The juice market has been the underperformer of the soft commodities market, with prices having fallen steadily as production prospects are almost flat for the season. This appears to contrast the market expectations expressed mid-2014 that production would be sharply reduced.
Florida continues to witness strong imports, supporting supply at a time when production remains constrained, albeit on par with 2013-14. In addition, the sliding Euro and weak aggregate demand in the Eurozone, is dragging consumption and leaving Brazil with more product to ship elsewhere, particulalry the United States.
In this context, US domestic supply remains plentiful. On the other hand, consumption in the US continues to decline at a relatively rapid pace. This can in part be attributed to high prices and in part to broader diet trends. In addition, a greater retail choice of beverages has also contributed to the loss in consumer base. Fruit juice demand may be softer in the short term reflecting the economic malaise and deflationary environment.
Producers in Brazil have been adversely affected by the draught earlier in the season and the 2015-16 crop was harmed with premature fruit drop following the blossoming. The effects of El Niño last year caused increased uncertainty in the markets, influencing commodities markets from energy to orange juice. On the other hand markets depend on uncertainty in a fundamental way. Whether trading orange juice or pork bellies, the vagaries of the weather causes the uncertainty that allows many commodities futures markets to exist and flourish.
Crucially, weather in Florida weather remained freeze free. Given that the greatest risk of damage to citrus crop is from Christmas week through mid-January, Florida has managed to avoid an adverse blast of arctic air with no serious threats of cold in the forecast. The Valencia harvest in Florida typically begins in February and the harvesting of the crop is advancing and with each passing week there are fewer and fewer oranges in harm way.
According to the USDA, global orange production for 2014/15 is expected to fall 4 per cent from the previous year to 48.8 million metric tons as lower yields are forecast for Brazil, China, and the EU. As a result of the reduced availability, fruit for processing is expected to drop over 7 percent with exports down 3 per cent.
In this context, global orange juice production for 2014/15 is forecast down to 1.8 million tons (65 degrees brix) on less fruit available for processing in Brazil and Mexico. Consumption is expected to broadly match production while stocks decline for the third consecutive year.
US production is forecast down 2 per cent to 481,000 tons as a result of lower availability of fruit in Florida. Consumption is forecast up 1 percent on increased imports and lower ending stocks. Brazil's production is forecast down 10 percent to 1.0 million tons on lower crushing yields as well as reduced oranges for processing. With exports from the world's largest producer again forecast to exceed production, stocks are reduced to the lowest level in 5 years.
On the other hand, global grapefruit production for 2014/15 is forecast to rise to a record 6.2 million metric tons as growth in China more than offsets declines in Israel and Turkey. Exports fall 9 percent as consumption grows 3 percent on strong demand in China.
|Volume, million litres*||2010||2011||2012||2013||% Change|
Source: European Fruit Juice Association
For more information on the Global fruit juice market, see the latest research: Global Fruit Juice Market
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