Orange Juice May Rise as Disease Strikes Florida

Orange-juice futures may rise about 6 percent over the next 18 months because of crop disease in Florida, the world’s second-largest producer, said Kenneth Geld, chief executive officer of Louis Dreyfus Commodities in Brazil.

Prices may rise to $1.25 a pound, Geld said yesterday in an interview in Sao Paulo. Orange juice for January delivery rose 1.7 percent to $1.174 on ICE Futures U.S. in New York yesterday, and has gained about 73 percent this year. Louis Dreyfus is one of the world’s three largest processors of orange juice.

The U.S. Department of Agriculture said Oct. 9 that Florida will produce 136 million boxes of oranges in the harvest that is just starting, down from a revised 162.4 million in the previous season. Farmers have removed trees to slow the spread of citrus greening, an incurable bacterial disease that kills the crop.

“The citrus-greening situation in Florida is very serious and is likely to fuel prices in the next six to 18 months,” Geld said. Low temperatures in the state and rising global demand will also contribute to price increases, he said. The orange harvest in Florida runs from Oct. 1 through January.

Greening is the most-damaging citrus disease in Brazil, the grower-run Fund for Citrus Plant Protection, or Fundecitrus, said on its Web Site. The bacteria has infected 50 percent of trees in Araraquara, which accounts for about 10 percent of output in Sao Paulo state, the world’s biggest growing region.

Florida Contamination

“The contamination in Florida is far worse than in Brazil,” Guilherme Oliveira Silva, an analyst at research firm Forb Consultoria, said today by phone from Araraquara.

Louis Dreyfus Commodities accounts for more than 15 percent of global production, according to its Web site. The company, with facilities in Florida and Brazil, produces about 83 million boxes of oranges and 330,000 tons of juice a year. Brazil is the world’s largest orange-juice producer.

Louis Dreyfus is expanding in Brazil to cut its reliance on independent growers, according to Geld. Production from its own farms will account for as much as 40 percent of its needs in Brazil within the next five years as trees mature, compared with about 15 percent at present, Geld said. The company processes about 60 million boxes of oranges a year in Brazil. Each box weighs 90 pounds, or 41 kilograms.

‘Never Invested as Much’

“We have never invested as much in citrus in Brazil as in the last three years,” he said, declining to specify the exact amount Louis Dreyfus was spending on the expansion. The company is evaluating whether to expand groves in Brazil by 15 percent, to 35,000 hectares in the next two years. Production costs would be lower than in Florida, he said.

Louis Dreyfus is seeking to boost profit through selling so-called premium orange juice products such as Not From Concentrate in Europe, a pasteurized version of the drink which conserves flavor better and commands higher premiums.

“We want to diversify from the commodity and sell added- value products,” Geld said. Europe is expected to consume 1.5 billion liters of Not From Concentrate this year, a four-fold increase from five years ago, he said. “Over 70 percent of it comes from Brazil and this is a huge opportunity for us,” he said. Orange juice for January delivery fell 1.6 cent, or 1.4 percent, to $1.158 as of 1:55 p.m. in New York today.

Source : Bloomberg