Growers' woes

The global wine glut may be ending but now there is an orange glut building up.

Global demand for orange juice has been declining, particularly in the main consuming regions of Europe and North America, with global imports falling from 1.5 million tons in 2008/2009 to a forecasted 1.1 million tons by 2019/2020, affecting the long term prospects for the industry. This trend is starting to take its toll on Brazil, the largest producer which currently supplies some four-fifths of world exports. According to a new report by Dutch Rabobank (June 2013), this waning demand has driven a reduction in investment and the exodus of independent producers, both of which signify a considerably diminished Brazilian harvest, and will be reflected in an increase in prices in 2014.

Andres Padilla, Rabobank analyst, commented: "The Brazilian orange juice sector is heavily dependent on exports, with the country accounting for 80 percent of the global export market. This makes it especially vulnerable to changing demand in the key export markets of Europe and North America, which are currently witnessing a consumer shift towards less expensive drinks with lower sugar and acidity contents.

"This shrinking global demand, combined with large Brazilian orange crops in 2011 and 2012, has led to record high stocks of frozen concentrate orange juice (FCOJ), causing the price to tumble in late 2012. Low prices for orange producers, and a lack of long-term contracts with juice processors have resulted in a large number of smaller independent Brazilian producers reducing their exposure or exiting the sector".

In October 2012 Rabobank said that a massive global oversupply of wine between 2004 and 2010, that depressed prices and led many growers to rip up vines, looks like coming to an end. However, this may come too late for many grape growers in Australia. According to a recent study in Australia, one third of grape-growers in South Australia's premium wine regions wish to leave the industry. The survey shows that grape prices have dropped by half since 2008 and that only 10 percent of growers are paid on time by the wine companies. Australia is the world's seventh largest wine producing country behind Italy, France, Spain, the U.S., China and Argentina. Amongst the world's major wine exporters it ranks fourth behind Italy, Spain and France.

After the wine glut, the orange glut, the milk glut, the Arabica coffee bean glut, the olive oil glut ... what's next?