Future of the Global Orange Juice Industry Allen Morris, Presenter Global Citrus Industry Economics Workshop, University of Florida, Citrus Research & Education Center, Lake Alfred, FL, April 8, 2010
DISEASE SITUATION AND FUTURE CROP SIZES Future of the Global OJ Industry 2
HLB is in Florida and Brazil Impact on production, prices and grower profits Assumptions, grove-care management, policies, recommendations 3
Million Boxes 200 Florida Orange Crop Projections 180 160 140 120 100 80 60 40 2024-25 2023-24 2022-23 2021-22 2020-21 2019-20 2018-19 2017-18 2016-17 2015-16 2014-15 2013-14 2012-13 2011-12 2010-11 4
Florida Orange Production Baseline Season Prod. mil. Boxes 2009-10 131.000 2010-11 164.776 2011-12 159.860 2012-13 156.749 2013-14 152.469 2014-15 149.644 2015-16 145.368 2016-17 141.425 2017-18 138.619 2018-19 135.162 2019-20 131.785 2020-21 127.277 2021-22 125.262 2022-23 123.709 2023-24 121.772 2024-25 121.268 2025-26 121.003 2026-27 120.925 2027-28 120.991 5
Brazilian Citrus Industry Long Term Outlook 400 350 300 250 200 340 330 320 315 306 290 281 310 301 296 287 273 265 292 283 279 271 257 249 275 266 262 255 242 234 Optimistic Realistic Pessimistic 258 251 247 239 232 227 220 214 150 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: GCONCI Brazilian Citrus Industry : Long Term Outlook 6
Citrus Belt Movement Trends Fonte: Fundecitrus e IEA Source: GCONCI Brazilian Citrus Industry : Long Term Outlook 7
HLB Assumptions No cure/growers do nothing Forecasts are based on implementation of best grove-care management practices for HLB in core grower group Stop the spread of the psyllid in 2 to 3 yrs Availability of resistant trees in 7-8 yrs 8
Production Management Practices Mixed approaches: Scout, spray and remove infected trees Foliar nutrition program Core of producers follow first approach: Tree population declines from 65 to 45 million trees over next 5-10 yrs Production declines Loss rates in 5% to 6% range Tree loss-rate stabilizes/plantings afterwards 9
Demand Assumptions Continue Advertising Maintain U.S. per capita consumption; increase total U.S. OJ demand by 1.0% Increase E.U. OJ demand by 1.5% 10
Recommendations Continue Research Continue Advertising Develop Risk Management Program/Develop Tree Insurance Continue/improve data gathering and reporting (NASS, FAS, IEA & Brazil, etc.) Develop formalized baseline data in Brazil on orange and OJ production 11
GROWER COSTS AND INVESTMENT RISKS Future of the Global OJ Industry 12
Production Costs for a 10+-Year-Old Southwest Florida Processed Orange Grove 2002-03 Without Greening 2008-09 Without Greening 2008-09 With Greening $/Acre % of Total $/Acre % of Total $/Acre % of Total Weed Control & Herbicide 183.13 23.3 185.68 16.7 185.68 11.9 Spray-Pesticide 137.18 17.4 148.48 13.3 372.88 23.8 Fertilizer & Lime-Calcium 152.56 19.4 332.54 29.8 332.54 21.2 Pruning/Topping 28.03 3.6 31.48 2.8 31.48 2.0 Tree Removal/Resets 102.44 13.0 143.36 12.9 265.79 17.0 Irrigation & Ditch Maintenance 184.16 23.3 243.17 21.8 243.17 15.5 HLB Scouting Management & Canker Decontamination 0.00 0.0 33.30 2.7 134.29 8.6 Total Production Costs 787.50 100.0 1,115.04 100.0 1,565.83 100.0 13
Costs of Greening Management Program for Valencia Oranges $ Per Acre Base Grove Care For Mature Grove 1,115.04 (Includes canker decontamination) Additional Costs For Greening Additional Spraying (3 sprays + Temik) 224.40 Scouting (4 times / Year) 103.96 Additional Tree Removal and Reset Care 122.43 Sub-Total 450.79 Grove Care Costs With Greening 1,565.83 Cost of Nursery Trees Pick, Roadside and Haul Costs $8.50 / Tree $2.52 / Box 14
($/Ac) $3,844 Initial Production: 150 tree/ac 3.5 bx/tree 6.2 p.s./bx 0 $1,057 10 Yr Cum NPV by fruit price, HLB Foliar Program -$1,730 (%/Yr) 3.5% 2.9% Tree Loss Threshold by fruit price, HLB Foliar Program 2.4% $1.10 $1.25 $1.40 Fruit Price ($/p.s.) 15
The potential for Mechanical Harvesting is to reduce costs by: 75 /box ($200-300/acre) 16 16
Economic Sustainability of Sao Paulo Citrus Production Most citrus growers will stop to invest on new groves or even worse some of them may quit the business because of: High cost of production:» Grove care expenses, specially to control the HLB disease» Labor cost Riskier conditions:» Greening (HLB) disease and other phytosanitary problems (Citrus Canker, etc) Weak dollar» Brazilian Currency Appreciation April 6-8, 2010 Boteon, M 17
Picking Cost US$ 0,90 US$ 0,35 April 6-8, 2010 SP average harvesting costs (picking + roadsiding). The cost above does not include hauling. 18
These are studies cases and do not represent the average costs of production in Sao Paulo. The grove care costs for April specific 6-8, 2010 grove site may differ depending tree age, tree density and the grove management. 19
TOTAL COST OF PRODUCTION Season 2008/09 Note: This study case does not represent the average costs of production in São Paulo. The grove maintenance costs for a specific grove site may differ depending upon tree age, tree density and the grove practiced performed. April 6-8, 2010 20
