Lemons and Limes
World citrus production and consumption has witnessed a period of strong growth since the mid-1980s. Production of oranges, tangerines, and lemons and limes have all expanded rapidly. Larger production levels have enabled higher levels of total as well as per capita consumption of citrus. Even faster growth has been realized for processed citrus products as improvements in transportation and packaging have lowered costs and improved quality.
With rapid output expansion and slower demand growth for some citrus products, however, has come lower prices for both fresh and processed citrus products, especially at the grower level. As a result, the rate of new plantings has slowed. Hence, projected growth rates in both production and consumption over the next ten years are expected to be lower than those realized over the last ten years.
The two largest citrus producing countries: Brazil and the United States are expected to retain their leadership. Sao Paulo, Brazil and Florida, United States will continue to be the two largest processed orange producing regions in the world. With the growth of clementine consumption, Spain is expected to expand its production of tangerines. China will also realize expanded production and consumption of oranges and tangerines. China may also become an important market for processed citrus and fresh grapefruit. Other Latin American producing countries such as Argentina, Mexico, Cuba, Belize, and Costa Rica are also expected to continue to expand production, but at a slower rate. Apart from Spain, European producing countries are expected to continue to experience small declines in production.
Citrus production and consumption in Asia is also expected to expand, but consumption will be supported primarily from domestic production. Many of these countries maintain high tariffs on imports of citrus. Citrus producers in the Near East will continue to compete with other non-agricultural demand for land and water.
Given the uncertain political and economic environment in Africa, production is expected to expand only in those countries along the Mediterranean Sea and in South Africa. Historically there has been little trade among the countries of Africa.
In the remainder of this paper, highlights are presented on production and consumption of fresh and processed citrus by the four major varietal classifications: oranges, grapefruit, tangerines, and lemons and limes.
World consumption of oranges grew at a compound rate of 3.5 percent over the period ranging from1986-88 to 1996-98. While consumption of fresh oranges grew at an annual rate of 2.9 percent, this was superceded by growth in processed orange consumption, which grew 4.2 percent per annum. Increased consumption of processed oranges in Europe was one of the primary forces supporting expanded world consumption. Even though per capita consumption of fresh oranges in the EU declined from 13 to 9.7 kg, per capita processed orange consumption nearly doubled to 30 kg (fresh fruit equivalent). Per capita consumption of processed oranges also grew in Canada and the United States, offsetting decreases in fresh orange consumption.
Processed orange consumption, however, is still concentrated in the developed countries of North America and Europe. These two regions collectively account for over 88 percent of world consumption. In other regions, however, particularly Latin America, markets for processed orange products appear to be evolving. Processed orange consumption in Mexico more than doubled and Brazilian consumption increased by 50 percent over the period from 1986-88 to 1996-98.
While fresh orange consumption declined in many of the developed countries, it expanded in many developing countries, especially in the emerging economies of Mexico, India, Argentina and Brazil. Strong consumption growth was also observed in China. Fresh orange consumption is declining in the developed countries for two reasons. First, it is being replaced by orange juice consumption. The evolution of not-from-concentrate (NFC) orange juice in both North America and Europe has been supported by the perception that NFC closely duplicates fresh-squeezed in flavor but offers greater convenience. Second, with advancements in transportation and storage, fresh citrus is now confronted with more competition from other fruits such as bananas, grapes and strawberries.
The projections for 2010 for orange production and consumption are predicated on two assumptions. First, the rapid expansion of world orange production will slow. Brazil is currently facing two major disease problems: citrus canker and citrus variegated chlorosis (CVC). Growers are also receiving lower prices for oranges used for processing, which has slowed the rate of new plantings. Florida is also facing disease challenges from the citrus tristeza virus and citrus canker. Lower grower prices in Florida have also slowed new plantings. These lower prices will also affect other Western Hemisphere orange producing countries such as Mexico, Belize, Costa Rica, Argentina and Cuba. These countries allocate a sizeable proportion of their orange production to processed utilization which is dominated by Sao Paulo and Florida.
