Get ready for orange juice to go up in price: here’s why

(CNN Business) –– There are problems with oranges.

The citrus diseases and the bad weather are limiting the supply of oranges in the United States and internationally. Meanwhile, the demand for orange juice, that dwindled for years, skyrocketed during the pandemic.

That has led orange juice prices to rise in the pandemic…and will likely continue to do so. Futures on frozen orange juice have surged more than 50% during the pandemic. In fact, they hit a two-year high just last week, rising 5% this Thursday. .

“You have the classic supply-demand mismatch,” said Shawn Hackett, president of Hackett Financial Advisors, which specializes in agricultural commodity analysis. Therefore, consumers should expect “much higher prices in the supermarket.”

A shelf of orange juice is half empty at a Target store in the borough of Queens in New York City on Oct. 19, 2021. (Credit: Anthony Behar/Sipa USA)(Sipa via AP Images)

The anticipated increase in orange juice prices comes as consumers already facing the effects of inflation in multiple sectors. The US consumer price index rose 7% over the past year before seasonal adjustments. This is the steepest increase in prices since June 1982, the Bureau of Labor Statistics reported last week.

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During the past year, food for consumption at home became more expensive by 6.5%, while prices in restaurants increased by 6%. Fruit juice and soft drink prices have already soared 5.7% this year, and orange juice futures are up.

The offer is reduced

Last week, the US Department of Agriculture (USDA) said it expects Florida to produce 44.5 million boxes of oranges this year, an unusually small crop. What’s more, that would be the smallest harvest since the 1944-1945 season when 42.23 million boxes were produced, a USDA Florida statistician told CNN Business.

“The Florida citrus crop is going to be one of the smallest crops since the 1940s,” said Judith Ganes, president of J Ganes Consulting, which provides commodity analysis to the food and agriculture industry. “It’s going to be even less than production several years ago… when Hurricane Irma hit Florida,” he added.

Florida’s orange crops, responsible for most of the orange juice produced in the country, have been declining for years, he noted. One of the culprits is an insidious citrus disease, known as citrus greening, which causes smaller oranges and fewer fruit per tree.

“The disappointment of another drop in the forecast is hard to overstate,” Shelley Rossetter, deputy director of global marketing for the Florida Department of Citrus, said in a statement. He added that Florida citrus growers are focused on “finding new solutions for citrus greening.”

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Oranges that are smaller produce less juice, Ganes explained. That means processors, already having to pay extra cost due to declining orange supplies, must also buy more oranges to make the same amount of juice that comes from healthy fruit. That, in turn, means higher costs for consumers.

At the same time, international growers face their own shortages.

“Brazil suffered a historic drought last year. This significantly affected the orange crop that is used to produce orange juice,” Hackett said. “They are not going to have exportable supplies at the [usual]”, he highlighted.

And as supply shrinks around the world, orange juice experiences a pandemic-driven renaissance.

The demand for orange juice is growing

Before the pandemic, “American demand for orange juice had been declining for 20 years in a row,” Hackett said.

That’s in part because changing consumer ideas about health have made fruit juice, which is relatively high in sugar and calories, out of fashion. It’s also because, over the years, many Americans stopped eating breakfast regularly at home and opted for takeout.

But, during the pandemic, many went back to eating breakfast at home. And some put orange juice back on the menu.

Because of that, sales of 100% non-concentrated juices in the US rose from $5 billion to $5.5 billion in 2020, and remained mostly at that level in 2021, according to data from Euromonitor International.

“We are still dealing with demand today that is way above what it was in 2019, before the pandemic hit,” Hackett said. “So we have this renewed demand at a time when available supplies are very, very, very short,” he said.

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