Orange juice futures have soared to a record high of $3.03 per pound, as the US Department of Agriculture (USDA) slashed its forecast for the Florida orange crop by 3.3% due to the impact of storms and diseases. Florida is the largest producer of oranges in the US and a major supplier of orange juice to the global market.
Storms and Diseases Devastate Florida Oranges
The USDA estimated that Florida will produce 44.5 million boxes of oranges in the 2022/23 season, down from 46 million boxes projected in June. This would be the smallest crop since 1943, when the state harvested 42.2 million boxes. A box weighs 90 pounds.
The main reason for the lower forecast is the damage caused by Hurricane Ian, which hit Florida in late September and brought strong winds and heavy rains that knocked down fruit and flooded groves. The storm also increased the risk of citrus greening, a bacterial disease that reduces fruit size and quality.
Citrus greening has been plaguing Florida’s citrus industry for more than a decade, causing production to decline by more than 70% since its peak in 2003/04. The disease is spread by a tiny insect called the Asian citrus psyllid, which feeds on the leaves and stems of citrus trees.
The USDA also reported that fruit drop rates were higher than normal due to dry weather conditions earlier in the season, which stressed the trees and made them more susceptible to pests and diseases.
High Demand for Orange Juice Amid Pandemic
While supply has been shrinking, demand for orange juice has been rising, as consumers seek healthy products amid the coronavirus pandemic. Orange juice is rich in vitamin C, which is believed to boost immunity and prevent infections.
According to Nielsen data, retail sales of orange juice in the US increased by 7.8% in volume and 9.8% in value in the 52 weeks ending July 10, compared to the same period a year ago. The average price per gallon rose from $5.17 to $5.40.
Orange juice consumption has also been supported by the reopening of restaurants and hotels, which were closed or restricted during the lockdowns. The food service sector accounts for about 20% of the US orange juice market.
Outlook for Orange Juice Prices
Analysts expect orange juice prices to remain high in the near term, as supply remains tight and demand stays strong. However, some factors could limit the upside potential or trigger a correction.
One factor is the weather in Brazil, the world’s largest producer and exporter of orange juice. Brazil is expected to harvest a bumper crop of 388 million boxes of oranges in 2022/23, up 14% from the previous season, according to Fundecitrus, a Brazilian citrus research organization. This could increase the global supply of orange juice and ease some of the pressure on prices.
Another factor is the exchange rate between the US dollar and the Brazilian real. A stronger dollar makes Brazilian orange juice cheaper and more competitive in the international market, while a weaker dollar makes it more expensive and less attractive.
A third factor is the consumer behavior and preferences. As the pandemic eases and vaccination rates increase, consumers may switch to other beverages or reduce their consumption of orange juice. Orange juice also faces competition from other fruit juices and drinks that offer more variety and innovation.