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Orange crop is set to be the smallest since World War II, causing OJ prices to rise

It has sent orange juice prices higher during the pandemic, and they are likely to continue to rise: Futures on frozen orange juice have risen by more than 50% during the pandemic, and they rose to the highest level in two years last week - rising by 5 % only Thursday.

"You have your classic supply-demand mismatch," said Shawn Hackett, president of Hackett Financial Advisors, which specializes in agricultural commodity analysis. Therefore, consumers should expect "much higher prices in the supermarket."

The expected rise in orange juice prices comes as consumers are already facing inflation across multiple sectors. The U.S. consumer price index rose 7% over the past year before seasonal adjustments, the steepest rise in prices since June 1982, the Bureau of Labor Statistics reported last week.

Over the past year, food consumed at home was 6.5% more expensive, while restaurant prices rose 6%. Prices for fruit juices and non-alcoholic beverages have already risen by 5.7% this year, and futures on orange juice have risen.

Supply is shrinking

Last week, the USDA said it expects Florida to produce 44.5 million boxes of oranges this year, an unusually small harvest. That would be the smallest since the 1944-45 season, when 42.23 million boxes were produced, a Florida statistician at the USDA told CNN Business.

"The citrus crop in Florida is becoming one of the smallest crops since the 1940s," said Judith Ganes, president of J Ganes Consulting, which offers commodity analyzes to the food and agriculture industries. "It will be even less than the production that took place several years ago ... when Hurricane Irma blew through Florida," she said.

Florida's orange crops, which are responsible for most of the country's orange juice, have been dwindling for years, she noted. A culprit is a creeping citrus disease, called citrus greening, which leads to smaller oranges and less fruit per hectare. tree.

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"The disappointment of another drop in the forecast is hard to overestimate," Shelley Rossetter, assistant director of global marketing at the Florida Department of Citrus, said in a statement. She added that Florida citrus growers are focused on "seeking new solutions for citrus greening."

Smaller oranges produce less juice, Ganes explained. This means that processors, who already have to pay more due to the reduced supply of oranges, also have to buy more oranges to make the same amount of juice that comes from healthy fruit. This in turn means higher costs for consumers.

At the same time, international breeders are struggling with their own set of shortcomings.

"Brazil had a historic drought last year that significantly hurt the orange crop used to produce orange juice," Hackett said. "They're not going to have exportable supplies on [typical] level."

And like supply contracts worldwide, orange juice is experiencing a pandemic-driven renaissance.

Demand is growing

Before the pandemic, "U.S. demand for orange juice had been down for 20 years in a row," Hackett said.

This is due in part to the fact that consumers' changing ideas about health have made fruit juices, which are relatively high in sugar and calories, out of date. It's also because over the years, many Americans stopped regularly eating breakfast at home, and instead opted for an on-the-go meal.

But during the pandemic, many have again started eating breakfast at home, and some have put orange juice back on the menu.

As a result, US sales of 100% unconcentrated juices rose from $ 5 billion to $ 5.5 billion in 2020 and remained mostly at that level by 2021, according to data from Euromonitor International.

"We are still dealing with demand today that is far above what it was in 2019 before the pandemic hit," Hackett said. "So we have this renewed demand at a time when the supply available is far, far down."

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