It wasn’t until the 1930s, after the coffee crisis, that the Brazilian citrus industry began to play a major role in the economy. By 1939 oranges had become one of the 10 most important export products for Brazil.
The sector’s growth was further boosted in the 1960s by the big freeze in Florida that destroyed a large part of its citrus groves, which meant Brazil had to increase its production, as an alternative supply base, in order to meet existing orange juice demand in the US and Europe.
By the 1980s, Brazil had become the largest citrus fruit producer in the world and the leading orange juice exporting country. Today, Brazil is the still the leading global producer of oranges, with over one million hectares of citrus trees planted. Production is based mainly in the state of Sao Paulo, which makes up for 70 per cent of the sector’s total volumes, which on average surpasses 400 million boxes (one box is 40.8kg).
The majority of Brazilian orange production is destined for the frozen concentrate orange juice (FCOJ) industry, and it is also in the state of Sao Paulo, that 98 per cent of juice is processed. In 2004, Brazil accounted for 83 per cent of global exports, which equates to 1.25 million tonnes of juice and the European Union is by far the largest market for juice, with Belgium surprisingly leading the demand.
Over the past few decades, the growth in the Brazilian citrus sector has paralleled growth in exports as the industry evolved. However, it is with orange juice that Brazil has dominated the world markets.
The 2004 citrus season produced 242m boxes, but the combination of oversupply and lack of buyers caused prices to drop. Hortifruti Brasil reported in December 2004 that for the sector to make up for the poor returns, producers in the Sao Paulo region need to harvest about 360m boxes by June 2005, which represents a volume increase of more than 28 per cent.
Furthermore, fruit for industry also fell by 23 per cent in the same year, because at the start of 2004, companies were reluctant to re-negotiate contracts that expired during the 2003/04 harvest. As a result many growers harvested their groves without a guaranteed market for their fruit. It was only towards the end of the year, mainly because of the lack of supply from the hurricane damage caused in Florida and the uncertain volumes in the Brazilian sector, that companies showed increased interest in buying fruit. As a result, farm-gate prices rose in November, although according to Hortifruti Brasil, they were still below grower expectations.
It is no surprise that because of its scale, the Brazilian citrus sector attracts a lot of attention from governmental departments and academia. In 2000 and again in 2003, a study was undertaken by PENSA - Programme for Agroindustrial studies by the University of Sao Paulo, and supported by Fundecitrus (Citrus Plant Protection Fund), to map and analyse the Brazilian citrus sector. The PENSA study mapped and quantified all parameters that influence the sector including machinery, citrus producers, packaging, nurseries, the juice industry, fresh fruit suppliers, transportation and logistics.
Researcher and coordinator of PENSA, Marcos Fava Neves says: “With the second study carried out under this partnership, we could trace some comparisons and analyse the citrus sector’s evolution in recent years.”
According to the study findings, at the end of 2003 the Brazilian citrus sector represented 1.87 per cent of the total Brazilian exports, and 4.47 per cent of agricultural exports, of which FCOJ accounts for 72 per cent. The state of Sao Paulo’s importance continues to increase because it is the major supply base, responsible for 95 per cent of the country’s orange juice production and exports.
During the three-year mapping period, Brazil maintained its position as the largest orange producer worldwide, and oranges represented 49 per cent of all Brazilian fruit production. The sector’s importance to the country can also be measured by the fact that 400,000 jobs are generated and it contributed US$139m to the national economy.
The PENSA study also highlighted the considerable growth potential that exists for fresh fruit in both domestic and international markets, because the country only exports less than one per cent of its overall fresh citrus volumes. Although domestic orange consumption has suffered with a 40 per cent drop during 2003, in contrast, domestic demand for ready-to-drink juices has been increasing in recent years at an average rate of 40 per cent a year.
“The highest growth markets for our industry are Europe, China, India and other Asian countries, and they will be the focus in our export campaigns”, says Admerval Garcia, chairman of the Brazilian Association for Citrus Exporters, Abecitrus. But given the changes to the main companies in the sector throughout 2004 - Cargill exited the Brazilian market and sold its facilities to Cutrale and Citrosuco, and Sucocitro was sold to Citrovita - there are fewer players to go after this foreign demand.
“Based on the latest PENSA study and domestic market potential, the sector can develop strategies and collective actions to encourage and stimulate consumption,” says Neves.
“This was one of the studies’ goals and as a result of the 2000 study, a promotional organisation, Laranja Brasil, was created by the companies in the sector with the objective of promoting Brazilian citriculture.”
Although Brazil is the world leading citrus producer and exports of FCOJ are increasing, the fresh orange market has remained stagnant at around 30 per cent. To change this, researcher Orlando Sampaio Paces of Embrapa (Brazilian Agricultural Research Corporation) has recommended the introduction of a new orange variety, Salustiana, to help extend the harvest of the orchards. “Along with declining orchard longevity, another disadvantage of the citrus sector in Brazil is the inability to sustain a year-round supply base.” he says. But the increase in tree disease is a also a major factor that hurts the citrus growing region of Sao Paulo, resulting in reduced fruit quality and rising costs associated with pest management.
The Salustiana variety is seedless and has its origins in Valencia, Spain. It is a clone of Nucellar and has a high tree productivity of 40t/ha. “It is ideal for both the fresh market and the juice-processing sector,” says Paces, “and should be put into production in 2005.”
Abecitrus chairman Garcia says that a significant change for the sector has been the impact of new US anti-terrorism laws which have placed greater demands on shipping lines. However, this is not the only pressure the US is placing on the Brazilian industry. At the time of writing, the US Commerce Department was conducting an anti-dumping investigation based on allegations made by Florida citrus growers that their businesses were harmed by $158m worth of Brazilian orange juice imports.
Seven Brazilian companies will be investigated including Citrosuco Paulista and Frutopic. The Florida-based associations have requested that an import duty be placed on Brazilian FCOJ, as well as pasteurised not-from-concentrate juice, because they believe exports to the US have being priced below cost for several years, hurting the state’s industry. The decision to impose such duties will take several months, and in the meantime, Brazil’s citrus will continue to benefit and evolve.