Recommendations Support production research projects to improve cost efficiencies such as: more efficient spray methods, better pysllid control and yield improvement. Continue to evaluate the economics of a foliar nutrition program. Combine spatial auto correlation analysis with land value impacts. Support land use policies directed specifically to benefit citrus producers. Create a methodology to directly compare Brazilian with Florida costs of production. 21
RECOMMENDATIONS Future of the Global OJ Industry 22
Recommendations 1. Continue domestic advertising campaign. 2. Partner with Brazil to develop a global generic advertising campaign that initially focuses on the EU and later is extended to the developing countries such as India and China. 3. Continue research & development investment in productionrelated research that includes economic analysis. 4. Develop a tree insurance program that provides indemnity for growers following best management practices. 23
Recommendations (Cont.) 5. Develop the methodology to estimate the economic benefit of being in a Citrus Health Management Area. This includes the ability to predict the spread of HLB within a block and the effect of management interventions on that spread. 6. Conduct additional research on the foliar nutritional program addressing specifically the ability to manage newly planted/reset groves. 7. Encourage better data collection in Brazil/Sao Paulo. 24
Recommendations (Cont.) 8. Better reporting of management practices related to HLB in Florida. We are limited by what we can do if we don t know what the industry is doing. 9. Continue to conduct research on other means to reduce production costs including low-volume pesticide sprays, implementation of mechanical harvesting, and more efficient production inputs including fertilization. 10. Develop an optimization model that considers the entire citrus production/marketing system and then allocates scarce research dollars across that system, i.e., what research efforts offer the highest return? 25
Participating Economists 1. AYERS, Antonio Juliano Scientific Manager, Fundecitrus, Araraquara, SP, Brazil 2. BARBER, Robert Economist, Florida Citrus Mutual, Lakeland, FL 3. BEINHART, Roger Statistical Analyst, National Agricultural Statistics Service-USDA, Washington, DC 4. BLAUER, Reed Agricultural Economist, Office of Global Analysis-FAS-USDA, Washington, DC 5. BOTEON, Margarete Researcher, Center for Advanced Studies on Applied Economics, USP, Piracicaba, SP, Brazil 6. BROWN, Mark G. Senior Research Economist, Economic & Market Research Dept.-FDOC, Gainesville, FL 7. CASER, Denise Viani Director, Center of Agricultural Statistics, Institute of Agricultural Economics, Sao Paulo, SP, Brazil 8. CLOUSER, Rodney L. Professor, Food & Resource Economics Dept.-IFAS-UF, Gainesville, FL 9. DA SILVA, M.L.M. AGRAFNP-Info & Consulting Agribusiness Co. & GCONCI-Group Citrus Consulting, SP, Brazil 10. DA SILVA, Valquiria Director, Institute of Agricultural Economics, Sao Paulo, SP, Brazil 11. GAO, Zhifeng Assistant Research Scientist, Food & Resource Economics Dept.-IFAS-UF, Gainesville, FL 12. GEUDER, Jeffrey K. Agricultural Statistics Director, Florida Field Office-NASS-USDA, Maitland, FL 13. GUNTER, Dan L. COO, Citrus Research & Development Foundation, CREC-IFAS-UF, Lake Alfred, FL 14. HODGES, Alan W. Extension Scientist, Food & Resource Economics Dept.-IFAS-UF, Gainesville, FL 15. LESTER, W. BERNARD Retired, Former Executive Director, Florida Department of Citrus, Lakeland, FL 16. HOUSE, Lisa A. Professor, Food & Resource Economics Dept.-IFAS-UF, Gainesville, FL 17. LOHBAUER, Christian Executive President, CitrusBR-Brazilian Assoc. of Citrus Exporters, Sao Paulo, SP, Brazil 18. MORRIS, Robert A. Assoc. Extension Scientist/Economist, Citrus Research & Education Center-IFAS-UF, Lake Alfred, FL 19. MOSS, Charles R. Professor, Food & Resource Economics Dept.-IFAS-UF, Gainesville, FL 20. MURARO, Ronald P. Professor, Citrus Research & Education Center-IFAS-UF, Lake Alfred, FL 21. NORBERG, Robert P. Deputy Executive Director of Research & Operations, Florida Department of Citrus, Bartow, FL 22. PAGLIUCA, Larissa Gui Graduate of Agronomy Engineering, USP, Piracicaba, SP, Brazil 23. POLLACK, Susan Agricultural Economist, Economic Research Service-USDA, Washington, DC 24. RACEVSKIS, Laila A. Assistant Professor, Food & Resource Economics Dept.-IFAS-UF, Gainesville, FL 25. RAHMANI, Mohammad Economic Analysis Coordinator, Food & Resource Economics Dept.-IFAS-UF, Gainesville, FL 26. ROKA, Fritz M. Associate Professor, SW Florida Research & Education Center-IFAS-UF, Immokalee, FL 27. SCHMITZ, Andrew Eminent Scholar, Food & Resource Economics Dept.-IFAS-UF, Gainesville, FL 28. SPREEN, Thomas H. Professor, Food & Resource Economics Dept.-IFAS-UF, Gainesville, FL 29. TOZATTI, Gilberto Consultant, GCONCI-Group Citrus Consulting, SP, Brazil 30. VANSICKLE, John J. Professor, Food & Resource Economics Dept.-IFAS-UF, Gainesville, FL 26
All presentations will be available on Friday, April 9th at the fdocgrower.com website: http://www.fdocgrower.com/emr/powerpoint.php 27 27
Thank you! 28 28