Mon, Jun 10, 2013 - Page 15 News List

Brazilian orange growers face high production costs

AFP, RIO DE JANEIRO

High production costs have orange growers in Brazil, the world’s top orange juice exporter, bracing for a tough citrus season, despite last season’s record harvest and high juice prices.

“The orange market is going through its worst moment in two years: World consumption is stagnating, production costs are rising and processors are getting more and more powerful,” said Marco Antonio do Santos, president of the Taquaritinga growers’ union.

In the last season, Brazil produced an estimated 1.4 million tonnes of oranges, well above the 1 million tonnes forecast for the upcoming season.

The record harvest solidified the country’s ranking as the world’s leading orange juice producer and exporter, but it also increased world stocks even as Brazilian exports have been falling since 2007.

Soaring production costs mean the overproduction has not translated into lower prices — prices of concentrated juice have actually tripled since 2005 to reach US$2,300 a tonne — but it is still not enough to keep growers out of the red.

Booming Brazil has updated its labor code and increased its minimum wage, which this year rose to the equivalent of US$337 per month from US$332.

Land lease costs and prices of pesticides linked to oil prices have also risen.

“The government calculated that we have a production cost of about US$5 per crate [40.8kg], while we are selling it at US$3.5 to US$4,” Antonio do Santos said.

“In the citrus belt of Sao Paulo, half of the orange farms have disappeared over the past 10 years, and only the most productive survive,” Antonio do Santos said. “The other producers have switched to sugar cane, corn and soybean.”

According to data from the government’s crop supply agency Conab, 36,700 hectares of orange trees were uprooted between last year and this year.

Independent growers have been hurt by increasing coordination among the companies that process and market the juice.

One coalition of exporters — the Brazilian Association of Citrus Exporters (Citrus BR) — monopolizes 97 percent of orange juice exports.

“We are uniting because the bottling companies are merging,” said Ibiapaba Netto, a spokesman for Citrus BR, adding that, despite the rising price of concentrated juice, they cannot afford to pay growers any extra.

“Orange juice faces new competition from energy drinks, multi-vitamin beverages, cold teas, flavored waters and Chinese apple juice, which is cheaper,” he said.

Both sides agree their industry could benefit from tapping into new markets — and that one with major potential is right at their feet: the domestic Brazilian market, where orange juice is rarely consumed.

“Brazil is booming. In a few years, our country can have as many people drinking orange juice as in Germany, which is the world’s leading consumer per capita,” Antonio do Santos said.

The orange production chain generates more than 200,000 direct jobs in more than 300 Brazilian cities and export revenues of between US$1.5 and US$2.5 billion annually.

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