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COMMITTEE ON COMMODITY PROBLEMS |
INTERGOVERNMENTAL GROUP ON CITRUS FRUIT |
Twelfth Session |
Valencia, Spain, 22-25 September 1998 |
CITRUS PRODUCTION, DEMAND AND TRADE PROJECTIONS TO 2005 |
1. This paper has been prepared to serve as a basis for the Intergovernmental Group's discussion of the medium-term outlook for production, consumption and trade of citrus fruit. It reviews recent trends in the citrus economy and analyses the prospects to the year 2005. Members are requested to review and comment on, and/or revise if necessary, the information that concerns them.
2. The production projections are based on complex sets of country-specific data, which include inter alia citrus tree inventories, age profiles of plantings and average yields for countries where these were available. Real prices were assumed to remain constant at 1992-94 levels throughout the projection period. This simplifying assumption was thought to not be inappropriate due to the relatively low medium-term price responsiveness inherent in the supply of citrus fruit. For countries for which there were information limitations, output was projected largely on the basis of historical trends, assuming that these would continue. Finally, some adjustments were made on the basis of judgements associated with knowledge of special factors affecting production in selected countries, such as the market opportunities provided by the continuing implementation of the Uruguay Round Agreement and the North American Free Trade Agreement (NAFTA), the recent changes to the EC Common Market Organisation for fresh Fruits and Vegetables, and other policy developments at the international and national level.
3. A new feature of this projections exercise, when compared to previous ones undertaken under the auspices of the Group, is that consumption and trade for fresh and processed citrus have been differentiated. In order to accomplish this, the share of production directed to the fresh and processed sectors was determined on the basis of recent utilization patterns, which were assumed to remain constant throughout the projection period. However, information regarding investment intentions in the processing sector, when available, were taken into account in adjusting prospective shares. As usual, the volumes of processed citrus consumed and traded have been converted to fresh fruit equivalents.
4. Consumption projections for both fresh and processed citrus were made on the basis of per caput consumption levels, and their likely development in light of historical trends and/or changes in projected income levels1. The resulting per caput consumption projections and the United Nations population projections were used to arrive at total consumption at the country level. The base period (i.e. 1992-94) real prices were assumed to remain constant throughout the projection period. The demand projections were also adjusted, as far as possible, to take account of other relevant developments, such as the implementation of policy changes (e.g. tariff reductions), recent trends in consumer preferences, etc. and specialized knowledge regarding the individual markets concerned.
5. During the final calibration phase, given the relative lack of flexibility that the production of perennial crops usually exhibits once planting has taken place (at least in the short to medium-term), the market was cleared by adjusting consumption at the country level, so that when aggregating consumption over all countries it would equal global production. Care was exercised so that a balance was maintained between production, if any, and consumption and trade, at the country level. This market clearing step assumes that all citrus produced finds an outlet. No account was taken, however, of possible waste or production losses due to lack of market outlets, and thus in some cases the projected demand levels, mainly those relating to domestic demand, would only materialize if certain economic and infrastructure constraints were overcome.
6. Due to methodological limitations the projections for trade undertaken within this exercise refer only to net trade. Net imports are the balance of gross imports minus gross exports, while net exports are the balance of net exports minus gross imports. Therefore, while a single country can export and import a particular citrus fruit type in a particular year, it can not be a net exporter and a net importer at the same time.
7. Net trade projections were done by calculating the difference between projected production and projected consumption at the country level. For instance, the projections for net exports (or export availabilities) were done by deducting domestic consumption from output in producing countries. Export availabilities can be viewed as the amount of product that would be available for exports in a producing country after local consumption needs have been taken into account. Import requirements can be interpreted as the volume of imports required to meet local demand after local production, if any, has been taken into consideration. Net exports and net imports were calculated by country for each variety and for fresh and processed citrus.
8. Due to problems with the accuracy of the re-exports data available to the Secretariat and the difficulties inherent to the calculation of appropriate conversion factors, mainly those for processed citrus, the trade analysis contained in this document focuses on the net export side. Despite this, net import figures have been included for information purposes. The Group's consideration and guidance on how to obtain better indications of trade flows and net import levels is sought.
9. It is important to view these projections as analytical tools and exercise caution when interpreting the results. Particular attention should be given to the price implications of the analysis which have been developed throughout the text, though not specifically quantified.