The second assumption is that fresh orange consumption in the developed countries will continue to decline on a per capita basis. Processed orange consumption will continue to expand in the emerging economies of Latin America, Asia and Eastern Europe, although its main markets will still be found in North America and Europe.
Projected orange production in 2010 is 64 million MT, approximately 10 percent greater than that realized over the 1996-98 period. The projected annualized rate of growth of 0.76 percent is substantially lower than 3.9 percent which occurred from 1986-88 to 1996-98. The projected 64 million MT of production is expected to be utilized as 35.7 million MT fresh and 28.3 million MT processed. The share of production claimed by processed utilization is projected to increase marginally.
Orange production in developed countries is projected to grow at an annualized rate of 0.6 percent with most of that growth coming from the United States. Production in Europe is projected to show little change, with a small increase in Spain offset by declines in Italy and Greece. Production in South Africa is expected to continue to grow as it continues to exploit its advantage as an off-season supplier to the northern hemisphere. On the other hand, production in Israel will continue to be affected by population growth, urbanization and access to adequate water supply. Japan's orange industry is also projected to continue its secular decline as imports become more available.
Production in developing countries is projected to increase at an annualized rate of 0.8 percent. Production in both Mexico and Brazil are expected to contract modestly. Over the next 10 years, it is likely that Brazil will experience a sizeable contraction of production as the combined effects of disease and low grower prices are felt. By 2010, however, the Brazilian industry should be in full recovery and be able to maintain its dominance of the world processed orange market. Mexico is highly vulnerable to the citrus tristeza virus which has been found in the Yucatan peninsula. Mexican producers have also thus far been unable to take advantage of preferential access to the United States market offered under the North American Free Trade Agreement (NAFTA).
Smaller Western Hemisphere orange exporting countries such as Argentina, Cuba, Belize and Costa Rica should find market opportunities as the larger orange producing regions undergo adjustment. Cuba is noteworthy in that it has expanded its orange processing capacity and been able to stabilize and begin to increase its orange output despite the trade embargo imposed by the United States. The processing sector of Belize and Costa Rica has also undergone consolidation, which should lower costs. These two countries, however, are the only two significant processed orange exporters with duty free access to both the United States and the EU. Therefore, they are both vulnerable to further trade liberalization in the processed orange market.
Orange producing countries in Asia are expected to continue to expand production, but nearly all of this production will be consumed in domestic markets. China is projected to overtake Mexico as the third largest orange producing country, and India will challenge Spain as the fifth largest producer. Huge domestic markets in both of these countries, however, mean that virtually all production will be consumed internally. Trade liberalization in these countries could open these markets to off-season imports. Other large Asian orange producing countries such as Iran and Pakistan will also continue to send most of their production to domestic markets. The exception to this observation is Turkey which can, because of its location and its membership in a Customs Union with the EU, compete in the European market. The Mediterranean countries of Morocco and Egypt are also expected to benefit from their proximity to Europe, although they compete directly with Spain, which benefits from being within the EU and TRQs of the EU.
The relatively small projected increase in production will support small increases in consumption of fresh and processed oranges. Per capita citrus consumption in both North America and Europe is expected to change little from current levels. Relatively flat per capita consumption growth in these regions is a direct result of slower domestic production growth and the projected small increase for the main supplier of processed orange products: Brazil. Most increases in consumption will be found in developing citrus-producing countries such as India, Pakistan, China, Mexico, and Brazil.
Brazil and Mexico are notable in that all Latin American countries have historically consumed oranges through the purchase of fresh oranges and then the production of fresh squeezed orange juice at home. In recent years, however, consumers in Brazil and Mexico have begun to buy ready to drink orange juice. This trend is expected to continue as rising incomes in these countries will provide support for switching from home production to direct purchase of orange juice. Rising incomes in Chile and Argentina may also support increased consumption of processed orange products.
