A Brief Assessment of the Orange Price and Market Situation

By Allen Morris, UF/IFAS/CREC

Currently fruit prices are high and so is grove profitability. But this is temporary, unless something is done to turn weak and falling orange juice demand around. Analysis shows that both orange juice demand and consumption have dropped sharply in the past 10 years. Demand is how consumption behaves in response to price changes while consumption is disappearance of the product without taking prices into consideration. Currently, OJ demand is 21% less at all prices, while demand for juice blends is up 200% at all prices. This decline in orange juice demand is due to advertising that does not effectively differentiate orange juice or tell consumers why that difference has value, and the elimination of the FDOC merchandising field force.

This problem with the market has been seen dramatically in recent years. In 2006/07, the Florida orange crop dropped from 148 million boxes to 129 million boxes, while orange prices on the cash market increased to $2.11 per pound solids. Retail prices increased by 22%, to $5.91 per gallon. In response, the retail OJ market plummeted 16%. The sluggish sales caused juice inventories to expand from 363 million gallons to 624 million gallons, a 72% increase. The result was that fruit prices on the cash market dropped from $2.11 to $1.06. The spring of 2008 was a dramatic example of that decline. Between January and June, cash Valencia prices dropped from $1.65 to $1.05, a 36% drop in only 5 months.

Increasing consumer OJ demand is where our focus should be. Every minute we delay, we lose more of our market to competing juice blends. Over the past five years orange juice consumption has dropped 27% while consumption of juice blends has increased 8%. And juice blends are higher priced than orange juice. The quicker we start to increase consumer demand, the quicker we will see positive market results.
It is a proven fact that generic marketing does indeed grow OJ demand. Brand advertising only benefits a specific brand rather and does not grow the OJ market as a whole.

The Florida Citrus Industry and the FDOC need to create a detailed marketing campaign with a compelling message that tells why orange juice is different than other juices and drinks and explains why that difference has value. Now is certainly not the time to become complacent about the orange juice market! We need to take steps to restore OJ demand or everyone is in trouble!

**What do you think?  Please feel free to get in touch with us.**