10. World orange production grew at an average annual rate of more than 3 percent between 1982-84 and 1992-94, from 36 million tonnes to nearly 50 million tonnes. In 1995 production exceeded 51 million tonnes (Table 1a). Most of the growth was accounted for by developing countries, primarily in Latin America but also in Asia and to a lesser extent in Africa. In Latin America, the volume of production expanded considerably in Brazil and in Mexico. These two countries alone accounted for more than 40 percent of the increase in the volume of global production during the 1982-84 to 1992-94 period. In Asia, production expanded significantly in China, India and Pakistan, while in the Near East production reached substantially higher levels in the Islamic Republic of Iran. In developed countries, production expanded in the European Community and the United States.
11. About 55 percent of consumption of oranges was in fresh form in 1982-84. This share did not change substantially over the decade to 1992-94 as consumption in both fresh and processed form grew at about the same rate. At the global level, per caput consumption of fresh and processed oranges increased from about 8 kg to more than 9 kg over this period.
12. Consumption of fresh oranges rose from about 20 million tonnes in 1982-84 to 26 million tonnes in 1992-94 (Table 2a). The growth in consumption of fresh oranges was mainly in the developing countries. Among the various regions, the largest absolute increase in volume was in Asia, followed by Latin America and Africa. In the developed countries, consumption of oranges rose only slightly to about 8 million tonnes, with most of the growth occurring in Europe. On a per caput basis, world consumption of fresh oranges rose from 4.5 kg to 5.1 kg. By the early nineties, per caput consumption in developing countries amounted to 4.7 kg , not very distant from the average level of 6.2 kg in developed countries.
13. In the case of orange products, primarily frozen concentrated orange juice (FCOJ), consumption increased from about 16 million tonnes to 21 million tonnes (Table 3a). The increase was concentrated in the developed countries, primarily in North America and Europe. Per caput consumption of processed oranges rose in developed countries from 12.3 kg to 15.5 kg over the 1982-84 to 1992-94 period as income growth, competitive pricing, consumer preference and convenience factors continued to favour the growth of this market.
14. Between 1982-84 and 1992-94, net exports of fresh and processed oranges increased by about 1.8 percent annually. This rate was considerably below that prevailing in the seventies and early eighties, reflecting mainly slower growth in trade of processed oranges following the recovery in production in the United States which resulted reduced import requirements in that country (Table 5a). Net trade in fresh oranges remained relatively stable, as a large share of the increase in consumption of fresh fruit was supplied from rising domestic production in developing countries (Table 4a). Increasing shipments to economies in transition accounted for most of the growth in net exports of fresh oranges.
15. In 2005, production is projected to exceed 62 million tonnes. While world orange production would continue to grow, expansion would be at a slower rate than in the previous decade. In the developing countries growth is expected to be substantially lower due to a number of factors. In some major markets ample domestic supplies and declining prices would dampen growth, while slackening growth in international markets for both fresh and processed citrus would curtail expansion in countries particularly dependent on exports. In some cases, disease problems and reduced agronomic maintenance and inputs associated with lower returns are projected to further limit production growth. In developed countries, the rate of growth in production would also weaken. Growth would be sufficient to maintain export trade and domestic market requirements. Most of the expansion is anticipated to occur in the United States which would move from the position of declining net importer to a marginal net exporter.
16. The growth in consumption to 2005 would occur mainly in developing countries, and would be mainly in the form of fresh fruit, although increasing volumes of oranges would be consumed in processed form in some countries, such as China, Mexico, Argentina and Brazil. In certain countries, however, various infrastructure and market constraints would need to be overcome for this potential to be realized. In the developed countries, consumption would continue to expand but at a somewhat slower rate that in the past decade. Consumption of fresh fruit would grow most rapidly in the economies in transition which would also become increasingly important markets for processed oranges.
17. On the basis of the assumptions indicated above concerning price-induced adjustments in demand, net exports of fresh and processed oranges would increase by less than 1 percent per year to 2005, compared to a growth rate of 1.8 percent during the previous decade. By 2005 net exports would amount to only about 29 percent of world orange production compared to nearly 34 percent in 1992-94, reflecting the increasing share of consumption supplied by domestic production.
18. Net exports of fresh oranges would grow at an average annual rate of 0.4 percent, slightly less than a third of that of the previous decade mostly as a result of increasing import demand in economies in transition. The rate of growth in net exports of orange products to 2005 would also decline sharply. While import demand in the EC and the economies in transition would continue to grow, the United States would shift from being the largest single net importing country in 1992-94 to becoming a net exporter of processed oranges.