The recent trade agreement between China and the United States has opened the Chinese market to imports of fresh and processed citrus. While a sizeable middle class has evolved in China, that country is still faced with infrastructure issues that work against large-scale importation of fresh and processed orange products. It is likely, however, that consumers in the large coastal cities of China will have increased access to imported citrus products. The large population living in these areas and their growing purchasing power should provide a significant outlet for citrus exports.
Expanded consumption of fresh and processed orange products in other East Asian economies is hampered by declining domestic production and trade barriers which increase the cost of these products to consumers. The Japanese processed orange market has failed to live up to expectations generated by the signing of the U.S.-Japan Beef and Citrus agreement in 1986. The long distances that oranges and other citrus products must travel from the major producing countries in the Western Hemisphere also hamper citrus consumption in East Asia. These observations notwithstanding, per capita orange consumption in nearly all of the countries of the Far East is projected to show small to moderate increases. Nearly all of this consumption growth will come from increased domestic production.
Tangerines differ from oranges because nearly all tangerine production is intended for the fresh market. The major producers of tangerines are China, Spain, and Japan followed by Brazil, Korea, Pakistan, Italy, Turkey, Egypt, the United States, Morocco and Argentina. Spain has had significant success with its seedless Clementine varieties in Europe, and more recently, in the United States. Spain accounts for over 50 percent of world's exports of fresh tangerines. The other major exporters are Morocco and China. Morocco has a well-developed Clementine industry and ships to Europe and the United States.
Most tangerines, however, are consumed in the country of production. Thus the large consumption countries for tangerines are China, Japan, Pakistan and Egypt. Domestic production also supports significant tangerine consumption in Algeria, Mexico, Israel, Australia, Argentina, Paraguay, Bolivia, Cyprus, Jordan, Lebanon, Korea and the United States. The countries of the EU other than Spain, Italy, Greece and Portugal are the main importing countries.
Processed tangerine consumption is scattered and difficult to track. Most tangerine juice is blended with orange juice. Spain, Japan and China have tangerine sectioning industries. A report at the 2001 China/FAO Citrus Conference suggests that China produces 250,000 MT of tangerine sections per year. Canned tangerine sections from Japan and Spain are exported to North America. Canned fruit products in developed economies, however, will encounter difficulties competing with the new array of "fresh cut" fruit products that are increasingly available in those countries.
World tangerine production is projected at 15.4 million MT in 2010, up modestly from 15.05 million MT in 1996-98. The projected annualized growth rate of 0.17 percent is much smaller than the 4.6 annualized growth rate realized between 1986-88 and 1996-98. Tangerine production is projected to expand modestly in Spain, China, Morocco, Brazil, and Argentina. The industry will continue to contract in Japan, and production in the United States is expected to decline as it faces competition from imports and other fresh fruit alternatives.
The bright spot for fresh tangerine consumption is the seedless Clementine varieties currently cultivated in Spain and Morocco. U.S. consumption of this product has risen dramatically in the last five years. Their small size along with the characteristics of an easy-peeler and seedless nature of the fruit make this a desirable snack for children. Efforts have been initiated to produce Clementines in California, United States. Florida currently imposes restrictions on the planting of Clementine varieties.
Spain is expected to continue its role as the dominant exporter of tangerines. The success of the Clementine varieties will serve to support its position. Morocco is the second largest exporter of fresh tangerines. Phytosanitary concerns have limited the ability of both Mexico and Brazil to expand into exportation of fresh tangerines. The main citrus producing area of east Mexico is still plagued by the Mexican fruit fly. The recent outbreak of citrus canker in Brazil will restrict producers there from large expansion of fresh exports of tangerines or other citrus varieties.
