Some French professionals of the sector believe that the price of orange juice and other fruit for juicing increased significantly due to Brazil's virtual monopoly on orange juice.
Prices of oranges increased 55% in four years, 115% for grapefruit and 60% for apples, according to the French inter-sector partnership (UNIJUS).
Prospects are no better for 2013, says the President of UNIJUS, Emmanuel Vasseneix, who fears increases of up to 70% for grapes, 20 to 60% for apples and 40% for grapefruit. Meanwhile, orange prices could increase between 10% and 25%.
The raw material accounts for 53% of the juice's production cost and increases immediately affect prices paid by consumers.
Among the explanations for this sharp rise, Vasseneix notes Asian consumers preference for fruit juices, stimulating global demand. But, when it comes to oranges, it is mainly because of Brazil's dominance, something that worries French industrialists. "By itself, Brazil controls 70% of the world's orange production, and even up to 85% with the orchards it acquired in Florida," the other major production region, says Vasseneix.
Emmanuel Manichon, president of the Professional Institute for the Quality of Fruit Juices (QUALIJUS) estimates that Brazil is no longer a developing country. The average salary of orchards doubled in ten years and, simultaneously, the Brazilian currency, the real, has appreciated against the dollar, contributing to higher prices.
Vasseneix argues that, "Brazil artificially maintains the high cost of raw materials, about US $2,400 to US $2,500 per ton of concentrated juice," considering that it takes a litre of concentrate to obtain 6 litres of juice.
While the worldwide price runs the risk getting to 2,100 dollars, the Brazilian Government buys reserves and dumps them into the domestic market through a school nutrition program.
"Currently, the reserves have reached record levels of 1.1 million tons," says Thomas Gauthier, UNIJUS' general secretary.
The uprooting of vines penalized the production of juice.
The combined effect of these factors is immediate in a tense market, says Gauthier.
And the orange, the most consumed fruit juice in the world, isn't the only one concerned: there is also concern regarding the supply of apples and grapes. "China, a major source of global supply of apples, stopped squeezing their own in 2012 so they could sell the fruit," says Thomas Gauthier.
According to the professional journal Food News, China produced 33.2 million tons of apples in 2010 while the United States, the second largest producer, produced 4.2 million tons, far behind China. Chinese apples often complete production for France and other European countries, as in 2012, when winter and late frosts at the time of flowering affected production.
As for the grapes, also affected by the bad weather, juice production is traditionally in competition with wine. And the spectacular advance of cognac sales in Asia increased the pressure. "Regarding grapes, juice production is never a priority, to which we have to add that the European Union encourages the uprooting of vines in France, Italy and Spain," laments Gauthier, noting that that was why the lack of production capacities was felt in 2012.
Source: estrategiaynegocios