19. The projections for oranges to 2005 suggest that most of the increase in production would be absorbed in domestic markets, particularly in developing countries where fresh fruit first and processed fruit subsequently, would increasingly become part of the diet as income levels improve. In some of these countries, however, significant challenges in the distribution and processing of fruit will need to be met for this potential to be realized. Alternatively, structural surpluses and deteriorating prices would result in downward adjustments in production over the longer term.
20. For supplies mainly directed to international market outlets, price prospects are uncertain. Reduced net import requirements for processed oranges, and slower growth in import demand for fresh fruit in mature markets and where competition exists from other fruits, including exotics, would dampen prices. However, on the supply side, production of oranges is susceptible to the vagaries of weather, and crop variations will continue to affect price levels. Moreover, on the demand side, potential exists for enhancing consumption, particularly through the promotion of the nutritional benefits of oranges in traditional and new markets.
21. World tangerine production exhibited strong growth between 1982-84 and 1992-94, increasing at an annual average rate of about 4.2 percent (Table 1b). Production rose from 8.2 million tonnes in 1982-84 to 12.4 million tonnes in 1992-94. Increased crops in many countries, notably China among developing countries and Spain among developed countries, more than offset a large production decline in Japan.
22. Less than 10 percent of consumption is in processed form, mainly canned sections and juice. During this period, consumption of fresh tangerines rose at an average annual rate of more than 5 percent, from 6.7 million tonnes to 11.0 million tonnes (Table 2b). Consumption growth was almost completely in developing countries, where per capita intake rose from 0.8 kg to 1.9 kg. In developed countries, consumption stagnated, and per capita intake actually declined slightly to about 3.0 kg reflecting mainly reductions in Japan, where a significant drop in the volume of locally produced tangerines, coupled with wider availability and increased demand for other types of fresh fruit, were the main reasons for the contraction. However, in the European Community, the largest market area among developed countries, total consumption of fresh tangerines grew at an average annual rate of 2.7 percent with per capita intake reaching 5 kg in 1992-94.
23. Net exports of fresh tangerines showed strong growth during the 1982-84 to 1992-94 period, increasing at an average annual rate of 3.0 percent (Table 4b). In absolute terms, most of the increase in supplies entering international markets originated in the Mediterranean region, particularly Spain, and were directed to markets in the EC and North America. Net trade of processed tangerines was almost non- existent in the period between 1982-84 and 1992-94.
24. World production is projected to increase at an annual average rate of 2.8 percent to 17.4 million tonnes in 2005. Though relatively rapid, growth would be much slower than in the previous decade. High growth rates are foreseen for Spain, China, Mexico, Egypt and Morocco. By 2005 China would be producing 7.8 million tonnes, mainly for its expanding domestic market.
25. Global consumption of fresh and processed tangerines would rise at an average annual rate of 3.3 percent, also considerably less than in the previous decade. Much of the growth would take place in China, where total market absorption would reach 7.7 million tonnes. At this level, per capita intake would amount to 5.8 kg, somewhat high if compared to levels in other major markets, but below that in many producing countries. However, attainment of this level would imply that various constraints associated with quality, price and distribution would be overcome. Among other markets, consumption in the European Community primarily, and in North America and in economies in transition to a lesser extent, would continue to expand. The downtrend in consumption in Japan would continue, though at a slower rate than in the previous decade, and per caput consumption would stabilize around 11 kg.
26. In the period to 2005 net exports of tangerines would continue to grow at an average annual rate of about 3 percent, with most of the increase in supplies to international markets originating in Spain. Increases would also occur in export availabilities in Morocco, as well as in Egypt, Turkey, Argentina, Mexico and Uruguay. While import requirements would expand in the Near East and in some countries of Latin America and Asia, most of the growth would continue to occur in the European Community, North America and the economies in transition. Although a growing market segment, processed tangerine exports by 2005 would account for only 7 percent of all tangerines traded internationally. The largest increases in exports of tangerine products would be taking place in China, Morocco and Japan.
27. The projections indicate that a large share of prospective increases in production will be absorbed in domestic markets, notably in China. Elsewhere continuing strong growth in import demand would allow increasing export supplies to be marketed at generally remunerative prices. The factors contributing to the favourable price outlook for tangerines would include continued improvement of the quality of supplies in international trade, the convenience aspects associated with easy peeling varieties, and the development of early and late maturing varieties to permit marketing over an extended period.
28. World lemon production rose at an annual average rate of 3.5 percent to reach 7.9 million tonnes in 1992-94 (Table 1c). Among developing countries which registered an average growth rate of 5.7 percent, large increases were recorded in Argentina, Brazil and Uruguay in Latin America; in the Islamic Republic of Iran, and in India and Thailand. In developed countries, production remained stable, with growth in the European Community (mainly in Spain) offsetting reductions in the United States and some other countries.
