Orange juice crisis prompts search for alternative fruits

Orange juice prices have soared to record highs, driven by bad weather and disease in Brazil, the world’s largest exporter, prompting manufacturers to explore whether they can use mandarins instead to make the drink.

Orange juice futures — which allow industry players to hedge against swings in prices — have been on a tear since the end of 2022 when a hurricane, then a cold snap, devastated acres of orange groves in Florida, the main growing region in the US, the world’s second-biggest producer. But the rally has accelerated sharply this month as the prospect of a dismal harvest in Brazil has panicked the market.

Concentrated orange juice futures, traded on Intercontinental Exchange in New York, hit $4.92 a pound on Tuesday, almost double the price a year ago.

“This is a crisis,” said Kees Cools, president of the International Fruit and Vegetable Juice Association (IFU). “We’ve never seen anything like it, even during the big freezes and big hurricanes.” 

The crippling shortages have raised fears of a price rise that will hit consumers and fundamentally reshape the global orange juice industry, according to the IFU.

Normally manufacturers can overcome differences in flavours from one season to another by blending stocks of frozen orange juice — which has a two-year lifespan — from the last season with the newer crop. But three consecutive years of dwindling supply have depleted stockpiles.

The long-term solution to a dearth of oranges, according to Cools, might be to make orange juice from mandarins, whose trees are more resilient to climate change in growing regions.

The only longer-term option “without touching the naturalness and image of the product” might be “to use different species of fruit”, Cools said.

The industry is already experimenting. In Japan, which normally imports 90 per cent of its orange juice, mostly from fruit grown in Brazil, the supply crunch has been exacerbated by a weak yen, pushing up import costs further. Seven & i Holdings, the owner of supermarket chain 7-Eleven, has turned to the country’s domestic supply of mandarins, launching a mandarin and orange juice product.

The IFU was considering embarking on the regulatory process to allow the drink to contain citrus fruits other than oranges, Cools said. That would require a legislative change, first in the Codex Alimentarius food standards code established by UN bodies, and then at a national level, such as by the US Food and Drug Administration.

Today’s supply squeeze dates back 20 years to when citrus greening — an incurable disease spread by sap-sucking psyllid insects that makes the tree’s fruit bitter before killing it altogether — was first detected in the US.

By 2008, it had spread throughout Florida, which historically accounted for more than 80 per cent of US supplies. Two decades ago Florida churned out about 240mn boxes of orange juice a year, according to Cools. Today, exacerbated by climate change, it is down to just 17mn.

Brazil stepped in to make up the shortfall but now the South American agricultural powerhouse is also beginning to struggle. Production this year has fallen by a quarter to 232mn boxes of oranges, according to estimates from Fundecitrus, the citrus growers organisation.

Brazilian orange groves had been battered by higher than average temperatures and below average rainfall, said Andrés Padilla, an analyst at Rabobank. Less than a third of farms were irrigated and even they had “struggled to cope”, he said.

Rabobank estimates nearly 40 per cent of orange groves in the main growing region in the south-east of the country are infected with citrus greening.

The disease also makes the oranges drop earlier, which means farmers tend to harvest before they normally would, again affecting the “taste profile”, said Padilla, adding that this “creates challenges for the orange juice industry”.

The only way to cure the disease was to rip out the tree, “which the farmer doesn’t like to do because there are still oranges”, said Cools. “But yields are bad and the quality [of the fruit] is bad.”

Industry executives say consumers are therefore likely to feel the impact for years. Many manufacturers are already passing on rising costs to their customers.

“Due to those turbulent and uncertain factors both globally and in the UK, we have had to review the prices and sizes of our drinks,” said Sarah Baldwin, chief executive of Purity Soft Drinks.

Meanwhile, consumer demand shows no sign of easing. Before the coronavirus pandemic, some Americans had ditched orange juice, troubled by its sugar content, and switched to supplements to get their daily dose of vitamin C, said Jack Scoville, a broker at Price Futures Group in Chicago. But “during Covid a lot of people discovered juice again”, he said.

Additional reporting by Michael Pooler in São Paulo

Climate Capital

Where climate change meets business, markets and politics. Explore the FT’s coverage here.

Are you curious about the FT’s environmental sustainability commitments? Find out more about our science-based targets here

Letter in response to this article:

Keeping shelves stocked through a supply crisis / From Ian Thompson, Vice-President, Northern Europe, Ivalua