Orange juice prices have skyrocketed by 77% due to decreased production in key growing regions. This price hike raises concerns that orange juice and fresh oranges may soon become too costly for many consumers.
Sharp Increase in Wholesale Prices
Over the past year, the wholesale price of orange juice has soared by nearly 77%. Since February 2020, when the COVID-19 pandemic began, prices have increased fivefold. Florida and São Paulo, which together account for 85% of the global market, are the primary determinants of market prices, heavily influencing costs and availability in Europe.
Market Prices Reach New Highs
The benchmark futures contract for frozen concentrated orange juice has climbed to $6,500 per tonne (almost €6,000) at the European port of Rotterdam. While rising production, export, and packaging costs contribute to higher prices, the main drivers are poor weather conditions and disease affecting crops.
Drastic Declines in Production
Fundecitrus recently estimated a 24% year-on-year decrease in the Brazilian orange harvest, predicting 232 million cases compared to 307 million the previous year. In the US, the Department of Agriculture expects a slight increase in production from last year, but it remains significantly lower than two years ago. Drought and Huanglongbing disease (yellow dragon disease) have severely impacted crops in both Brazil and Florida.
Potential Decline in Consumer Demand
Orange juice consumption has been declining, particularly in the United States, where it has halved over the past decade. European consumption is also decreasing, though less dramatically. As production falls and costs rise, orange juice brands are turning to other fruit juices and cocktails. This long-term trend suggests oranges may become viewed as a luxury product, potentially leading to further declines in consumer demand.
SOURCE: Ref Image from Capital
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