Raw Juice Watch February 2012

8/2/2019 Raw Juice Watch February 2012

1/54

Raw Juice WatchFocus - Orange and Apple

Issue 4

February 2012


2/54

Global orange production is forecasted at 51 million metric tons (MMT), down

4% primarily due to a 12% drop in Brazil and a 22% drop in Mexico.Production is forecasted higher for all other top producers.

Orange juice global production is forecasted down 8% because of Brazilssharp decline in fruit for processing

NFC production is steadily rising and its exports have overtaken those ofFCOJ.

Chinas soft drinks industry is exploding. FCOJ imports have doubled in twoyears and orangeis the countrys favourite flavour. Global orange juicesupplies might not be able to satisfy Asian demand.

The fungicide Carbenzadim is contributing to the increase of the orangejuice prices. Since the beginning of 2012, the FDA has confiscated 14% of

the orange juice imported in the country. Some years of poor harvests in Brazil and Florida have constrained

production and prices have therefore climbed. The price of orange juicemight remain high in the next years due to productioncosts and low yields.

Citrosuco and Citrovita merge has been approved by Brazils anti trustregulator (CADE).

Raw Juice WatchExecutive Summary orange juice


3/54

China continues to dominate as the worlds largest producer and exporterand the global apple production for 2011/12 is forecasted at a record 65.2million metric tons (MT), up 4% from the previous year. The EuropeanUnion forecast is nearly 10% higher.

Surveillance of arsenic in US apple juices is ongoing, and the FDA willcontinue to evaluate all available data and information. Consumers may be

paying more attention to which countries the juice comes from. The price of apples continues to climb in China, and exports are down,

owing to smaller supplies, rising labour and productioncosts, plus risingdomestic demand. AJC production will be down 15% due to lowersupplies and the global consumption of AJC will be smaller during 2012.

Chinesefresh fruit consumption is booming. The immediate effect has

been to send the price of raw material soaring. In US and Europe beverages with a lowerjuicecontent and/or healthy

drinks (omega3, vitamins, etc.) are being developed, threatening pure juiceconsumption.

Raw Juice WatchExecutive Summary apple juice


4/54

Index

Orange

Introduction on production & trade

World Oranges Production

World Juice Production

NFC and FCOJ

Global orange juice supplies /Asian demand

Food Safety issues

World Oranges Trade Flows

World Juice Trade Flows

Introduction on price

Orange Juice Future Contracts

Retail Sales in the US

FCOJ stocks

Brazil

FCOJ price

Mergers

Apple

Introduction on production & trade

World Apples Production by region

Production and Consumption

Where does that apple juice comefrom?

Food Safety Issues

Trade exports surging

World Trade Flows by region

Introduction on price

China

2012 apple juice shortage Chinese AJC prices are settling but always

high


5/54

Overall introduction

Source: USDA/Citrus, World Markets and Trade January 2011 Citrus Update
http://www.sxc.hu/browse.phtml?f=download&id=1207128


6/54

Production


7/54

ProductionIntroduction on production & trade

Source: Citrus: World Markets and Trade, January 2012

Global orange production is forecasted at 51 million metric tons (MMT),

down4% primarily due to a 12% drop in Brazil and a 22% drop in Mexico,both caused by dryconditions. Production is forecasted higher for allother top producers. Continued weakdemand in the EU is offset bystrongdemandinRussia. US exports are forecasted down due toreduced production in California and Texas.

When it comes to orange juice, global production is forecasted down 8%to 2.2 MMT because to Brazils sharp decline in fruit for processing.However, their exports are forecasted up based on a draw down in stocks.USproduction forecast is up slightly as more Florida oranges will beavailable for processing. However, US exportable supplies will be downbecause of tight stocks. Due to the uncertainty regarding the outcome ofFDAinspections for carbendazim in orange juice, this 26th January

forecast assumes no impact on world trade.


