Low yield may limit revenue in 2018/19

Cepea, January 4 2019 – The smaller production of orange in the citrus belt in Brazil (São Paulo and Triângulo Mineiro) in 2018/19 kept the demand for the raw material high at processing companies in São Paulo during 2018. Consequently, prices have increased. The yield decrease, however, may limit the profitability of citrus growers this season.

 

In general, prices of orange remained high this year in both the industrial and the in natura segments. The 30.8% production decrease in the citrus belt, which may amount only 275.7 million 40.8-kilo boxes (Fundecitrus – Citrus Defense Fund data), underpinned values.

 

In the spot market, prices rose mainly after the confirmation of the low supply (in August), changing from 20.00 to 24.00 BRL per box. For citrus growers, however, the price increase was only positive for those who had not traded fruits through mid and long-term contracts yet – which did not surpass 22.00 BRL per bag, including harvesting and freight to the crushing company.

 

Therefore, although prices were firm in 2018, the production decrease may limit profits of producers who trade with the industry. The low number of boxes produced per hectare tends to push up costs per unit. Considering the average of this season (from July/18 until December, 28, 2018), prices of pear orange and late varieties in the spot market closed at 22 BRL per 40.8-kilo box, harvested and delivered at the processor, 16% up compared to that in the same period in 2017.

 

IN NATURA MARKET – Unfavorable weather conditions in late 2017 (during the development of flowers of the 2018/19 crop) and in the first semester of 2018 (period of fruit growing) reduced the supply of orange. This scenario, along with the high demand from the industry, boosted quotes for the in natura product in 2018.

 

The price average for pera rio, which was more affected by the climate, hit the highest level of 2018 in October, of 32.83 BRL per 40.8-kilo box, on tree, 70.4% more than that observed in the same month of 2017, in nominal terms.

 

The low availability of pear orange in 2018 also increased the demand of other varieties, such as valência, reducing even more the supply of this fruit in the in natura market. In this scenario, some citrus growers started to anticipate the harvesting – which may boost quotes in early 2019, when the supply is typically smaller.

 

TAHITI – The price trend for the tahiti lime in 2018 was similar to peak that observed in 2016: atypically, values remained at high levels. Even in the supply (February), quotes were underpinned by the firm demand in both international and domestic markets.

 

EXPORTS – The production recovery in Florida and the decrease in São Paulo have limited Brazilian shipments of orange juice. In the partial of this season (2018/19 – from July/18 to November/18), shipments to the United States decreased 45% in relation to those in the same period of the season before. Exports to all destinations, in turn, totaled 375.8 thousand tons, 27% lower than in 2017/18.

 

(Cepea-Brazil)

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