The allocation between fresh and processed utilization is expected to remain the same as historical levels, with more than 90 percent of total production allocated to the fresh market. Tangerines are not desirable for juice production because of relatively low juice content, higher harvesting costs, and a tendency for off-flavor juice. Thus processed utilization of tangerines will come from tangerines that do not make fresh market grade and via the demand for tangerine sections.
Growth in world grapefruit production has slowed with production increasing from 4.2 million MT in 1986-88 to 4.9 million MT in 1996-98, an annualized growth rate of 1.6 percent. The freezes of the early 1980s severely reduced grapefruit production in the United States and Cuba became an important supplier. By the mid 1990s, world production had recovered to levels comparable to the 1970s. Producers in the three largest grapefruit producing countries, the United States, Israel, and Cuba, however, are facing a difficult period with stagnant demand for both fresh and processed grapefruit. The grapefruit production area in Florida, United States is currently contracting as producers are exiting grapefruit production. The citrus tristeza virus is projected to kill millions of grapefruit trees in Florida. Grapefruit prices, at this time, are too low to encourage widespread replacement of trees lost to tristeza.
Among the major citrus varieties, only grapefruit has a level of processed utilization comparable to oranges. In the 1996-98 period, fresh utilization was 2.9 million MT, and processed utilization was 2.0 million MT, with processed accounting for over 40 percent of total utilization. Processed utilization in Cuba has increased dramatically, with 90 percent of the crop processed in 1999.
As grapefruit production is better suited for tropical climates, its production is scattered among the countries near the equator in Latin America, Africa, and Asia. The largest producing country, however, is the United States. The United States is the largest exporter of fresh grapefruit, accounting for nearly 40 percent of total world fresh exports. South Africa and Israel are the next most important exporters. A new entrant to the fresh grapefruit market is Turkey. Most grapefruit production, however, is consumed in domestic markets, with total fresh exports accounting for less than 40 percent of world production.
Projected world grapefruit production in 2010 is 5.5 million MT, an increase of 10 percent above the 1996-98 average. Nearly all of the projected increase will occur in developing countries. Production in the United States and Israel is expected to remain flat, with modest increases projected for Cuba, Mexico, Argentina and South Africa. The recent high level of new plantings in Turkey will support higher production and provide competition to Israel and the United States in the European market. The allocation of production between fresh and processed utilization is projected to remain at historical levels.
Fresh consumption of grapefruit in developed countries will face the same difficulties that confront oranges and tangerines. Increased competition from other fresh fruits will result in small declines in per capita consumption. The opening of import markets in China is expected to allow per capita consumption in that country to grow.
Per capita consumption of processed grapefruit is also projected to decline. Processed grapefruit competes directly with processed oranges. As consumers in the developed countries continue to move towards orange juice and away from grapefruit juice, grapefruit producers will need to find new markets and/or new products.
Lemons and limes are acid citrus fruits that differ from other citrus varieties in that they are typically consumed in association with other foods. Lemons are generally produced in colder climates such as the western United States, Spain, Italy, and Argentina. Lemons are also adapted to drier climates such as Egypt and Iran. India is also a major producer. Limes, on the other hand, are highly sensitive to cold weather and are grown exclusively in tropical climates. The major producers are Mexico and Brazil.
In 1996-98 lemon and lime production was 9.25 million MT with 7.3 million MT utilized in the fresh market and 1.9 million MT processed. Spain, Argentina, and Mexico are the largest export suppliers.
Lemon and lime consumption is found in many countries throughout the world. Imports account for approximately 18 percent of world consumption. Besides the developed countries of North America and Europe, lemon and lime consumption is also found in the countries of Eastern Europe and former Yugoslavia, as well as developing producing countries such as India, Iran, Mexico, Brazil, Argentina, Bolivia, Peru, and Jamaica. Countries in the Near East including Jordan, Cyprus, Lebanon, and Egypt also exhibit relatively high levels of per capita consumption.