8/54

World OrangesProduction - Worldmid2011/mid2012(forecast) 1.000 metric tons


World Total 51.352

2010/11 = 51.379

2009/10 = 49.779

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

Brazil USA China EU-27 Mexico Other

Brazils orange output has remained more or

less stable over the last 20 years


9/54

World JuiceProduction - Worldmid2011/mid2012(forecast) 1.000 metric tons at 65Degrees Brix


World Total 2.177

0

200

400

600

800

1000

1200

1400

Brazil USA China EU-27 Mexico Other


10/54

ProductionNFC and FCOJ

Source: Foodnews, The Big Issue, June 2011

Global demand for NFC orange juice slippedslightly in the recession, and

while sales are still dropping in the US, they are rising again in Europe,which is Brazils main market for NFC juice anyway.

Brazilian production of NFC has been steadily rising since 2004, whileFCOJproduction has been falling.Already, Brazilian NFC exports have overtaken those of FCOJ: customsfigures for the first five months of 2011 show that Brazil shipped 381000

tonnes of NFC orange juice, compared with about 362000 tonnes of FCOJ.

The wild card, meaning the factor that will exert the largest influence onorange juice prices, is Asian demand, that means Chinese (and possiblyIndian). Chinas soft drinks industry is exploding, and orange is thecountrys favourite flavour.In short, China will be consuming about 180000 tonnes of FCOJ within five

years. ChinasFCOJ imports have doubled in two years, and expectChinese imports to be close to 100000 tonnes by end of 2011.If Chinese consumers find that they prefer pure fruit juices and if theirincomes grow so they can afford to buy them, and if their per capitaconsumption levels rise to those of the Middle East, then the effects areincalculable.


11/54

ProductionGlobal orange juice supplies will not satisfyfuture Asian demand

Source: Foodnews,June 2011

If India and China increase their orangejuice consumption to just 4.5 litresper head, or roughly the same consumption level as the Middle East and LatinAmerica, there will not be orange juice left for the rest of the world


12/54

ProductionGlobal orange juice supplies will not satisfyfuture Asian demand

Source: Foodnews, June 2011


13/54


Source: FoodNews, June 2011


14/54

Food Safety issuesOrange juice

January 10th- The Environmental Protection Agency (EPA) hasconducted a preliminary risk assessment based on the recent reports ofcarbendazim in orange juice. Based on this risk assessment, EPA hasconcluded that consumption of orange juice with carbendazim at the lowlevels that have been reported does not raises safety concerns. The The USFood and Drug Administration (FDA) is, however, conducting its own testingof orange juice and, if such fungicide is identified at levels that present a

public health risk, it will alert the public and take the necessary action toensure that the product is removed from the market. The latest fruit juicecontamination concern comes only months after the FDA published a similarletter in relation to arsenic levels in apple (FoodQualityNews, 10thJanuary)

January 12th- The price of orange juice futures hit a 34-year high, afternews that US food safety authorities would block imports of the fruit

containing even low-levels of carbendazim. The commodity rose by nearly10% and reached its highest price (FoodQualityNews, 12th January)


15/54

January 12th- On January 11th, the US FDA was notified by US-basedcarbonated soft drinks company, Coca-Cola, that fungicide which usage isnot approved in the US is being used by Brazilian orange growers. TheBrazilian law permits the use of the fungicide (a chemical compound orbiological organism used to kill fungi or fungal spores that can cause seriousdamage in agriculture) , known as carbenzadim, to fend off black spot onorange trees (a type of mould that grows on trees). Testing on all

imported orange juices has been initiated. Until testing can be done, theimports are being held at customs (Esmerk, 12th January)

January 13th- Shipments of orange juice imported from all countries havebeen temporarily suspended by the US while it carries out testing of theproducts. Products with low levers of the carbendazim would be banned ordestroyed (Esmerk, 13th January)

January 16th- US-based soft drinks maker PepsiCo reported that itsTropicana orange juice contained traces of fungicide carbendazim, anunapproved chemical, However, the levels found in its product are below theamount that would pose a health risk (Esmerk, 16th January)



16/54

January 19th- CitrusAustralia, an industry body representing commercialcitrus growers. Has appealed to the government of Australia to makeimported citrus juices testing processes much stringent. This movefollows detection of carbendazim fungicide, which was barred in theAustralian citrus industry almost two years ago, in some imported fruit juicesin the US(Esmerk, 19th January)

