Bug Bites Cut Florida Orange Crop to
Lowest in 2 Decades
By Marvin G. Perez - December
26, 2013 3:35 PM ET
gnat-sized insect, the Asian citrus psyllid, forced
Dean Mixon to replace about 1,000 orange trees in
the past two years on the 50-acre Florida farm his
grandfather started in the 1930s. The bug spreads
a disease called citrus greening, causing fruit
to shrink and drop early.
“This is the worst we ever had
to deal with,” said Mixon, 62. “Young trees can’t
develop strong roots, and the quality of the fruit
is also affected. We have been able to slow the
spread of the disease, but not eradicate it.”
the world’s largest orange grower after Brazil, will harvest
121 million boxes of the fruit in the season that began
Oct. 1, the fewest since 1990, the U.S. Department of
Agriculture estimates. Orange-juice futures in New York
will rally 16 percent to $1.6465 a pound by the end of
June, up from $1.4215 today, according to the average
estimate of nine traders and analysts surveyed by Bloomberg
Futures entered a bull market this month
as dry weather compounds the damage from citrus greening.
Some types of oranges, including early and mid-season
varieties, are projected to drop prematurely from trees
at the highest level since 1961, the USDA said Dec.
10. The shrinking crop may boost costs for companies
including Pepsico Inc. (PEP), the maker of Tropicana
juices, and Coca Cola Co., which sells Minute Maid and
Simply Orange brands. U.S. consumers spend about $1.45
billion on the juice annually.
in uncharted territory,” said John Ortelle, who
has been following the industry for more than 30
years and is vice president for McKeany-Flavell,
an Oakland-California based broker whose clients
have included Dole Food Co. and Kraft Foods Group.
“Whatever producers have tried to tackle the disease
has had a minimal effect so far. Growers took out
trees and added extra nutrients. You just don’t
know when and if the effects will be positive.”
rose 21 percent this year on ICE Futures U.S. in New
York, trailing only natural gas and cocoa among the
19 raw materials tracked by the Thomson Reuters/Jefferies
CRB Index, which declined 4.1 percent. The MSCI All-Country
World Index of equities rose 19 percent, while the Bloomberg
Treasury Bond Index fell 3.2 percent. The Bloomberg
Dollar Index, a gauge against 10 major trading partners,
gained 3.8 percent.
in Florida received as little as 2 inches (5.1 centimeters)
of rain from Oct. 1 through Dec. 22, according to Kyle
Tapley, a meteorologist with MDA Weather Services in
Gaithersburg, Maryland. That compares with the 30-year
average of as much as 8 inches. About 28 percent of
the state is experiencing “abnormally dry” weather,
according to the U.S. Drought Monitor.
the USDA cut its production outlook seven times over
eight months as drought compounded damage from greening.
Smaller fruit size may mean that the final count for
this year’s crop will total 115 million boxes, or 5
percent less than the government estimates, said Jerry
G. Neff, a branch manager for Bradenton, Florida-based
Allendale Risk Management Inc. who was the most-accurate
forecaster in a Bloomberg survey before the USDA’s Dec.
10 report. A box weighs 90 pounds (40.8 kilograms).
has discouraged growers from increasing production as
new trees must be sown in greenhouses rather than outdoors
to avoid further contagion, doubling the cost of planting
to about $8 a tree, according to Tom Spreen, a retired
University of Florida professor and an industry consultant.
The area planted with orange groves will total 459,311
acres this year, the lowest since at least 1978, when
the government data begins. The USDA survey was conducted
every two years until 2009, when it became annual.
have also been spurred by increases in housing development
and urban sprawl, said Mixon, whose 50-acre farm in
Bradenton, Florida, is down from 350 acres in 2006.
consumption may cap price gains for futures, according
to Judy Ganes-Chase, the president of J. Ganes Consulting
in Panama City, Panama. U.S. retail prices for frozen,
concentrated orange juice reached $4.7026 a pound by
the end of November, down 5.9 percent from a year earlier.
The cost is up 28 percent from a decade ago, threatening
consumer demand, Ganes said.
