Unless Brazil’s 2023/24 orange harvest provides a significant supply surprise, record high orange juice (OJ) prices will remain for another season, Rabobank says. A sharp contraction in global demand in 2H FY23 could also bring prices down.
Rabobank said the record high prices are because of a “very tight” market, with smaller-than-expected production and low inventories.
Rabobank senior analyst Andrés Padilla said, “We see very low inventories from two consecutive small harvests in 2020/21 and 2021/22, plus worsening news for the current 2022/23 season, creating the perfect environment for OJ prices to see a significant rally this year, surpassing levels last seen back in 2017 and climbing toward all-time highs.”
Meanwhile, a decline in demand for OJ is forecast to accelerate this year due to higher prices and weakening consumer demand. Rabobank said that would allow for the market to find an equilibrium at high levels.
It’s expected prices will stay high until forecasts of Brazil’s 2023/24 harvest come through and provide some clarity.
For Australia, Rabobank associate analyst Pia Piggott said prices for OJ have also been subject to inflation.
“While orange juice prices are not specifically tracked, the most recent quarterly Australian Consumer Price Index found the non-alcoholic beverages category – of which orange juice is part – had risen 10.5 per cent in the year to December 2022,” she said.
Piggott said local price increases in orange juice were likely to be the result of a combination of both global market factors and conditions in Australia which had affected local production.
“Australia does import approximately half of the orange juice consumed here – including a considerable amount from Brazil – however the other half is produced from local oranges, so the challenging weather conditions that growers have encountered here in the past year, with flood damage in a number of areas, would also have impacted production and be feeding into higher prices, despite increases in navel orange rejects being channeled from eating to juicing,” she said.
In the US, ongoing production decline in Florida has seen imports rising over the last four years.
“The base assumption here is that the US will remain primarily dependent on imports in the coming years, as there is no clear path for a sustained recovery in Florida under current conditions. Significant additional investments would be required to increase production, but rising production costs are making new investments in orange groves less attractive,” Rabobank said.
Globally, Rabobank said the market would see limited relief in the short term from the current supply squeeze. Inventories will remain constrained for some time and even with positive news out of Brazil, the market fundamentals are supportive of high prices during 2023/24.
“However, the demand-side risks should not be underestimated. A ‘weaker’ consumer in Europe and North America, already feeling the effects of inflation, could reduce OJ consumption at an even faster pace in 2H FY23 and cause the market to be more balanced quicker than current estimates,” Rabobank said.
