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| 8-14-09
A surge of optimism capping the 2008-09 citrus season lost momentum from a forecast suggesting Florida's orange crop has not shrunk enough to boost farm prices.
The widely anticipated forecast released Friday by Elizabeth Steger of Citrus Consulting International Inc. in Orlando showed Florida growers would produce 154 million boxes of oranges in the 2009-10 season, which begins in October.
"That's bearish for farm prices," said Tom Spreen, a leading citrus industry economist from the University of Florida in Gainesville. "The market has shrunk to the point where 150 million boxes will just about supply the entire U.S. market for orange juice."
"I was really hoping for about 140 million boxes to stimulate the (farm) price level," said Ray Bentley, a Winter Haven-based grower with 2,600 grove acres, about half in Polk County.
Bentley and other growers may get their wish if another closely watched pre-season forecast of 141 million boxes of oranges in 2009-10 comes closer to the mark. That came from Louis Dreyfus Citrus Inc., a Winter Garden juice processor and subsidiary of the French conglomerate, Louis Dreyfus Group.
"There was quite a bit of optimism in the last few weeks that prices would be significantly better next season. This just adds to the confusion," said Larry Black, production manager at Peace River Packing Co. in Fort Meade, which owns 1,500 acres, almost all in Polk.
Black and Hood Craddock, president of Latt Maxcy Corp. in Lake Wales, which owns 5,000 citrus acres, agreed the disparity between the Dreyfus and Steger estimates will cause many growers with unsold oranges to stay out of the market until the first official citrus crop forecast on Oct. 9 from the U.S. Department of Agriculture.
"The farm price had firmed up significantly in the last two weeks," Craddock said. "This will soften the market."
Before Friday, deals for 2009-10 oranges were based on the prevailing belief of an orange crop between 140 million and 150 million boxes, growers reported. Some growers believed the crop would be as low as 135 million boxes, said Mike Sparks, chief executive at Lakeland-based Florida Citrus Mutual, the state's largest growers' representative.
About half the annual Florida orange crop has already been sold to a juice processor or citrus broker through multi-year contracts, which guarantee growers a floor price despite market conditions. Roughly 20 percent is committed to cooperative plans, in which growers share the profit at the end of the season based on orange juice sales.
The remaining crop is sold on the "cash market" shortly before or during the season. Cash farm prices depend very much on current market conditions, and that's where the crop size has the greatest impact.
The low-crop expectations had pushed the farm price for oranges up 25 percent or more in early cash contract negotiations, growers reported. They might stay that high if the Dreyfus estimate proves more accurate.
If Steger comes closer to next season's actual orange crop, however, "it will be a struggle for growers to survive with the prices we expect," said Bob Norberg, an economist and deputy executive director of the Florida Department of Citrus in Lakeland.
U.S. orange juice sales constitutes another major factor affecting the farm price. Rising domestic OJ sales since March was the primary reason for growers' optimism at the end of 2008-09.
"When you're talking 154 million boxes of oranges, it will be difficult to move that much OJ," Sparks said. "The 141 million boxes is a much more manageable number."
Spreen calculated a 154 million-box crop would mean 950 million gallons of orange juice, or close to the 1.2 billion gallons of U.S. orange juice consumption in 2008-09. The difference is not enough to move farm prices, he said.
In half of the past 10 seasons, Steger's estimate fell within 6 percent of the final USDA orange crop count.
The exceptions are the 2004-05 and following seasons, when hurricanes later destroyed much of the state's citrus crop, and in 2007-08, when her forecast overshot the final crop by nearly 17 percent.
The Dreyfus estimate has ranged from 2 percent to 9 percent off the mark during the last decade, except the two hurricane seasons. But it overshot the 2006-07 orange crop by 24 percent.
"These early estimates, we enjoy hearing them and speculating, but they're very unreliable," Black said. "The USDA forecast is the most reliable."
Read the original article on The Ledger.