World lemon and lime production is projected at 10.6 million MT in 2010, an increase of 15 percent from the 1996-98 level. The projected annualized rate of growth is 1.1 percent, down substantially from the 4.4 percent rate of growth observed from 1986-88 to 1996-98. A slower rate of production growth is projected in face of declining prices for lemons and limes.
Small increases in per capita consumption are projected across all of the major markets. Spain, Argentina and Mexico will continue to be the largest export suppliers of fresh lemons. With the decline of lime production in Florida due to diseases and flat lemon production in California and Arizona, the United States will become the largest importer of fresh lemons and limes and will account for 20 percent of the world's imports by 2010. The United States has recently entered into a trade agreement with Argentina which will allow off-season importation of lemons. Lemons and limes do not face the same competition from other fresh fruit crops confronting other fresh citrus varieties given their different consumption pattern
The allocation of lemons and limes to fresh and processed uses is expected to remain near historical levels. Lemons and limes are grown primarily for the fresh market with the juice from lemons and limes used primarily as a flavoring in beverages.
After a period of rapid growth in production, it is not surprising that citrus producers across the world are facing declining prices. Nearly all agricultural crops are affected by production/price cycles. For perennial crops such as citrus, price cycles are long, spanning several years, because of the long lag between price signals and output changes. Statistical evidence of price cycles in citrus is difficult to establish because random events such as freezes, drought, pests and diseases have, in the past, tended to disrupt production by causing severe unintended contractions in supply.
In the analysis presented in this paper, the main assumption behind the slowdown in rate of growth of citrus production is that lower prices currently faced by citrus growers will cause reductions in the rate of new plantings and thereby reduce output growth. Given the geographical concentration of citrus production, it is possible that some random events will result in a major reduction in output and stimulate a new round of production expansion. Without a random production shock, however, the first decade of the 21st century will see retrenchment and consolidation and eventually favorable prices will return. Higher prices will be the impetus for new grove development.
Citrus is a product that offers many advantages in the lifestyles of people who are health conscious, demand convenience, and place a premium on food safety. Continuing improvements in transportation logistics will allow exporters to provide year-round supplies of high quality fresh citrus products, and also allow processed citrus producers to provide convenient, reasonably priced products to consumers throughout the world. These observations mean that world demand for citrus products will continue to expand, and that the long-run outlook for citrus producers remains positive.
In this section, a brief outline of the methodology used to make the production and consumption projections is presented. In an effort of this magnitude, it is impossible to rely exclusively on quantitative techniques to accomplish a detailed forecast of production and consumption by country. Therefore, expert opinion combined with information provided by FAO, the Foreign Agricultural Service (FAS) of the United Stated Department of Agriculture (USDA), and production reports from individual countries is the main approach used.
A mathematical model of the world orange market developed at the University of Florida (Spreen; McClain; Brewster and Spreen) includes separate production model for Florida, United States and Sao Paulo, Brazil. These two regions collectively account for over 80 percent of total world orange juice production. The model also encompasses orange juice consumption in the United States, Canada, the EU, and the rest of the world which is comprised mainly by Japan. This model was calibrated to reflect the 1999-00 season and then was solved in a forward recursive fashion through the 2009-10 season.1 This quantitative forecast served as the basis for the world orange production and consumption projections.
The world orange juice model has been adapted by Zabaneh to incorporate orange juice production in Belize, Costa Rica, and Honduras. The new planting equations estimated by Zabaneh, however, were highly inelastic to price and therefore were not in the production forecast for those countries. A forthcoming publication by Nova, et al on the Cuban citrus industry provided the basis for the assumption that Cuba will divert most of its orange (and grapefruit) production to the processing sector.
In making consumption forecasts, the most important consideration was changes in per capita consumption. For example, per capita fresh orange consumption in Europe declined from 1986-88 to 1996-98. There are several reasons for this decline as discussed in the paper, including increased availability of orange juice and increased competition from other fresh fruits, all of which remain in place. Therefore, the projection is for the downward trend in per capita fresh orange consumption in Europe to continue although Europe will continue to be a large market for fresh oranges.
