Weather issues may constrain the recovery of the 21/22 harvest

Cepea, June 1st, 2021 – Estimates released on May 27 confirmed the expectations of agents consulted by Cepea, that the orange harvest in the 2021/22 season might be higher than that in the previous crop, but the output might not be high.

 

According to Fundecitrus (Citrus Defense Fund), the orange harvest in the Brazilian citrus belt (São Paulo and the Triângulo Mineiro) should total 294.17 million boxes (of 40.8 kilos each) in 2021/22, a slight 9.5% up from that in the 2020/21 season, which was much lower than the previous. In general, the output in the 2021/22 season should be 10.5% lower than the average in the last 10 crops.

 

In late 2020, Cepea collaborators believed that the harvest would be 15% higher, but, with the lower rainfall in 2021, agents reduced expectations, which were confirmed by Fundecitrus.

 

This scenario results from the weather issues – majorly rains below the average – in both the second semester last year (which hampered flowering and flower settlement) and the first semester of 2021 (influencing fruits growth).

 

This slight recovery interrupts the biennial behavior of orange groves since 2015/16 – of years of high production interleaved with years of low production – which had been balancing supply and demand.

 

A season of low production followed by another one of low production may boost the demand from processors for oranges (which is already high) and push up prices. Until the end of May, agents from large-sized processors were bidding up to 30.00 BRL per 40.8-kilo box, harvested and delivered to processor. It is worth to mention that bids started in late March, as agents already feared low production.

 

Although higher prices bring some relief to farmers, profit margins may still be tight or even negative for those who have had low productivity, since low yield tends to increase the production cost per box. This year, costs have been higher because of the valuation of inputs, which is linked to the dollar appreciation against Real.

 

High demand from processors reflects the effects of low production on ending stocks. Data from CitrusBR (Brazilian Association of Citrus Exporters) show that the initial inventories of Frozen Concentrate Orange Juice (FCOJ) in the 2021/22 season (July 2021) should be around 273 thousand tons. Considering production estimates from Fundecitrus, of 294 million boxes, the volume to be crushed may be around 260 million boxes, considering a possible decrease in the share of the in natura market, which should consume 34 million boxes. In this scenario, Cepea calculations indicate that ending stocks in the 2021/22 season (June 2022) may be around 200 thousand tons, which had not been observed since late 2016/17.

 

It is worth to consider that calculations take into account stable sales and the average industrial yield in the last five crops (271.7 boxes to produce a ton of FCOJ). However, rains below the average may favor this scenario, with less boxes needed to produce a ton of concentrate juice.

 

AREA AND NUMBER OF PLANTS – As already expected, the area allocated to orange groves in the citrus belt did not change much compared to that in the previous season. According to Fundecitrus, total area (São Paulo + Triângulo Mineiro) is estimated at 379.409 thousand hectares, 4.1% down from that in the 2020/21 season. The number of plants is forecast at 189.6 million, 3.5% down.

 

(Cepea-Brazil)

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