January 21st- Food safety officials in Hong Kong are continuing to liaisewith US authorities over carbendazimlevelsin orange juices despitetests on the beverage returning negative results (BeverageDaily, 21st January)

January 24th The FDA is yet to find any trace of carbendazim in imports oforange juice sine promising to block entry to shipments containing thefungicide (FoodProductionDaily, 24th January)

January 30th - US food safety officials have denied entry to 11 shipments(6 from Canada and 5 from Brazil) of orange juice products, including fiveform Brazil, after carbendazim was found in import samples. The JuiceProducts Association (JPA) has applauded the FDA measures, but urged theagency to increase the allowable level of carbenzadim in orange juiceconcentrate form 10ppb to 60ppb. Testing continues, and identical measureswere implemented by food safety authorities in Australia and NewZealand(FoodProductionDaily, 30th January)



17/54

January 31st

- Since early 2012, the FDA has confiscated close to 14% oforange juice imported into the country since they contained traces offungicide carbendazim(Esmerk, 31st January)


February 6th An eventual interruption of imports would bring economicimpacts and image impacts since the product would be perceived as unsafewhen in fact it follows the highest standards of quality and food safety. The EPAhas maintained that any level of carbendazim in orange juice below 80ppb doesnot pose a health risk. FDA is still blocking the raw material from entering thecountry as it is not in line with American regulation, although there are no healthconcerns when considering the final product (FoodProductionDaily, Feb 2012)


18/54

Trade


19/54

World Oranges Trade Flows - Worldmid2011/mid2012(forecast) 1.000 metric tons


Imports (total flow 3332)

0

200

400

600

800

1000

1200

1400

EU-27 Russia SaudiArabia

Canada UnitedArab

Emirates

Other

0

200

400

600

800

1000

1200

SouthAfrica

Egypt UnitedStates

Turkey EU-27 Other

Exports (total flow 3993)

2010/2011


20/54

World Oranges Trade Flows - Worldmid2011/mid2012(forecast) 1.000 metric tons


Processing (total 22130)

0

1000

2000

3000

4000

5000

60007000

8000

China EU-27 Brazil Mexico UnitedStates

Other

Fresh Domestic Cons. (total 28561)

0

2000

4000

6000

8000

10000

12000

14000

Brazil UnitedStates

EU-27 Mexico China Other

2010/2011


21/54

World JuiceTrade Flows - Worldmid2011/mid2012(forecast) 1.000 metric tons at 65Degrees Brix


0100

200

300

400

500

600

700

800

EU-27 UnitedStates

Canada China Japan Other

Imports (total flow 1308)

0

200

400

600

800

1000

1200

1400

Brazil United

States

Mexico EU-27 South

Africa

Other

Exports (total flow 1531)


22/54

Price


23/54

PriceIntroduction on price

Orange juice is showing signs of coming off its historical price high, Some

years of poor harvests in both Brazil and Florida have constrained productionand prices have steadily climbed. The movement of the Brazilian citrusgroves from the north to more southern regions, as a means of escaping citrusdiseases, has also had a negative effect on yields. High production costshave also curtailed investment in citrus. Many trees are old, especially inFlorida. These trees must be replaced soon, or production in a decade or sowill be compromised. The good news is that while there have been declines in

the value of citrus growing land, mature orange groves are presently themostvaluable agricultural land of all and this might tempt more orangefarmers to hold onto heir land.

According to Rabobank, the price of orangejuice will remain high in the next10 years due to increasing production costs and low yields in the main

growing areas (Esmerk, June 2011)


PepsiCo has a strategy to sell more Tropicana brand OJ: add water to itsnew products. This will satisfy those consumers who add water beforedrinking OJ as they like it less thick and of course it will mean higher profitmargin (Bloomberg Business Week, February 2012)


24/54

Orange Juice Futures Contract

Source: Juice Market, December 2011

A lackofexports from Brazil tothe US fuelled speculativebuying and put off any tradeselling. Brazilian producersappear to be holding the line onprices in Europe and putting thejuice into storage.


