Hurricanes keep troubled citrus industry on the ropes
Thursday, September 9, 2004
With Florida's $9.1 billion citrus fruit industry already reeling from years of overplanting, competition from imports and the low-carb craze, the recent back-to-back hurricanes destroyed more than a fifth of the state crop and will likely mean higher prices for consumers in the coming weeks.
The latest blow, a double whammy that battered the state from the west coast and then from the east, swept through at least two-thirds of the fruit-growing land over three weeks. Grocery store prices for citrus products may rise by as much as 25 percent later this fall, some analysts said.
Florida produces 75 percent of the nation's oranges. About 90 percent of them are used to produce juice. The state also supplies about half of the world's supply of grapefruit.
In mid-August, Hurricane Charley decimated about 115,000 acres of groves in several large, citrus-producing counties just south of Orlando. The losses, nearly $150 million in value, affected 20 percent of the total crop, according to Florida Citrus Mutual, the state's largest association of citrus growers. Then, last weekend, Frances' 13 inches of rain and 105-mph winds yanked fruit from trees and left orchards waterlogged.
Officials are still tallying the damage and crop loss from Frances. Updated U.S. Department of Agriculture crop estimates won't be available until next month.
Before Hurricane Charley, the U.S. Department of Agriculture estimated the state's citrus crop at 225 million boxes, with each box equaling about 90 pounds.
"The impact of both storms is pretty severe," said Dan Gunter, executive director of the Florida Department of Citrus, an agency of state government. "The extent of the losses are real difficult to estimate. You had fruit blown off trees by the wind, some trees that lost limbs that won't produce as much fruit next year, and some trees pushed right over. We've got groves that are now standing in water and that damages trees and cuts the oxygen off to the roots."
For some orange and grapefruit growers, many of whom have been losing money the past few years, two devastating storms so close together could spell the end of their livelihood. It might cost many of them more than it's worth to harvest the surviving fruit, the growers association said.
Prices have been on the wane for months. Sales of orange juice have been hurt by the popularity of low-carb diets such as Atkins. Declining demand and large crops have meant lower prices for the growers.
Orange juice had recently been trading near 30- and 40-year lows in the futures market, traded on the New York Board of Trade. In May, the crop reached 58 cents a pound, the lowest in 40 years.
"Any food that has carbs has been impacted by the low-carb diet," Gunter said. "It has impacted our sales of orange juice. The low-carb diet is the primary reason we've seen sales of orange juice decline in the last three years." Citrus manufacturers were able to gain some ground however, by introducing several low-carb drinks, which caused wholesale prices to rise again, said James Cordier, the head trader at Liberty Trading Group in St. Petersburg.
Then Hurricane Charley hit, shrinking the crop and fueling prices higher. Since Charley, prices on the futures market have risen by about 20 cents per solid pound, which equals about a gallon.
"If a particular producer has lost 60 or 70 percent of their production, it reaches a point where it's no longer economical to harvest at all, and that's where we could run into real trouble with supply later on," Cordier said.
He said he would expect to see wholesale prices rise by 20 percent and retail prices to rise by 20 to 25 percent.
"We will learn of the production figures long before harvest and retailers won't wait to make the raises, they'll do it after they find out what kind of losses" occurred, Cordier said.
Although no official estimates are yet available for grapefruit, some growers have told state officials they've lost 60 to 80 percent of their crop. Florida's citrus industry was on track to produce 40 million boxes of grapefruit this year.
"We think we've lost a significant amount of grapefruit in the four counties," hardest hit by Frances, including Indian River, Martin, St. Lucie and Palm Beach, Gunter said. Grapefruits "are heavy, large, and reaching maturity and the weight causes them to drop off the trees easily."