Orange Production Sours on Weaker Demand

Brazil Orange Production
Brazil Orange Production
Brazil Data Talk: Brazil has emerged as the largest producer of oranges and orange juice in the world, followed by the United States, China, India and Mexico. This has been attributed to a host of factors including good weather and hydrographical conditions, excellent soil and massive investment in relevant agricultural technologies. Due to the eradication of less productive plants in São Paulo state, which is the largest orange producer in Brazil, there has been a decrease in the planted area, leading to a reduction in production. Orange production dropped sharply to 16.3 million tons in February 2013 from 18.4 million tons during the previous month. This represents a 17.09% year-on-year decline in orange production, compared to the modest 2.10% growth seen in January. February also saw the orange plantation area declining to 695.84 thousand hectares from 810.44 thousand hectares in January 2013, though average yields remained fairly stable at 23.36 thousand kilograms per hectare. Orange plantations suffered from weak external demand, resulting in massive excess supply and growing inventories; part of Brazil’s orange crop has not been harvested due to poor demand, mainly due to the economic setback in the European markets and by health-related sanctions imposed by the US government. Europe and the US are among the largest buyers of Brazilian orange juice. This was compounded by further losses from adverse weather conditions, and crop disease and pest infestation. Indeed, producers are converting towards more versatile crops, such as sugar cane, given its lower sensitivity to fluctuations in external demand. Sugar cane plantations grew to 9.82 million hectares in February 2013 from 9.30 million hectares during the previous month, representing a 5.6% month-on-month increase. Brazil Orange Production In 2012 orange juice exports totalled 1.90 billion kilograms, or USD2.28 billion, of which 42.7% was exported as frozen orange juice. However, tighter regulation on orange juice exports imposed by the US, and lower external demand for orange juice overall, saw annual orange export volumes and value decline in 2012 by approximately 5.56% and 4.20% respectively. Orange exports, meanwhile, declined to approximately USD8.7 million in 2012 from USD16.36 million during the previous year. As a commercial cash crop, the poorer global economic outlook will continue to see weaker external demand for oranges and their derivative products, at least in the near future. Indeed, the switch to other crops, particularly sugar cane, reflects the pessimism regarding a quick recovery in the demand for oranges and orange juice. For their part, the Brazilian authorities sought to reinvigorate orange production through successful litigation of the US, in the Dispute Settlement Body of the World Trade Organization (WTO) regarding export sanctions of orange juice to the US. In the lawsuit, filed in 2009, Brazil challenged the legality of the methodology known as “zeroing”, used by the US to apply an antidumping measure against Brazilian exporters which resulted in a higher price of Brazilian products in the US market. The measure served as a de facto protectionist surcharge; upon the conclusion of the litigation, the US was obliged to amend their calculation methodology in Brazil’s favour. Despite the favourable outcome of the litigation, the Brazilian authorities continue to monitor the implementation of the new American legislation to guarantee a positive outcome for Brazilian producers. By Bruno Vasconcelos - CEIC Analyst Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. Back to Blog
20th March 2013 Orange Production Sours on Weaker Demand

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