Juice Imports, Market Prices, and Cost of Production

2020 Florida Growers’ Institute

Ariel SingermanAssistant Professor

Citrus Research and Education Center

45,000

95,000

145,000

195,000

245,000

Boxe

s (1,

000)

Orange Production in Florida

Source: USDA-NASS

USDA 2019/20 Forecast

2004 HurricanesCharlie (Aug 13, 2004)Frances (Sept 5, 2004)Ivan (Sept 15, 2004)

Jeanne (Sept 26, 2004)

Wilma (October 24, 2005)

Freeze (February 2006)

Irma (September 12, 2017)

6.54

6.116.24

5.27

5

6

7

Poun

d So

lids

per B

oxFlorida Oranges Pound Solids per Box

Valencias E & MSource: FDOC

0

50

100

150

200

250

300

350

400

450

500

Mill

ion

SSE

Gal

lons

Total: Brazil+Mexico Brazil MexicoSource: USDA-NASS

Orange Juice Imports from Brazil and Mexico into U.S.

FCOJ Beginning Inventories and Oranges Delivered-in Price

0.00

0.50

1.00

1.50

2.00

2.50

3.00

100

200

300

400

500

600

$/PS

SSE

Gal

lons

(Mill

ion)

Beg. Inventories E & M PriceSource: FDOC

Source: USDA-NASS

Orange Juice: Per Capita Consumption in the U.S.

2.00

2.50

3.00

3.50

4.00

4.50

5.00

Gal

lons

0.50

1.00

1.50

2.00

2.50

3.00

$ pe

r PS

Non-Valencia ValenciaSource: USDA-NASS

2019/20 Cash Market Prices

Delivered-in Prices for Processed Oranges in Florida

Weed Mgmt.$220.35

Sprays$584.14

Fertilizer$528.01

Pruning $33.23

Irrigation$201.14

Tree Replacement

$280.96

0

200

400

600

800

1000

1200

1400

1600

1800

2000

$ pe

r acr

e

Total Cost:$1,847 per acre

Source: CREC, UF/IFAS

Cultural Cost of Production per Acre for Processed Oranges in Southwest Florida by Program

Weed Mgmt.$220.35

Sprays$584.14

Fertilizer$528.01

Pruning $33.23

Irrigation$201.14

Tree Replacement

$280.96

0

200

400

600

800

1000

1200

1400

1600

1800

2000

$ pe

r acr

e

Total Cost:$1,847 per acre

If price $0.85/PS,breakeven cost is

$292 per acre

Loss: $1,555 per acre

Assuming 5.27 pounds solids per box; harvesting $2.97 per box; FDOC assessment $0.07 per box

Cultural Cost of Production per Acre for Processed Oranges in Southwest Florida by Program

Price per pound solids delivered-in (in dollars)0.85 1.10 1.35 1.60 1.85 2.10 2.31 2.60 2.70

Cost per acre(in dollars) Yield per acre (in boxes) needed for breakeven

292 203 106 72 54 44 36 32 27 26600 417 218 147 111 89 75 66 56 54700 486 254 172 130 104 87 77 66 63800 556 290 196 148 119 100 88 75 72900 625 326 221 167 134 112 99 84 81

1000 695 363 245 185 149 125 110 94 901100 764 399 270 204 164 137 121 103 991200 834 435 295 223 179 149 132 113 1081300 903 472 319 241 194 162 143 122 1161400 973 508 344 260 209 174 154 131 1251500 1042 544 368 278 224 187 165 141 1341600 1111 580 393 297 238 199 176 150 1431700 1181 617 417 315 253 212 187 159 1521847 1283 670 453 343 275 230 203 173 1652264 1573 821 556 420 337 282 249 212 203

Breakeven Yield for Early and Mids

Assuming 5.27 pounds solids per box; harvesting $2.97 per box; FDOC assessment $0.07 per boxSource: CREC, UF/IFAS

Weed Mgmt.$220.35

Sprays$584.14

Fertilizer$528.01

Pruning $33.23

Irrigation$201.14

Tree Replacement

$280.96

0

200

400

600

800

1000

1200

1400

1600

1800

2000

$ pe

r acr

e

If price $1.00/PS, breakeven cost is

$603 per acre

Loss: $1,244 per acre

Assuming 6.11 pounds solids per box; harvesting $3.05 per box; FDOC assessment $0.07 per box

Total Cost:$1,847 per acre

Cultural Cost of Production per Acre for Processed Oranges in Southwest Florida by Program

Price per pound solids delivered-in (in dollars)1.00 1.15 1.30 1.45 1.50 1.75 2.01 2.20 2.35

Cost per acre (in dollars) Yield per acre (in boxes) needed for breakeven

500 167 128 104 87 83 66 55 48 45603 202 154 125 105 100 80 66 58 54700 234 179 145 122 116 92 76 68 62800 268 205 166 139 132 106 87 78 71900 301 230 187 157 149 119 98 87 80

1000 334 256 207 174 165 132 109 97 891100 368 282 228 192 182 145 120 107 981200 401 307 249 209 199 158 131 116 1071300 435 333 270 227 215 172 142 126 1161400 468 358 290 244 232 185 153 136 1251500 502 384 311 261 248 198 164 145 1341600 535 410 332 279 265 211 175 155 1431700 569 435 352 296 281 224 186 165 1521847 618 473 383 322 306 244 202 179 1652264 757 580 469 394 375 299 247 219 202

Breakeven Yield for Valencias

Assuming 6.11 pounds solids per box; harvesting $3.05 per box; FDOC assessment $0.07 per boxSource: CREC, UF/IFAS

• Decrease in prices presents challenging management decisions

• Lag in mgmt. decisions -> effect in 2020/21?

• Using assumptions for yield and quality, found:

Average cultural cost of production of $1,847 requires prices for E&M and Valencias to be $2.31 and $2.01 per PS, respectively, just to breakeven

Average total cost of production of $2,264 requires prices for E&M and Valencias to be $2.70 and $2.35 per PS, respectively, just to breakeven

• Significantly reducing cost of production to adjust to lower prices will have long-run consequences on grove productivity

Management Decisions: Caretaking Spending

• A high percentage of fruit will be out of contract in 2020/21

• Production is down in Brazil and in Mexico

• Processors that were not in the market this season likely to come back (due to their contracts with suppliers abroad expiring)

• Contract prices: What cost of production do they cover? Any margin left?

• Would an industry-wide advertising program stimulate demand?

• How to increase brix to compete with Mexico?

• Impact of Covid-19 on supply and demand

Considerations for 2020/21

Thank you for attention

My contact info:Citrus Research and Education Center

singerman@ufl.edu(863) 956-8870

www.crec.ifas.ufl.edu/economics/