1, retailers sold 82.39 million gallons as of Nov. 23,
down 6.7 percent from a year earlier, the Florida Department
of Citrus estimated on Dec. 9, citing data from Nielsen
Co. U.S. inventories of frozen orange juice totaled
732.47 million pounds on Nov. 30, up 22 percent from
a year earlier, government data show.
are looking for lower-calorie options, said Ross Colbert,
a global beverage-strategist at Rabobank International
in New York who’s been studying the industry for more
than 10 years. U.S. per-capita consumption fell to 3
gallons in 2012 from 4 gallons in 2008 and 5.5 gallons
in 2000, Colbert said. An 8-ounce serving of orange
juice has about 110 calories, according to the government.
In the past 10 years, water consumption has increased
the most among all beverages, he said.
of oranges in Brazil will climb 8.5 percent to 435 million
boxes in the 12 months ending June 30, 2014, from a
year earlier, and juice output will jump 18 percent,
the USDA’s Foreign Agricultural Service said in report
Dec. 16. Yields will rise 12 percent.
take care of any shortfall we may have in production,”
said James Cordier, founder of Optionsellers.com in
Tampa, Florida. “While the U.S. crop is the smallest
we’ve seen in many years, sales at the retail level
are still sluggish.”
and other large speculators are increasing bets on a
price rally. As of Dec. 17, money managers raised their
net-long position by 11 percent from a week earlier
to 2,652 futures and options, Commodity Futures Trading
Commission data show. That’s the highest in three months.
in Florida in 1998, the Asian psyllid thrived on the
state’s temperate climate and sap collected from foliage
as it spread the bacterial-disease to all 32 counties
that produce oranges commercially. Greening has cost
the state’s economy $4.5 billion in lost revenue and
eliminated 8,200 jobs amid spending cuts since being
discovered in 2005, according to the Citrus Research
and Development Foundation.
said Dec. 12 it was providing $1 million for research
projects aimed at combating the disease. An additional
$9 million has been spent through a government research
program for specialty crops. More funds may be allocated
in a new farm bill currently being negotiated by lawmakers.
the president of Clewiston, Florida-based Southern Gardens
Citrus, has replaced about 500,000 trees since 2005
because of psyllid infestation and greening. The company
has about 1.8 million trees planted on more than 16,500
acres, and can process as much as 20 million boxes of
oranges per season, according to its website.
Florida grower, has tried fighting the insect with pesticide
and increasing fertilizer use to strengthen trees. Groves
have also been damaged by other crop diseases including
citrus canker, which causes leaves and fruit to drop
prematurely, he said.
“We use pesticide,
but the problem is that if it rains, it can be washed
off, or if you don’t catch the psyllid at the right
time, it becomes ineffective,” Mixon said. “If you use
too much pesticide, you can actually burn the fruit,
which can then become useless for fresh fruit or juice.”
risk of frost in coming months may further threaten
Florida’s crop, while U.S. demand increases seasonally
as consumers drink more to boost their vitamin C intake
and guard against influenza, said Fain Shaffer, the
president of Infinity Trading Corp. in Indianapolis.
is forecast to increase in Brazil, the country’s stockpiles
are heading for a three-year low, the USDA’s Foreign
Agricultural Service estimated on Dec. 16. At the end
of June 2014, inventories will drop to 93,000 metric
tons, down from 205,000 a year earlier and 474,000 tons
in 2012, according to the report.
of frozen concentrate in the 12 months that ended in
June 2013 fell 23 percent in Brazil because of lower
availability for fruit processing and low industrial
yields, the USDA said. Crop diseases including greening
are boosting production costs in the South American
country, prompting some farmers to switch to crops including
sugarcane and rubber, according to Conab, the government
from Brazil may shrink U.S. inventories that, while
up from 2012, are 49 percent smaller on average this
year than a decade ago, government data show.
a serious supply problem,” said Shawn Hackett, the president
of Hackett Advisors Inc. in Boynton Beach, Florida.
“Citrus greening is a structural problem, and Brazil
is having its own issues. There’s no way to turn this
around. Prices are going to go higher.”