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Market Data 06/07/2018

Brazil: Inventories may be critical again by June 2019; growers interrupt harvesting in SP

The smaller crop forecast for the Brazilian citrus belt in 2018/19 (São Paulo and Triângulo Mineiro), at 288.29 million 40.8-kilo boxes (almost 30 % lower than the 2017/18 season), should result in critical inventories at processors from São Paulo State on June 30 2019.

Brazil: Inventories may be critical again by June 2019; growers interrupt harvesting in SP
(Photo: CEPEA)

The smaller crop forecast for the Brazilian citrus belt in 2018/19 (São Paulo and Triângulo Mineiro), at 288.29 million 40.8-kilo boxes (almost 30 % lower than the 2017/18 season), should result in critical inventories at processors from São Paulo State on June 30 2019. In 2017//18, despite the larger crop, supply was not significant, only enough to slightly increase the low inventories from 2016/17.

Thus, by June 2019, inventories should be 50 % smaller, considering forecasts for the 2018/19 crop. Data released by CitrusBR (Brazilian Association of Citrus Exporters) on May 22 estimated ending stocks of Frozen Concentrate Orange Juice (FCOJ) Equivalent from 55.9 thousand tons to 154.7 thousand tons in June 2019. CitrusBR forecasts were based on the volumes crushed in the 2017/18 season, at around 243.4 million 40.8-kilo boxes, 34 % down compared to the 370 million boxes crushed in the current season (2017/18).

Cepea calculations, however, indicate inventories are more likely to be from 55.9 and 102.6 thousand tons, not reaching the maximum level estimated by CitrusBR (at 154.7 thousand tons). To forecast that scenario, CitrusBR considered exportations will keep firm. Now, if processors do not aim to reduce inventories that much, the volume shipped may decrease in 2018/19.

The 2017/18 ending stocks of orange juice should be at 305.9 thousand tons by June 30 2018, 20.3 % up compared to that forecast in February/18. The positive 2017/18 harvesting ensured comfortable inventories to processors this year.

In general, the global demand for orange juice has been firm, mainly from the United States, Considering Florida crop may be 35 % lower, according to the USDA, juice availability should continue low in the next season (2019/20).

Regarding growers’ revenue, forecasts for the short-term indicate prices may not change much. Most farmers have already closed contracts with processors, and even if bidding prices rise from now onward, only a few growers would have fruits available for trading. Besides, productivity should be low, since the number of boxes produced per hectare results in a higher cost per unit and lower margins.

BRAZILIAN MARKET – Orange sales were slow in the in natura market in May, due to both colder weather in São Paulo and truckers’ strike, which halted transportation. With the protests, which started on May 21, part of the fruits harvested stayed on trucks.
In that scenario, growers preferred to interrupt harvesting late in the month, aiming to avoid losses. In May (2 – 30), pear orange quotes averaged 26.33 BRL per 40.8-kilo box, on tree, 11.7 % down compared to that in April (2 – 30).

TAHITI LIME – The strike has affected the domestic and international markets of tahiti lime as well. According to Cepea collaborators, purchasers were concerned about acquiring fruits and not receiving them, while growers feared to be affected by flow difficulties. Farmers consulted by Cepea affirmed that the fruits that are still on tree should not be damaged by the harvesting interruption.

In May (2 – 30), tahiti lime quotes averaged 45.13 BRL per 27-kilo box, harvested, 142.5 % up compared to that in April (2 – 30).

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