25/54

Retail Sales in the USA

Source: FoodNews, September 2011

The US orange juice retail sales show a sharp decline from the sales of 12 months ago, but thefigures for the previous month have been revised slightly upwards.


26/54

FCOJ Stocks

Source: Juice Market December 2011

It will take time for US to build stocks, as theprocessing campaign has just started.Floridas crop is not big enough to build

enough carry over stocks for next seasonwithout a good volume of imports. Stocks ofFlorida FOCJ are at their lowest level inover a decade.

The recent FCOJ price volatility is theresult of sub-zero temperatures inCalifornia, a cold snap in Florida (lastDecember), the discovery of greeningin Texas and the carbendazim scare(Agra-Net, February 2012)


27/54

Brazil FCOJ offer price

Source: Juice Market December 2011, AgraNet, December 2011

Brazilians 2011/12 crop

is very large and the industry ispredicted to produce 1.4 milliontonnes of concentrate thisseason (1.0-1.2 is the average).Price levels are seen as stableto firm, so offersmight notcomedown in the futuremonths (Juice Market)

There are two reasons for which FCOJ price levels are not going to godown despite good harvests both in Brazil and Florida and poordemand in Europe and US (but consumption in the rest of the world iscontinuing to rise).The first reason is that the price of raw material has been underreported; the other problem is that despite the weakening of the USdollar, Brazilian production costs are high. Energy, transport,labour and others have soared(AgraNet)


28/54

Brazilwach out for
http://www.sxc.hu/browse.phtml?f=download&id=1207128


29/54

Production


30/54


Source: USDA Fresh Deciduous Fruit, World Markets and Trade, December 2011

Global apple production for 2011/12 is forecast at a record 65.2 millionmetric tons (MT), up 4% from the previous year. China, which produces overhalf of the total, is forecast to rise 5% to a record 35.0 million MT. TheEuropean Union is forecast nearly 10% higher as Poland rebounds from lastyears dismal crop, with moderate gains expected in Italy and France. The

United States is forecast up slightly.

Global exports are forecast up 10% to a record 5.6 million MT. European

Union shipments are expected to surge nearly 40% to 1.5 million MT. Chinaand Chile are expected to grow slightly on rising demand in Indonesia andRussia, while the United States is expected to contract modestly on reducedavailability. Russia is the largest importer and is expected to rise significantlyas demand outpaces production gains.

Still, the worlds largest producer of AJC, SHAANXIHaishengFreshFruitCo Ltd, is planning to buy fruit orchards in the US. The move seems to beintended to expand Shaanxis presence overseas, but the real reason is

probably because the company cannot source enough raw material inChina. This is the first hint that Chinese processors are actually consideringshifting AJC production overseas (FoodNews, December 2011)


31/54

World Apples Production - Worldmid2011/mid2012 (forecast) 1.000 metric tons

World Total 65.228

2010/11 = 59.206

2009/10 = 61.899

Source: USDA, Fresh Deciduous Fruit, World Markets and Trade, December 2011

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

Asia Europe 27 Americas Africa Oceania


32/54

World Apples Production - Americasmid2011/mid2012 (forecast) 1.000 metric tons

Americas Total 8.810

2010/11 = 8.745

2009/10 = 8.586

Brazil

USA


47% USA

(4.227)

14% Brazil

(1.240)18% Chile

(1.500)7% Mexico

(605)

4% Canada

(360)

11% Argentina

(850)

0

500

1000

1500

2000

3900400041004200430044004500460047004800


33/54

World Apples Production - Asiamid2011/mid2012 (forecast) 1.000 metric tons

Asia Total 42.809

xx% Others

(755)

2010/11 = 37.6132009/10 = 39.645

China


4% India

(1.750)

China

Turkey

India

Ukraine

Russia

Others

82% China

(35.000)

6% Turkey

(2.700)

3% Ukraine

(1.050)

2% Russia

(955)

3% Others

(1354)

05000

10000150002000025000300003500040000


34/54

World Apples Production - Europemid2011/mid2012 (forecast) 1.000 metric tons

18% Turkey

(1.580)

