Short-term fruit price effects resulting from high retail orange juice prices and accumulated inventories

Abstract

During the 1970s, 1980s, and early 1990s, U.S. retail market orange juice prices and delivered-in processed Florida orange prices were over 90% correlated, on an annual basis. Much like in the past, when processed orange prices increased reflecting a reduced orange crop following hurricanes in 2004 and 2005, wholesale and retail orange juice (OJ) prices also increased significantly and OJ consumption declined. However, Florida’s crop partially recovered in the following season and fruit prices declined, but retail OJ prices remain high. The result is continued low OJ consumption, high and increasing OJ inventories, and low cash market fruit prices, considerably below growers’ break-even costs. This is a dangerous threat to the Florida citrus industry. This paper analyzes the current relationships between delivered-in processed orange prices, retail OJ prices, and OJ demand, and examines processing firm and market behavior that explains these changed price relationships.