Orange juice futures are hitting record highs because of bad weather and a nasty citrus disease. That could mean higher prices at the grocery store.
In recent weeks, prices in the OJ futures market have topped $3 per pound. Around this time last year, prices were hovering at around $1.81 per pound.
The price increase has been fueled primarily by short citrus supply around the globe.
“It’s really a sad and perfect storm of what’s hitting the industry,” said Billy Roberts, senior analyst for food and beverage at CoBank.
In Florida, which typically produces most of the orange juice consumed in America, Hurricanes Ian and Nicole in the fall of 2022, plus a late freeze later that year, devastated crops already thinned by citrus greening, which cuts off key nutrients to orange trees. Trees infected with the disease produce fewer, lower-quality oranges and eventually die.
Late last year, the US Department of Agriculture predicted that in the 2022-2023 season, Florida was expected to produce 20 million boxes of oranges — a 51% decline from the prior year, and the smallest amount produced since the 1936-1937 season.
By July, the forecast had fallen even further. Last month, the USDA said it expected Florida to produce 15.9 million boxes in 2022-2023.
Citrus greening “has proven to be citrus growers’ greatest challenge,” said Mathew Joyner, CEO of Florida Citrus Mutual, a trade association, who added on a hopeful note that “new treatment methods to combat citrus greening are proving effective.”
Meanwhile, Brazil and Mexico, major international exporters, are having their own problems due to bad weather.
“The Brazilian orange crop itself is expected to come in a little bit lower,” said Roberts. “Those Brazilian crop numbers coming in, I think, have caused a bit of concern around the industry.”
As the situation has remained bad or even worsened this year, traders are coming to terms with the low supply, added Roberts. The surging prices are “partially a realization of just how impacted the conditions have been,” he said, on top of other production costs.
With supplies hurt by storm and disease, the United States is increasingly importing from international markets like Brazil, wrote Andrés Padilla, a senior analyst with Rabobank, in an April Rabobank report.
“Record-high orange juice prices in 2023 are a consequence of a very tight market, with smaller-than-expected production and low inventories,” he added.
“Very low inventories from two consecutive small harvests in 2020/21 and 2021/22, plus worsening news for the current 2022/23 season, created the perfect environment for rising OJ prices this year,” he wrote.
Mexico’s production has suffered in recent years because of drought, said Jack Scoville, an agricultural products analyst who is vice president at the Price Futures Group, a brokerage firm.
Spiking futures prices could mean higher prices at the grocery store, he said. On Walmart’s website, a 52-ounce bottle of Tropicana Original orange juice currently goes for about $4.
“There could be some more price increases coming [in] retail,” he said, noting that there is always a lag between prices in wholesale and retail.
But pricing also depends on consumer demand, not just supply.
Though there was a spike in interest in orange juice in the earlier days of the Covid pandemic, consumers have been trending away from the beverage for years.
Shoppers may not tolerate prices getting any higher, especially when they don’t see orange juice as a staple.
In the year through June, the price of non-frozen, non-carbonated juices and drinks jumped 8.2%, according to data released last month by the Bureau of Labor Statistics.
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August 10, 2023 at 03:31AM
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Orange juice futures are hitting record highs. Here’s why, and what it means for consumers - CNN
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