ORANGE MARKET - Q1 2020

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1. Overview:

Global orange juice production for 2020/21 is forecast to fall by 17% to 1.7 million tonnes (65 brix) due to lower output from Brazil. Consumption is projected to be flat and global trade is forecasted to be lower with smaller imports for the US and a sizable drop in Brazil’s exports.

Brazil’s orange juice production is forecast to drop by 25% to 992,000 tonnes with fewer oranges for processing. Consumption and stocks are both forecast to be slightly higher while exports are expected to be 27% lower.

Although US production of orange juice is forecast to be steady at 330,000 tonnes, increased carry-in stocks has boosted the total supply by 5%. In spite of the higher available supply, consumption is still expected to be flat and ending stocks are conse- quently forecast to rise. Production in the European Union is projected to be down by 16% to 81,000 tonnes. Consumption in the EU remains steady and imports are offset- ting the decline in production.

2. Brazil situation:

There is still a limited volume of fruit being processed from the 2019/20 crop in Brazil. Following a longstanding drought towards the end of last year, the groves have received a lot of rainfall over the past two months and juice yields are poor as a result, coming in at 300+ boxes per tonne of FCOJ.

There is also some major flooding in some regions. The forecast for production from the current 2019/20 crop in Brazil is 385 million boxes.

Processors are currently paying BRL20+/box, compared with an already expensive BRL18-20/box last month. Nevertheless, it is not unusual for fruit prices to rise towards the end of the crop due to the reduced availability. In addition, some of the larger processors are currently running fruit to NFC, which has allowed them to pay slightly more for fruit.

3. 2020/2021 crop:

The next crop in Brazil will be derived from multiple blooms. The latest bloom is occurring now. As mentioned, growing conditions are very wet at the moment. While this is unlikely to have an impact on the fruitlets from the first bloom, it may reduce the flowering from the latest bloom. A multiple-bloom crop always creates a certain amount of problems with quality in terms of sizing, brix and juice yields.

Due to the wetter conditions, current indications on the size of the 2020/21 crop now range between 250-270 million boxes, compared with 260-280 million boxes last month. getting a handle on this figure is very important for the industry. Analysts say that gauging whether the flowers from the latest bloom will convert to fruit is probably the most important factor in the medium term in order to better determine the size of the next crop. Future price direc- tion for FCOJ will also depend on gaining a better idea on the size of the 2020/21 crop. Most industry sources expect prices to remain stable or move slightly higher over the medium term.

Orange juice prices are soaring on global markets.

The future price of orange juice has spiked by more than 20% this month as consumers look for healthy products during the coronavirus pandemic. While demand has risen, supply has been hit as producers struggle to export goods due to transport restriction.

This has caused a rise in the price of orange juice futures which indicate its cost for delivery in the coming months. Orange Juice futures are the best performing asset so far this year.

The Covid-19 outbreak is hitting both the supply and demand for orange juice. The immune boosting properties are pushing consumer demand while shortages of tanker spaces and operational airlines to transport the products to market is restricting supply.