Fresh Squeezed

Morgan O'Rourke


August 1, 2013


This year marks the 30th anniversary of the semi-classic comedy Trading Places, in which Eddie Murphy and Dan Aykroyd attempt to get revenge on two unscrupulous commodities brokers that tried to bankrupt them. In the climax of the movie our heroes manipulate the frozen orange juice commodities market to turn the tables on the villainous Duke brothers, in the process making a fortune while leaving their tormentors in financial ruin.

Like a lot of people, as a kid I never could quite grasp how they pulled off the climactic scheme. All I knew was that the bad guys lost, “short selling” and “cornering the market” sounded cool, and evidently my favorite beverage could make you a fortune. That was enough for me.

But these days, it seems that it is harder than ever to make money selling orange juice. In June, the Florida Department of Citrus reported that retail orange juice sales in the United States fell 4.2% from the month before to 39.89 million gallons—the lowest volume sold in 11 years. In fact, orange juice consumption in the United States is down more than 25% since 2003. This decline in sales mirrors global trends, which indicate that orange juice imports will also fall more than 25%, from 1.5 million tons in 2008-2009 to 1.1 million tons in 2019-2020, according to industry analyst Rabobank. For countries like Brazil, which supplies 80% of the world’s orange juice exports, and top domestic-producing regions like Florida, these numbers are especially troubling.

The decline in orange juice consumption can be partially explained by a shift in consumer preferences. Diet-conscious consumers have become increasingly aware that despite its healthy reputation, orange juice has as at least as much sugar and calories as some sodas, so they are moving away from the breakfast mainstay to lighter alternatives. Other former orange juice drinkers are switching to less acidic options like waters and teas. (I, for one, have finally had to acknowledge the ravages of age and give up on my old favorite unless I’m willing to chase it with a Zantac to avoid the heartburn.) Meanwhile, new choices like coconut water, energy drinks, tea/juice hybrids and all sorts of other exotic, vitamin-enhanced or low-calorie beverages generate all the marketing buzz, making orange juice seem boring by comparison.

And as if changing tastes weren’t challenging enough, orange growers are also facing a more serious problem. Reportedly, a bacterial disease called citrus greening has decimated millions of Florida orange trees. The disease slowly kills the trees while causing them to produce bitter, misshapen fruit that drops to the ground before it ripens. There is no cure for the disease and if left unchecked, many fear that citrus greening could spell the end of Florida’s $9 billion citrus industry, an industry that also employs some 76,000 people. According to University of Florida research, citrus greening has already cost the state economy $4.5 billion between 2006 and 2012. To date, citrus growers and the federal government have invested tens of millions of dollars to fight the disease, but progress has been elusive and more and more trees are destroyed.  As a result, the U.S. Department of Agriculture has had to lower its forecast for this year’s citrus production by about 10% from the year before.

Perhaps the only bright spot for Florida orange growers is that Coca-Cola, maker of Minute Maid and Simply Orange brands, has pledged to invest $2 billion to plant 25,000 acres of new orange groves, signaling that the orange juice industry, despite its current problems, is not going to be left for dead.

But the fact remains that the industry is facing a major crisis from two sides. Orange growers and orange juice producers have to ensure the long-term viability of orange crops in the face of a potentially catastrophic disease, while at the same time fight a marketing battle to make sure the orange juice market itself remains intact. Addressing these threats will not be easy, but with the possible future of an entire beverage at stake, it’s going to take some skillful management and maybe a stiff drink or two.
For the sake of the orange juice industry, we should probably make it a screwdriver.

Morgan O’Rourke is editor in chief of Risk Management and director of publications for the Risk & Insurance Management Society, Inc. (RIMS)

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