Europe 27 Total 6.202

EU-27: Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark,Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia,Lithuania, Luxemburg, Malta, the Netherlands, Poland, Portugal, Romania,Slovakia, Slovenia, Spain, Sweden and the United Kingdom

2010/11 = 11.032

2009/10 = 12.061

(only EU-27)

EU27 & Croatia, Serbia, Norway Total 12.064


EU-27

Croatia, Serbia, Norway

98% EU-27

111.834

2% Croatia,Serbia,Norway

230

02000400060008000

1000012000140001600018000

Europe


35/54

World Apples Production - Africamid2011/mid2012 (forecast) 1.000 metric tons

60% Egypt

(3.570)25% South Africa

(1.500)

2010/11 = 800

2009/10 = 740

AfricaTotal 800


0

500

1000

1500

2000

2500Africa


36/54

World Apples Production - Oceaniamid2011/mid2012 (forecast) 1.000 metric tons

60% Egypt

(3.570)

25% South Africa

(1.500)

Oceania (Australia) Total 745

2010/11 = 746

2009/10 = 695


37% Australia

(270)63% NewZealand

(475)

Oceania

0100200300400500600700800900


37/54

World Apples ProductionProduction and Consumption

Source: David Berryman, DB October 2011

Production

Consumption

Indicate the increase/decrease vsthe previous 12 months


38/54

ProductionWhere does that apple juice come from?

Source: Food & Beverages, September 2011


39/54

Food Safety issuesApple juice

Source: Food Safety Watch, December 2011


40/54

Us food safety authorities are still considering setting guidance levelsfor inorganic arsenic in apple juice, despite reiterating its confidence inthe overall safety of the beverage. Surveillance of arsenic in US applejuices is ongoing, and the agency will continue to evaluate all availabledata and information.(FoodProductionDaily, December 2011)

With growing controversy over the potential for apple juice to containarsenic, consumers may be paying more attention to which countries the

stuff comes from. The FDA states that the labelling should includestatements of country of origin in a way that is conspicuous. But whenbottles ere checked on the shelves at grocery stores in the New York Cityarea, it was found that several juice bottles disclosed the foreign sourcesof concentrate for their juice in print that was hard to spot or read.It is really tough to spot the countries of origin on juice bottles. See picture

in the next pages (Food&Beverages, September 2011)


There has been a major shift over the past decade in how apple juicesold in America is produced. To make apple juice, manufacturers oftenblendwater with apple juice concentrate obtained from multiplesources, and over the last decade, the concentrate they use increasinglycomes from apples that are grown and processed in China, and questionshave been raised about that countrys use of pesticides (Food&Beverages,September 2011)

F d S f t i


41/54


Source: Food & Beverages, September 2011


42/54

Trade


43/54

TradeExports surging



44/54

TradeExports surging


Global apple exportsin 2011/12 are forecastto rebound 10% to arecord 5.6 million metrictons (MT) primarily dueto a larger availablesupplies from theEuropean Union andstrong global demand.


45/54

Trade - AmericasFresh apples in metric tonnesmid2011/mid2012

Canada 360

Imports 200

Exports 25

Processing 140

FDC 395

Mexico 605

Imports 235

Exports 250

Processing 110

FDC 730

Chile 1.500

Imports 0.5

Exports 840

Processing 465.5

FDC 195

Argentina 850

Imports 1

Exports 230

Processing 350

FDC 271

Brazil 1.240

Imports 105

Exports 75

Processing 175

FDC 1.095

USA 4.227

Imports 175

Exports 800

Processing 1.408

FDC 2.194


mid2010/mid2011


46/54

Trade - AsiaFresh apples in metric tonnesmid2011/mid2012

Russia 955Imports 1.200

Exports 1

Processing 800

FDC 1.314

India 1.750

Imports 125Exports 25

Processing 0

FDC 1.850

Turkey 2.700Imports 5

Exports 75

Processing 100

FDC 2.530

China 35.000

Imports 80

Exports 1.100

Processing 5.000

FDC 29.980


mid2010/mid2011


47/54

TradeEurope (EU-27 & Croatia, Serbia, Norway)Fresh apples in metric tonnesmid2011/mid2012

