The Economics of the Florida Citrus Industry

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The Economics of the Florida Citrus Industry

• Thomas H. Spreen
• Professor
• Food and Resource Economics
• University of Florida

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Citrus Production Regions in Florida

• Citrus production in Florida is in three main
  production zones central (ridge), southwest, and
  the east coast (Indian River).
• The Ridge area continues to be an important
  production region because it gives the highest
  yields and is located nearest to the processing
  plants. It is vulnerable to freezes, but a major
  freeze has not occurred since 1989.
• The southwest area is less freeze vulnerable, but
  drainage is an issue.

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• With hurricanes now a weather threat, drainage
  has become a more important issue.
• The southwest also has less temperature variation
  which can adversely affect yield.
• The Indian River region has historically
  specialized in fresh fruit production. Fruit
  yields are typically the lowest in the Indian
  River area.
• It is currently dealing with citrus canker,
  citrus greening, and also the effects of two
  hurricanes.
• Competition from population growth is a threat in
  all three production zones.

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Florida Commercial Citrus Acreage 2006
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Production Systems in Florida

• Since most citrus produced in Florida is
  processed, the goal of most producers is to
  maximize juice production.
• Recent trends in the evolution of production
  systems include water conserving irrigation and
  higher tree density.
• In newer plantings, tree density averages 150
  trees per acre (370 trees per ha.)
• Most irrigation is done via micro sprinkler.
  Drip irrigation is not widely used.

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• Fertilization is generally related to fruit
  production. Average nitrogen application is 200
  pounds per acre (224kg per ha.). Both granular
  and foliar fertilizer application are used.
• Weed control is another expense. This
  accomplished through the application of both
  herbicides and mechanical mowing.
• Major pest and disease issues include mites
  (especially rust mite), greasy spot,
  phytophthora, decline (blight), and leaf miners.
• The new threats are citrus canker and citrus
  greening (HLB).

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• Citrus canker is a major issue for fresh fruit
  producers.
• For processed fruit producers, however, a
  combination of copper sprays and selective
  removal of diseased trees should suppress the
  disease to tolerable levels.
• Citrus greening, however, is a major threat to
  commercial citrus production, both in Florida and
  Brazil.
• A successful strategy to combat greening has not
  yet been devised.

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Estimated Production Costs for a 10 Year Old
Central Florida Processed Orange Grove
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Preliminary Production Costs for a 10 Year Old
Southwest Florida Processed Orange Grove
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Increase in Fertilizer Costs for a 10 Year Old
Southwest Florida Processed Orange Grove Without
Citrus Greening Costs
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Change in Production Costs for Southwest Florida
Processed Oranges 2002-03 to 2007-08 Without
Citrus Greening Costs
Change
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Trends in Florida (U.S.A.) Fertilizer Prices
1999 to 2008
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Trends in Sao Paulo (Brazil) Fertilizer Prices
2002 to 2008
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Comparisons of Mixed-Fertilizer Prices in Florida
(U.S.A.) and Sao Paulo (Brazil) 2002 to 2008
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Increasing Fertilizer Prices Have Been Related to
Increase in Fuel Prices
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Current Citrus Cost Information Can Be Obtained
atUF/IFAS CREC Websitewww.crec.ifas.ufl.edu/ex
tension/economics
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Generic Advertising of Citrus

• Florida initiated a generic advertising program
  for citrus funded by the growers in the 1930s.
• Today, over 40 million is raised annually.
• Because of the greening threat, however, nearly
  one-half of the budget will spent on production
  research this year.
• The program recently endured legal challenges on
  two fronts.
• Historically, an equalization tax was levied on
  all citrus imports that entered Florida.

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• Import suppliers claimed (and were successful)
  that the equalization tax was equivalent to a
  tariff and states cannot levy tariffs.
• Now OJ imports from Brazil and elsewhere pay only
  a small administrative fee so that now the
  generic advertising program is funded solely by
  Florida growers.
• I have just completed a study that suggests that
  there is considerable free-riding by Brazil on
  the Florida promotion program.

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• In addition, a group of Florida growers
  challenged the constitutionality of the generic
  advertising program.
• That suit was settled in favor of continuance of
  the program, but there still some elements of the
  industry that question the effectiveness of the
  advertising program.
• Both fresh and processed citrus consumption is
  promoted.
• The tax is levied at the packinghouse or
  processing plant is deducted from growers
  return.

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• This group is balanced geographically, and fresh
  versus processed fruit interests.
• Advertising is conducted in a variety of outlets
  including network television, magazines, and
  in-store promotions.
• An agency of the State of Florida, the Florida
  Department of Citrus, administers the program. A
  group of commissioners, appointed by the Governor
  of Florida, oversees the FDOC.
• The FDOC also has regulatory responsibilities
  including enforcement of minimum Brix and ratio
  standards in citrus juice.

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Brazil and Generic Advertising

• The Brazilian citrus industry is dominated by
  four large processors who are also four of the
  largest growers. These grower/processors along
  with a handful of other growers account for
  nearly 50 percent production.
• Even though small in number, there is little
  cooperation in the Brazilian citrus industry.
• While they do cooperate to fund FUNDECITRUS, an
  entity related to plant health, they have shown
  no signs of cooperating in marketing.

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• Consequently, there is no generic promotion of
  citrus products in Europe or other markets
  outside of the United States.
• Unlike Tropicana and Floridas Natural in
  Florida, processors who also have retail brands,
  there is no example in Brazilian processors
  participating in the retail market.
• They view themselves as commodity producers and
  let someone else deal with marketing.

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Concluding Remarks

• Citrus growers in Florida face a disease threat
  from citrus greening. Population growth is also
  driving up the cost of land and the availability
  of water.
• Production costs have increased over the past
  five years with fertilizer showing the greatest
  percentage increase.
• Additional costs associated with citrus greening
  are approximately 450 per acre.

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• Florida has had a generic promotion program for
  citrus for nearly 70 years.
• The program has withstood recent legal
  challenges.
• In 2008, disease threats have resulted in a
  portion of advertising funds being diverted to
  production research.
• Brazil has shown no interest in participating in
  a generic promotion program.

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