Brazil: Orange juice inventories may be higher than strategic limit in 20/21, but below that in 21/22

The volume of orange juice stocked at Brazilian processors in the 2020/21 season (June 2021) is expected to be higher than the strategic limit (250 thousand tons). On the other hand, in the 2021/22 season (June 2022), the volume stocked may be lower than that.

As regards the 2020/21 crop, a report released by CitrusBR (Brazilian Association of Citrus Exporters) on June 9 indicates that the inventories of Frozen Concentrate Orange Juice (FCOJ) Equivalent may total 310.759 thousand tons in June 2021, 34 % down from that in the same period of the 2019/20 season, but 14 % up from that previously estimated (in February 2021).

In the 2021/22 season, although oranges still need to ripen, juice inventories are likely to decrease, despite the possible recovery of production forecast by Fundecitrus (Citrus Defense Fund).

Although this scenario is not a threat to world supply in the 2021/22 season, it has been concerning agents about availability in the following season (2022/23), since production would have to be higher in order to avoid a lack of juice. However, with the recent area reduction in the Brazilian citrus belt, production should hardly surpass 350 million boxes. Thus, the prices paid to orange farmers in Brazil are likely to continue at high levels, at least until next season.

ORANGE AREA IN BRAZIL – The crop forecast survey released by Fundecitrus in late May surprised agents from the Brazilian citrus sector. The area allocated to orange groves in the 2021/22 season had its second largest decrease – in terms of both hectares and percentage – since the beginning of the PES project, in 2015/16.

In the 2021/22 season, the area allocated to orange groves might total 379.4 thousand hectares, 16.262 hectares smaller (- 4 %) than that in the previous season.

According to Fundecitrus, one of the reasons for this decrease is the drought, which is becoming more and more severe in Brazil, majorly in the current season. Thus, area reductions were more significant in the citrus-producing regions of São Paulo that had low rainfall in the last couple of years, with the worst effects observed in non-irrigated, condensed and rootstock groves, which are not that drought-resistant. In these groves, productivity decreased sharply last season, and many plants died. Besides, the current high prices of some commodities, such as corn, soybean and sugar, have attracted farmers.

This area reduction should considerably lower the productive potential of the citrus belt to around 340 million boxes of 40.8 kilograms in years of good productivity (1,000 boxes per hectare, on average).

BRAZILIAN MARKET IN JUNE – The weak demand for oranges in the in natura market of SP along with the current low temperatures pressed down orange prices in the first fortnight of June. However, expectations are for limited price drops or even price rises as processing steps up, reducing supply in the in natura market, largely of early varieties.