Market Report - Global Orange Spring 2017

It’s always important to look at the overall global supply situation of any one product when trying to understand what’s happening in your local markets. Depending on the quality, quantity and origin of the product you buy, then what you pay and the challenges you face could be very different. Sometimes these supply dynamics are not just linked to the product and the origin of what you buy but are impacted by supply conditions in other parts of the world.
Just before launching our full Spring Market Report we’re focusing on orange from Brazil, Italy, Spain, South Africa and USA to give you a general oversight of how we see today’s situation.

Brazil

Orange Oil CP

Orange Oil CP Citrus sinensis Harvest: July - December

The orange story was certainly the talking point of 2016 with prices soaring to record levels. Recovery isn’t an overnight process and we all know that for the most part of 2017 times will still be difficult but it appears the tide is turning and there is some light at the end of this dark tunnel.

Not that anyone needs it but let’s remind ourselves of how we ended 2016:

  • The lowest crop in Brazil for 10 years!
  • A further 17% reduction in production of fresh fruits in the 2016/17 season
  • 2nd worst brix yield in history
  • Oil prices average 30% higher in 2016 from 2015 (FOB Santos Jan-Oct)
  • Oil prices in December 2016 40% higher that December 2015 with the gap widening month on month

This maybe a case of it simply can’t get any worse and maybe that’s correct. Are price levels of USD 12.00 /kilo and above sustainable for such a commodity? Do such prices do irrevocable damage to the industry’s credibility and the long-term use of this oil? Perhaps, but none of these questions were factors in what happened last year, just resulting questions you had to ask yourself after such an event.

There is no doubt we’re still in for a rough period as prices in January 2017 peaked at record levels and local juice stocks by June 2017 (end of the season) are expected to be at an all time low. Juice is always a good indicator for our oil sector as without juice production there’s no oil. Let’s bear that in mind as we read on.

And so we move on and look ahead to this year’s Brazilian orange production and the numbers appear to have suddenly improved, largely led by one company’s dramatic turnaround. However, these benefits will not be felt in the oil industry until much later in the year as today we are starved of supply and still have a period to wait until the next harvest.

According to USDA information, it expects Brazil’s fresh orange production to increase 27% over the course of the next season (starting July 2017 – ending June 2018). “Steady blossoming and adequate weather patterns have sustained the potential recovery of citrus yields this year” the USDA states. However, it does go on to say that this is an early estimate and a lot can happen between now and then, as we know.

If we focus on the juice sector, there are talks of doubling stocks in Brazil, which will increase the global position by 15% as juice demand starts to recover a little. If we are expecting stocks of juice to double in Brazil this should mean availability of materials to produce more oil, but what about prices? Does more supply mean lower prices.

In January 2017 spot orange prices in Brazil reached record highs and we know most of the supply pipelines around the world are running dry and between now and the new season it can only get worse, not better. Once the new season is in full flow it will take time to get to a position where demand is again satisfied so it’s likely to be towards the end of Q3, early Q4 before we see any price benefits from what we hope is an improved season ahead.

CItrusBR will release its data in May on the new season, which will be a good indicator as to what to expect for the rest of the year. For now let’s take some positives from what we hear but remain realistic in that prices always fall much slower that they go up (just like your gas/fuel at the gas/petrol station!)!

This maybe a case of it simply can’t get any worse and maybe that’s correct. Are price levels of USD 12.00 /kilo and above sustainable for such a commodity? Do such prices do irrevocable damage to the industry’s credibility and the long-term use of this oil? Perhaps, but none of these questions were factors in what happened last year, just resulting questions you had to ask yourself after such an event.

Market prices USD 12.00 - 13.00 /kilo

Italy

Orange Oil Blood

Orange Oil Blood Citrus sinensis Harvest: December - February

It has been a terrible few months for orange production in Italy as rain and hailstorms earlier in the year damaged or destroyed the ripening fruits to the extent that many have described it as the worst crop in living memory.  Total fruit for processing was down as much as 50% in March with hardly any fresh deliveries expected in April, marking the close of a bad campaign.

Prices of fresh fruit and oil are impossible to quantify at the moment as there’s either simply too little stocks to talk about or for what stock is available there is too much price speculation with significantly more demand than available product.

Referencing an article in Food News, it also went on to discuss the organic crop situation as follows:

“Furthermore, it has not been possible to process any quantities of organic blood oranges this season. Unprotected by any agrochemicals, the climatic conditions have resulted in a total loss of the organic blood orange crop this year.”

Market prices Euro 10.00 /kilo

South Africa

Orange Oil CP

Orange Oil CP Citrus sinensis Harvest: June - September

Last year wasn’t the best for South African citrus growers as drought conditions throughout 2016 and a lack of spring rains (September to November) have reduced output significantly – in some parts by as much as 30%. Overall the story was more mixed with some new plantations coming online to compensate for losses elsewhere but the official story tells us overall production was down 5%.

The bigger concern moving forward is the reduction in planted areas as many growers switch to soft citrus (tangerines, mandarins etc.) as export prices and demand yield better returns for farmers.

The 2017 season will kick off around June and expectations are for a similar year to 2016. Some may not give such an optimistic appraisal but others say there is nothing really significantly different from last year to make any other judgment.

Let’s hope that overall South Africa gets more rains and at the right times. Maybe this is just too much to wish for!

Market prices N/A

Spain

Orange Oil CP

Orange Oil CP Citrus sinensis Harvest: October - May

It’s been a quieter than expected for the Spanish orange oil market so far this season. What started with great optimism has been constantly challenged with changing conditions but there is still time for Spain to deliver on its earlier good forecasts.

Weak export demand before the start of the year, along with some severe weather conditions in December and January, dampened some expectations but the situation is slowly recovering, and with the Valencia type being a late bloomer we expect better news over the next weeks as the season is likely to last until June.

Although we haven’t seen any great impact from the Spanish yet to support the struggling oil markets, the latest data from the Spanish Ministry of Agriculture, Fisheries, Environment and Food (MAPAMA), Spain’s MY 2016/17 fresh orange production is forecast at 3.6 MMT, an increase of 17.6% compared to the previous campaign. The main Spanish orange producing areas are the regions of Valencia, Andalusia, and Murcia with an expected increase in orange production for MY 2016/17 of 19%, 17.3% and 18% respectively.  Hopefully some of this trickles down to the processors and we soon have some good news for Spanish orange oil!

Market prices Euro 10.00 - 11.00 /kilo

USA

Orange Oil Florida

Orange Oil Florida Citrus sinensis Harvest: February - May

Just when you thought it couldn’t get any worse……it does!

Our readers will be used to this story now as with each passing report and analysis the situation only seems to get worse.

New figures recently released in March by the USDA show an estimate for the 2016/17 season ending at 17% lower than last season, which was the lowest since 1963/4. The new 2016/17 estimate is for 69 million boxes, down from a closing figure of 81.6 million for the 2015/16 season.

All in all, the picture remains unchanged with the devastating effects of the past few years really becoming the new reality. Citrus greening, it seems, has irrevocably changed the citrus industry in Florida, although we all hope new research can make some contribution soon towards rebuilding this depleted market.

Market prices USD 12.50 /kilo