The price of physical oranges used for crushing in São Paulo has climbed to record highs © Bloomberg
The orange juice market is facing a squeeze.
Prices have surged to record highs as leading producers Brazil and the US face a sharp fall in output due to disease and bad weather.
Although demand for what used to be a favourite breakfast drink has been declining over the past few years due to worries about sugar, orange juice output is falling faster this year causing a scramble among juice manufacturers in Brazil, the world’s largest producer and exporter.
“Crushers are buying up all the fruit they can get hold of,” said Andres Padilla at Rabobank in São Paulo.
The changes are affecting leading orange juice producers and traders. Louis Dreyfus is seeking partners to try to increase its reach and distribution, while Cutrale, one of Brazil’s largest orange juice groups, bought US banana company Chiquita early last year in order to diversify its business.
Frozen concentrated orange juice traded on the ICE exchange in New York is trading around $2.30 a pound, up 64 per cent since the start of the year, while the price for physical oranges used for crushing in São Paulo has also climbed to record highs.
In Brazil, higher than normal temperatures significantly damaged development of the fruit. It is the second year in a row that the country’s citrus farmers have suffered from drought, and for the year to June next year, the US Department of Agriculture is forecasting the country’s orange juice output to total 885,000 tonnes, down almost a third from two years before.
Output in the US, the second-largest producer, has been severely hit by citrus greening disease, spread by an insect, the Asian Citrus psyllid. Greening has damaged trees, especially hitting the citrus industries in Florida. The USDA is predicting production this year to be at 383,000 tonnes, almost half of the level five years ago.
“Production in Florida is the lowest since the early 1960s,” said Mark Hudson at the USDA’s Florida field office.
The orange juice market entered public consciousness in the 1983 film Trading Places but has become a niche market as trading volumes have been affected by falling consumption.
Once the breakfast drink of choice, especially in the US, orange juice has fallen out of favour, as fruit juices have been targeted among some campaigners as high in sugar. The popularity of the Atkins diet in the early 2000s, which advocates low carbohydrate and high protein intake, hit fruit juice demand.
A larger choice of beverages has also affected the orange juice market. “There are more drinks available, including more teas and coffees,” said Mr Padilla.
Changing patterns in breakfast eating has also been a factor behind the fall in orange juice demand. As fewer people sit down for their morning meals, consumption has declined, said analysts.
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