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Disease, drought and alternative fruits: The orange juice industry is in crisis

Medianews Group/inland Valley Daily Bulletin Via Getty Images | Medianews Group | Getty Images
  • Orange juice prices have recently climbed to fresh all-time highs, with the industry rattled by a perfect storm of climate-fueled extreme weather, persistent supply constraints and a citrus disease known as greening.
  • The crisis has even prompted some orange juice manufacturers and blenders to explore whether alternative fruits, such as mandarins, apples and pears, can be used to make the drink.
  • "With no short-term solution in sight and the risk of worsening disease conditions, the situation remains critical," said Kees Cools, president of the International Fruit and Vegetable Juice Association.
A worker at a citrus fruit farm separates the tangerines for sale on June 6, 2024 in Piedade dos Gerais, in Minas Gerais State, Brazil.
Pedro Vilela | Getty Images News | Getty Images
A worker at a citrus fruit farm separates the tangerines for sale on June 6, 2024 in Piedade dos Gerais, in Minas Gerais State, Brazil.

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The orange juice industry is reeling.

Prices of the breakfast staple recently climbed to fresh all-time highs, rattled by a perfect storm of climate-fueled extreme weather, persistent supply constraints and a citrus disease known as greening.

The price rally accelerated sharply late last month, after research center Fundecitrus warned that Brazil, the world's largest producer and exporter of orange juice, was likely on track to register one of its worst orange harvests in more than three decades.

The crisis has even prompted some orange juice manufacturers and blenders to explore whether alternative fruits, such as mandarins, apples and pears, can be used to dilute the drink.

"With no short-term solution in sight and the risk of worsening disease conditions, the situation remains critical," Kees Cools, president of the International Fruit and Vegetable Juice Association (IFU), told CNBC by email.

Bottles of Simply Orange orange juice are displayed for sale in a grocery store on September 28, 2023 in Los Angeles, California.
Mario Tama | Getty Images News | Getty Images
Bottles of Simply Orange orange juice are displayed for sale in a grocery store on September 28, 2023 in Los Angeles, California.

Frozen concentrated orange juice futures, traded on the Intercontinental Exchange in New York, closed at $4.29 per pound on Monday — nearly double the price registered a year ago.

The benchmark contract has pared gains in recent weeks, falling from an intraday high of nearly $5 per pound on May 28.

What's going on?

Analysts at research group Mintec say that Brazil, which plays a hugely influential role in shaping the orange juice industry, typically produces about 300 million boxes of oranges (each weighing approximately 40.8 kilograms) per cycle. But the combination of extreme weather, such as flooding and drought, and greening has dramatically reduced crop production.

In a report published on May 10, Fundecitrus forecast that Brazil was set to produce 232.4 million boxes of oranges in the 2024 to 2025 season. That represents a 24% decline when compared to the previous cycle.

"Restoring normal stock levels in Brazil will require several consecutive good harvests. With 40% of Brazilian plantations affected by greening disease and the risk of this number increasing, coupled with volatile climate conditions, the likelihood of achieving such harvests is low," the IFU's Cools said.

"As a result, high prices are expected to persist. Although there is a slight decrease in demand, it is insufficient to rebalance the market," he added.

Detail of tangerines in baskets as workers at a citrus fruit farm load up a truck for sale on June 6, 2024 in Piedade dos Gerais, in Minas Gerais State, Brazil.
Pedro Vilela | Getty Images News | Getty Images
Detail of tangerines in baskets as workers at a citrus fruit farm load up a truck for sale on June 6, 2024 in Piedade dos Gerais, in Minas Gerais State, Brazil.

An untreatable disease that results in bitter, stunted fruit — known as greening — has joined adverse weather conditions as a long-term headwind for farmers in orange-growing areas across the world.

Greening has severely hampered orange production in the "Sunshine State" of Florida, where the IFU says production has collapsed to approximately 17 million boxes, down from 242 million boxes 20 years ago.

High incidence of citrus greening

Andres Padilla, a food and agribusiness research specialist at Rabobank, said that the high incidence of citrus greening will likely limit productivity over the coming months.

"Citrus greening remains a significant threat across all producing areas, and weather volatility will also limit potential growth in the upcoming 2024/2025 harvest," Padilla said in an April research note.

Citrus farmers have stepped up their actions against greening in Brazil in recent months, Padilla said, noting that greening was more prevalent in smaller groves, where agriculturalists tend to have limited resources to remove infected trees at the rates required to keep the disease under control.

"Another effect of citrus greening is that farmers will be incentivized to harvest early, reducing the potential for higher fruit drop rates, which could have a negative effect on fruit quality, and potentially diminish juice yields," Padilla added.

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