Cold Snap Brings OJ Price Worries
Farm prices for Florida citrus have been rising since January 2010 following a historically long cold snap that struck much of the state for two weeks that month.
Although freezing weather appeared to have little effect on the 2009-10 citrus crop, by the end of the season in June buyers had bid up farm prices in anticipation of shortages. That scenario repeated itself in December, when at least three freezes struck the state's citrus-growing region.
Now many citrus growers worry that too much of a good thing, even higher prices for their fruit, may hurt them in the long run.
If the higher farm prices lead juice processors -- who buy 95 percent of Florida oranges and about 60 percent of its grapefruit each year -- to raise retail prices on juice products, consumers could react by buying less juice. If orange juice demand falls too far, America's traditional morning beverage may find it has priced itself off the breakfast table, leading to a farm price collapse in future years.
By January 2010, Florida citrus appeared to be pulling up from a similar spiral of farm and retail price spikes followed by declining market share. At the time, U.S. orange juice sales had risen for nearly a year.
But then retail OJ prices began rising again in the spring, and sales volumes started back down.
By December, retail OJ sales had fallen 8 percent, according to the Florida Department of Citrus in Bartow. That was actually an improvement from double-digit percentage drops in the preceding two months, but it still represented the 11th straight monthly sales decline.
The decline appeared to slow because U.S. consumers adjusted to the shock of rising prices that began in January 2010, said Bob Norberg, an economist and deputy executive director at the Citrus Department. Although the average OJ retail price by the end of last year rose to $5.68 per gallon, 5.8 percent higher than a year earlier, that price had held there since July.
The retail price lull was not expected to continue in 2011, however.
The Citrus Department projected crop damage from the December freezes would reduce OJ inventories in Florida, which supplies the lion's share of the U.S. market, by 7 percent at the end of the season in June.
It had projected a mere 0.4 percent decline in OJ stocks at the season's beginning in October, which was expected to lead to stable farm and retail prices.
A smaller 2010-11 Brazilian orange crop than originally projected also will add upward momentum to U.S. farm and retail prices, said Bob Norberg, an economist and deputy executive director at the Citrus Department. Brazilian OJ stocks are projected to decline 16 percent this year.
In yet another sign of history repeating itself, the Coca-Cola Co. announced up to an 8 percent price increase on Minute Maid juice products this year. Norberg said Tropicana and other brands would follow.
The average increase in the OJ retail price at U.S. supermarkets should be less than a double-digit percentage, said Norberg, who declined to be more specific.
Florida growers also continue to battle the unchecked spread of citrus greening, a bacterial disease that threatens the viability of the state's largest agricultural sector.
The deadly bacterial disease first surfaced in Florida in 2005, and it took only about two years before it was found in every citrus-producing county in the state. Scientists estimate greening has infected 18 percent of the state's citrus groves, a figure that will double every year.
Polk County leads the state's citrus-producing counties with 83,471 acres of commercial groves in 2010. Polk historically leads the state in annual citrus production, including the 2009-10 season, when local commercial growers produced nearly 27.9 million boxes.
