But the outlook for the state's grapefruit growers is not as positive.
By Kevin Bouffard
THE LEDGER

LAKELAND | Florida orange growers can expect another good year for farm prices in the 2007-08 Florida citrus season, although down slightly from last season's record prices.

But grapefruit growers could leave some 2 million boxes on the tree this season because prices offered by the state's juice processors will be less than the cost of harvesting, according to Mark Brown, the chief economist for the Florida Department of Citrus.

For consumers, who saw a 21.6 percent increase in retail OJ prices during the past season, orange juice price hikes should moderate while grapefruit juice should remain flat or dip slightly.

That's the scenario Brown laid out for the Florida Citrus Commission at its Wednesday meeting. The 2007-08 season began last month and runs through June.

The 2004 and 2005 hurricanes continue to affect citrus industry economics in 2007-08 and will likely do so into the next decade. In the five seasons before the hurricanes, Florida growers produced an average 226 million boxes of oranges and 45 million boxes of grapefruit.

The U.S. Department of Agriculture has projected the state's orange growers will produce 168 million boxes this season, up 39 million boxes (30 percent) from 2006-07. It projects grapefruit production at 25 million boxes, down 2.2 million boxes (8 percent) from last season.

About 95 percent of the state's orange crop goes to juice, and historically about 60 percent of grapefruit becomes juice.

The farm prices for Florida oranges should remain high because the past three seasons of low production have left the state's juice processors with their lowest inventories since the 1980s, when three major citrus freezes hit the state. Processors started this season with just 576.3 million gallons, Brown said.

That should keep the demand for the new orange crop high.

Brown projected Florida growers would receive $5.86 per box for early and mid-season juice oranges, which are harvested until March. He projected the farm price for the Valencia orange crop, picked from March to June, at 8.04 per box on tree.

If that proves accurate, growers would receive nearly 19 percent for early-mids and almost 34 percent less for Valencias. The USDA estimated juice orange growers last season received $7.21 per box for early-mids and $10.75 for Valencias, both historic highs not adjusting for inflation.

"On tree" represents the money growers receive after the juice processors deduct harvesting, transportation and other costs of getting the fruit from grove to plant. The growers' profits come after they deduct caretaking, labor and other costs from the on-tree price. Most growers reported having their most profitable season in 2006-07.

The record orange prices led processors to increase the price for all OJ products last season.

The average retail OJ price jumped 21.6 percent to $5.70 per gallon in 2006-07, up from $4.69 the previous season. Although U.S. volume sales declined 12.8 percent to 649 million gallons last season, processors received $3.7 billion for OJ products, up 6 percent.

Brown projected retail OJ prices could rise to $5.86 up to $6.06 per gallon in the coming year. At the lower level, volume could increase slightly to 653 million gallons, but it would drop to 640 million at the higher price.

Per capita (the number of gallons consumed by the average U.S. consumer), OJ consumption could fall to 4.2 gallons in the coming year, down slightly from 4.3 last season but down a full gallon from the 2000-01 season.

"I'm optimistic we'll see better sales than what we see here," said Citrus Commissioner Bob Behr, an economist and vice president at Florida's Natural Growers in Lake Wales. He was the only commissioner to comment on Brown's report.

Grapefruit

Brown painted a much darker scenario for grapefruit juice. Farm prices for grapefruit shot up after the 2004 and 2005 hurricanes blew as much as 75 percent of each season's crop off the trees. As a result, the retail price of grapefruit juice, which had been declining since the 1990s, soared because processors feared they would exhaust their inventories.

The average retail price for grapefruit juice reached $6.22 in 2006-07, up 30.7 percent from three years earlier, according to Brown. U.S. volume sales crashed to 21.7 million gallons last season from 34.2 million in those three years.

The sales collapse meant Florida processors actually began building grapefruit juice inventories despite the crop declines. Inventories went to 56.9 million gallons at the start of this season - a 40-week supply at current sales rates - from 41 million gallons a year earlier.

Those inventories mean grapefruit growers can expect to lose money on this season's crop after processors deduct their costs. Brown projected they would lose as much as 71 cents for white grapefruit and $1.52 for red grapefruit.

Fresh grapefruit would still be profitable, Brown said. He projected growers would get $10.32 per box on tree for fresh white grapefruit and $10.51 for fresh red varieties.

But not all grapefruit can be sold as fresh. Packinghouse workers cull fruit with scars and blemishes from the packing line, and the "elimination" fruit gets sent to the juice plants. That's where grapefruit growers would lose money.

But if Brown's projected farm prices prove accurate, many growers will not sell grapefruit that normally goes directly to a processing plant from the grove, he said. As a result, as many as 2 million boxes (8 percent) of this season's crop will be abandoned, or left unharvested.

If that happens, Brown added, there could be some upward pressure on the farm price for juice grapefruit, which means some growers could break even on that crop for the season. He projected retail prices for the season at $6.16 to $6.36 per gallon.

For other fresh citrus growers, Brown projected $14.80 per box on tree for late-season Honey tangerines, $13.80 per box for early tangerines, $9.65 for tangelos and $7.90 for Navel oranges. He projected early-mid oranges sold fresh would get $3.90 per box on tree and Valencias $4.85.

If that proves accurate, Florida's entire citrus crop this season will be worth $1.32 billion, down slightly from $1.36 billion last season.

[ Contact Kevin Bouffard at kevin.bouffard@theledger.com or call 863-802-7591. ]