EU-27 12.064

Imports 755

Exports 1.640

Processing 3.112

FDC 8.067

EU-27: Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark,Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia,Lithuania, Luxemburg, Malta, the Netherlands, Poland, Portugal, Romania,

Slovakia, Slovenia, Spain, Sweden and the United Kingdom


mid2010/mid2011


48/54

Trade - AfricaFresh apples in metric tonnesmid2011/mid2012

South Africa 800

Imports 0

Exports 315

Processing 235

FDC 250


mid2010/mid2011


49/54

Trade - OceaniaFresh apples in metric tonnesmid2011/mid2012

Australia 270

Imports 0

Exports 3

Processing 30FDC 237

New Zealand 475

Imports 1

Exports 300

Processing 120

FDC 56


mid2010/mid2011

P i


50/54

Price

P i


51/54


Source: FoodNews, October & November 2011

The price of apples continues to climb in China. At the same time, there areindications that consumers will not pay high prices for apple juice.Little fruit is coming regularly into the plants and some small processors haveclosed down their plants. Other processors bought raw material very earlyand at what seemed like very high prices then but which have since proved tobe a bargain. It is doubtful whether there are many stocks left at this priceor not.When it comes to AJC, US needs for import is not covered as it should be,

due to lack of availability. Russiasrequirements have been growing but arelikely to be smaller because of the high prices and assuming that Russia willbuy more from Eastern Europe rather than China.Europe will buy primarily from Poland, Turkey and South America, but stillit will need some supply from China.For sure the global consumption of AJC will be smaller during 2012. Still, aweakening of consumer demand will not result in the AJC price falling.

There seem to be an unrecognised problem with Chinese apple yields,claiming that while the area devoted to apple growing has expandedenormously in recent years, the government has concentrated simply on thisaspect and not on actually improving the productivity of existing (and new)orchards, and official claims of larger harvests are erroneous.

P i


52/54


The government figure is just based on the trees and even if theapple tree

number is the same or has even increased a little, the apple quantity is reallyreduced, especially for processing apple.Soft drinks majors are trying to secure their supplies for the whole of 2012at practically any price.

Source: FoodNews, October & November 2011

AJC production is forecast by USDA at 600000 tonnes in 20111/2012,down 15% from the previous year, due to lower supplies of low quality

apples and higher prices associate with juicing apples. As apple qualityimproves, more apples are being devoted to the fresh consumptionmarket (AgraNet, December 2011)

Chinese fresh fruit consumption is booming, and this boom has coincidedwith a great improvement in storage and distribution. China is now richand its citizens are learning how to spend their money. The immediate effect

has been to send the price of raw material soaring. Chinas farmers haveresolutely refused to grow apples purely for processing, because they do notwant to be dependent on a single type of customer. So there is competitionfor the fruit.

P i


53/54


In theory, a high apple juice would constrain consumption. This used to be the

case in the past and consumers, traditionally, would switch to orange or viceversa if orange was expensive and apple was cheap. But now both juicesare costly.

In the US and Europe there is a tremendous effort being put into developingbeverages with a lower juice content and which still appeal to consumers.The development of healthy soft drinks represented a tremendous threat to

pure juice consumption, and that it was relatively easy and cheap to makesuch products, now that there are some many functional and healthy

ingredients around (Omega-3, vitamins, minerals, anti-oxidants etc). There aresigns that such products are winning consumers.


Apple Juice Prices


54/54

Apple Juice Prices2012 global apple juice shortage in China

The Chinese AJCsupply situation islurching from precarious

to potentially catastrophic,due to lack of fruitdeliveries. 2012 will bea challenge: coveringAJC demand will not beeasy, as customersMostly need to cover aMinimum 12-monthcontract period.

Chinese AJC is an extremelyexpensive product and its price willnot be falling in the foreseeablefuture. The price has trebled in lessthan three years.Some processors are worried, havingsigned contracts early in the seasonbased on the expectation of muchlower raw material prices. Brokencontracts or price renegotiationshave happened or are happeningright now.

Raw Juice Watch February 2012

Documents

Transcript of Raw Juice Watch February 2012