysts say the impact of higher inflation in Europe could have a negative impact on consumption there. Orange juice prices in the supermarket are still fairly low, but these prices are based on contracts for bulk juice fixed last year. For this reason, analysts expect prices in the supermarket to spike from January 2023. If consumption does shrink in Europe this could keep a lid on FCOJ price levels, particularly if stocks in Brazil begin to build beyond current expectations. At the same time, there is not enough NFC orange juice on the market at the moment and with the recent hurricane in Florida likely to draw down the supply there, the US industry will look to Brazil and Mexico to supplement the dearth of single strength supplies. According to Secex, Brazil shipped 175 900 tonnes of orange juice in July and August 2022, an increase of 8% compared with the same months last year.

Next season

The bloom for the 2023/24 season in Brazil has begun in some areas, but it is still far too early to give any indications on the outlook for next season, say analysts.