No quantitative model is available for tangerines, and given the high level of domestic utilization for tangerines, it would be exceedingly difficult to estimate supply or demand equations on a country-by-country basis. Fresh tangerines, however, face some of the same challenges confronting oranges. Clementine varieties, however, appear to be the exception. One of the problems associated with fresh citrus is that it often contains seeds and is difficult to peel. The increased convenience offered by bananas, grapes, and berries is attractive for busy middle class consumers in North America and Europe. Clementines, however, are seedless and relatively easy to peel. Their small size makes them attractive to children. Therefore, the projection is developed tangerine producing countries such as the United States will continue to face declining markets, but production in Spain and Morocco will continue to expand as export markets are opened for Clementine varieties.
Grapefruit producers have faced difficult market conditions for several years. With the exception of Texas, United States and Turkey, most grapefruit producing countries have had difficulties since the 1993-94 season. A quantitative model of the world grapefruit model (Brown and Spreen; Ali) developed at the University of Florida was used to forecast grapefruit production in Florida and fresh and processed grapefruit consumption in the major markets of the United States, Japan, the EU and Canada. The demand equations used in the model suggest a negative long-term growth rate for fresh grapefruit consumption in the United States and little growth rate in the other markets.
Using the same methodology as used for oranges, the forecasts from the quantitative method were used as a basis for world projections. Trends in per capita consumption were the primary factor used in individual country consumption forecasts. This information combined with the fact that production in both Israel and Cuba, the second and third largest producers, is growing very little suggested that world grapefruit production will grow very little over the next several years.
Lemons and limes are the most difficult citrus product to analyze because there is little published information available. It is also important to distinguish between lemons and limes because each are dominated by different production regions. World lemon production has been growing at a rate commiserate with world population growth. Lime production in Mexico, however, has exploded and support increasing per capita consumption of limes in the United States and the EU. The production forecast made for Mexico was based upon the assumption that the growth rate for limes in that country is not sustainable, especially with the infrastructure problems that still plague the industry (see Roy, et al. for further discussion). There have also been reports of low prices during the summer, the period of largest harvest.
The challenges facing consumption of other fresh citrus varieties do not carry over to lemons and limes. Thus a more optimistic consumption forecast was presented, tempered by the assumption that high rates of consumption increases could not be sustained.
Brewster, Charlene, and Thomas H. Spreen. "Price Equilibrium in Spatially Separated Multi-Product Markets: An Application to the World Processed Orange Juice Market." Selected paper presented at the American Agricultural Economics Association meetings, Salt Lake City, UT, August, 1998. (Abstract: Amer. J. Agr. Econ. 80(1998): 1175)
McClain, E.A. "A Monte Carlo Simulation Model of the World Orange Juice Market." Unpublished Ph.D. dissertation, Food and Resource Economics Dept, University of Florida, 1989.
Nova, Armando, Thomas H. Spreen, and Carlos Jauregui. "The Citrus Industry of Cuba: 1994-1999." Forthcoming International Working Paper, Food and Resource Economics Department, University of Florida, Gainesville, FL, March, 2001.
Roy, Michel, Chris O. Andrew, and Thomas H. Spreen. Persian Limes in North America: An Economic Analysis of the Production and Marketing Channels. Lake Alfred, FL: Florida Science Source, Inc., 1996, 146pp.
Spreen, Thomas H. "The Free Trade Area of the Americas and the Market for Processed Citrus Products." Paper to be presented at the 13th Intergovernmental Meeting on Citrus, Food and Agriculture Organization, Beijing, China, May, 2001.
Zabaneh, Louis. "Economic Impact of International Trade Agreements on the World FCOJ Market." Unpublished Ph.D. dissertation, Department of Agricultural Economics and Rural Sociology, Clemson University, 1999.
1 For more details on this model, see the Annex in Spreen.