Florida and Brazil Orange-Juice Trends



In this report, we examine supply and demand trends for Florida and Brazil orange juice (OJ) and provide projections for the upcoming seasons. Trends in U.S. OJ prices, imports and exports, and OJ advertising impacts in the U.S. market are also presented.

Orange-Juice Supply


Historically, Florida has accounted for most of the OJ produced in the U.S. In 1994-95, Florida accounted for an estimated 93% of U.S. OJ production. In turn, the U.S. has accounted for about 37% of world OJ production in recent years. Brazil is the largest producer of OJ in the world, accounting for about 53% of world production in recent years. Hence, aggregate U.S. and Brazil OJ production has accounted for about 90% of world production.

Over the next ten years, OJ production in Florida is expected to expand by over 20%, while Brazilian OJ production is expected to expand about 11% or more. These projections are based on average yields, average fresh-processed utilization patterns and maintenance of the present tree populations in Florida and Brazil. OJ production levels in Florida and Brazil are expected to increase sharply in the next few years and then level off. The production increases are due to the maturing of relatively young low-yielding trees to older higher-yielding trees.

Orange-Juice Demand


The major markets for OJ in the world are the U.S., Europe, Canada and Japan. The U.S. market has accounted for more than half (55%) of the OJ consumption in these four markets, followed by Europe which has accounted for over a third (34%). Canada and Japan have accounted for about 6% and 5%, respectively.
The U.S. and Canada are considered more mature markets and are expected to experience relatively low growth rates in OJ demand (prices and other factors constant) in the upcoming years; while Europe and the rest of the world (ROW), including Japan, are developing markets and are expected to experience higher growth rates. In the U.S. and Canada, OJ demand growth rates are expected to be 1.5% or less. (Based on Nielsen sales, the growth in U.S. OJ demand appears to have been near zero in recent years.) In Europe and the ROW, growth rates are expected to be about 4%.
The price for OJ in each market is relatively sensitive to changes in quantity supplied. For example, a 10% increase in quantity supplied would tend to reduce price by more than 10% at the FOB level.

Orange-Juice Imports and Exports


As Florida OJ production has been recovering from the 1980's freezes, U.S. OJ imports have been decreasing while U.S. OJ exports have been increasing. This trend is expected to continue in the upcoming years as Florida OJ supplies expand further and replace Brazil OJ in the U.S. market. Florida's estimated production share of domestic availability has increased from 51.4% in the 1989-90 freeze season to an estimated 86.8% for the 1994-95 season. In the upcoming years, Florida is expected to supply well over 90% of the OJ in the U.S. market.

Orange-Juice Prices

In the next several years, aggregate U.S. and Brazilian OJ production is expected to grow faster than world OJ demand, putting downward pressure on prices. Given the expectation that the growth in Florida and Brazil OJ production will eventually slow down below the growth rate in demand, the downward price pressure is expected to be reversed and OJ prices are expected to increase.

Orange-Juice Advertising Impacts on Prices in the U.S. Market

OJ advertising increases demand, resulting in additional OJ sales and/or higher prices. Price increases, however are limited by OJ imports. Advertising-enhanced prices attract additional OJ imports which, in turn, put downward pressure on the prices. In the upcoming years, with Florida supplying most of the U.S. market and relatively little need for OJ imports (some imports can be expected for blending needs), OJ imports from Brazil are not expected to increase in response to advertising-enhanced OJ prices. In this case, the impact of advertising on price is expected to be greater than earlier years when Brazilian OJ imports tended to erode the price impact of advertising. That is, OJ advertising in the U.S. market may be more effective in enhancing OJ prices in the upcoming years when Florida dominates the market and relatively few OJ imports from Brazil occur.

 If you have any questions about this report, please contact Dr. Mark G. Brown.