ORLANDO, Fla. -- Retailers and consumers will probably see little or no increase in the price they pay for orange juice in the coming months, despite devastating citrus crop losses suffered this month by Florida growers in the wake of Hurricane Charley, commodity analysts said.
Florida's Department of Agriculture said 115,000 acres of groves in the southwestern part of the state had been heavily damaged by the Class 4 hurricane. This acreage accounts for an estimated 20% loss for Florida's citrus industry.
Yet a record 2003 harvest and a sluggish demand for orange juice have led to huge inventories of frozen and chilled orange juice. These will offset damage to the current crop.
"There's a lot of product out there that was stored. Prior to the hurricane, private estimates of the current crop's yield were coming in at 223 to 230 million boxes," said Boyd Cruel, soft commodities analyst for Alaron Trading Corp., Chicago. "If we do lose 10 to 20 million boxes of that, which is what we're estimating now, it's still a lot of product given the current level of demand."
Before the hurricane struck, orange juice futures were trading at their lowest average levels in almost three decades -- a slump that never translated to lower prices at wholesale or retail.
"For the past year and a half, the [orange juice] futures market has been cascading lower and lower, but retail prices haven't moved," said Judith Ganes-Chase, president of J. Ganes Consulting, Katonah, N.Y. "There was a huge margin between processors prices and what consumers were seeing on retail shelves. There's enough spread there that I would be fairly shocked to see retail prices climb as a result of the damage caused by Hurricane Charley."
For the 40 weeks ended July 3, total orange juice sales were down 3.6% in all retail channels; however, prices were up 0.5% over the same period a year earlier, according to combined ACNielsen Scantrack and Homescan data provided by the Florida Department of Citrus.
Despite their lower costs, processors have been reluctant to lower prices, Ganes-Chase said, because they believe that doing so would erode their pricing power without significantly improving volume sales. The low-carb diet craze is widely perceived to be at the root of softening demand.
"Whether low carb is flat, declining or getting ready for round two, I'm not sure," she said. "But even for people who were on a low-carb diet once and are no longer fanatically following it, I think there are some lasting changes of habit and lifestyle. There may be some orange juice consumption that is lost forever."
The storm will also have little impact on prices of fresh oranges, since the bulk of oranges grown for fresh consumption is sourced from groves in California and the Southwest.
The extensive hurricane damage could be a knockout blow for many southwest Florida citrus growers, who were already dealing with dismal prices and intensifying competition from Brazil. Yet the region's vegetable farmers are counting their blessings.
Had the hurricane struck just a few weeks later, major disruptions to the state's tomato crop may have occurred, too. Although Florida is better known for its citrus industry, it also produces more than 90% of the fresh tomatoes consumed in the United States between October and May, according to the Florida Tomato Committee, Orlando.
"[Tomato growers] may be delayed a few days in planting due to rain that followed the hurricane," said Gene McAvoy, an agricultural extension agent for the University of Florida. "But I don't anticipate any major supply problems unless there is more tropical weather."