29. The bulk of consumption (79 percent in 1982-84) was in fresh form, with single strength and concentrated juice being the major processed items. During this period, consumption of fresh lemons rose at an average annual rate of 4.7 percent, from 3.8. million tonnes to nearly 6.0 million tonnes (Table 2c). Consumption growth occurred in both developed and developing countries, although it was stronger in the latter. Per caput intake in developing countries rose from nearly 0.7 kg to 1.05 kg. In developed countries, consumption also grew but more modestly, mainly as a reflection of a more mature market with higher per caput intake levels. The European Community, the largest market area among developed countries, absorbed the largest absolute increase in consumption of fresh lemons, although consumption in the United States, another important market, grew at a faster pace.
30. Between 1982-84 and 1992-94, net exports of fresh and processed lemons increased by about 1 percent annually, reflecting a combination of faster growth for processed lemons and a contraction in fresh lemon exports. In absolute terms, most of the decrease in exported volumes of fresh lemons took place in the European Community, although significant reductions also took place in the United States and Japan. The main import contraction was observed in economies in transition (Table 4c). During this period, net exports of processed lemons grew underpinned by larger volumes originating in the European Community, despite the contraction in exports that took place in developing countries (Table 5c).
31. World production is projected to increase to 9.4 million tonnes in 2005. This implies an annual average growth rate of 1.5 percent, which is less than half that of the previous decade. The strongest production growth is foreseen for Mexico and Argentina in Latin America, and for China, Pakistan, Thailand and Turkey in Asia. By 2005, Mexico and India would be producing the largest volumes (over 1.1 million tonnes each), although important volumes would also be produced in Argentina, Brazil and the United States.
32. Global consumption of fresh and processed lemons would rise at an average annual rate of 2.2 percent, considerably less than in the previous decade. Much of the growth would be shared by developing producing countries, mainly those in Asia and South America. Total intake for developing countries as a whole would reach 5.8 million tonnes, a level which translates into a per caput consumption level of 1.2 kg. This is relatively low, however, when compared to the 2.7 kg projected for developed countries. Consumption in the European Community, North America and in economies in transition would continue to expand, and the downtrend in consumption experienced in Japan between 1982-84 and 1992-94 would be reversed, all of these developments being underpinned by stronger demand for limes and imports during the Northern Hemisphere's "off-season".
33. In the period to 2005 net exports of fresh and processed lemons would grow at an average annual rate of about 3.3 percent, or over threefold the annual growth experienced between 1982-84 and 1992-94 when demand for lemons contracted in the economies in transition and most of the growth occurred in producing countries. This expansion would be achieved despite projections for lower exports in developed countries, where rising domestic market absorption is foreseen, particularly in Europe. Most of the increase in supplies to international markets would originate in Argentina and Mexico, with the United States, Europe and Japan being their main outlets. Increases would also occur in export availabilities in Uruguay, Turkey and Thailand. Although import markets in developing countries would grow the fastest, developed importing countries would account for over 87 percent of the world import market.
34. Global demand growth for both yellow lemons and limes is expected to be slower than in the previous decade. However, net trade would increase more rapidly because of a recovery in the imports by economies in transition and expanding international markets for limes and "off-season" lemons. Therefore, price prospects in international markets would seem generally favourable as long as no large exportable surpluses materialize in major supplying countries and the demand in economies in transition continues to strengthen. For those exporting countries able to penetrate the markets for limes and "off-season" yellow lemons, the price outlook may be somewhat better. In the longer term, however, with the possibility of new supplying countries, such as Cuba, Costa Rica, Belize, and some Mediterranean countries, entering the international market, the price outlook for these market "niches" may need to be re-evaluated.
35. World grapefruit production grew at an average annual rate of nearly 1.5 percent between 1982-84 and 1992-94, from 4.2 million tonnes to nearly 4.9 million tonnes (Table 1d). This increase was achieved despite a slight decrease in output from developed countries as a whole. Most of the growth in developing countries originated primarily in Asia, and to a lesser extent in Latin America. In Asia, the volume of production expanded considerably in Thailand and in China. These two countries alone accounted for nearly two thirds of the increase in the volume of global production during the 1982-84 to 1992-94 period. In Latin America, production expanded significantly in Argentina and Cuba. In developed countries, production expanded slightly in the United States and the European Community, but fell substantially in Israel.
36. About 60 percent of total grapefruit consumption was in fresh form in 1982-84. This fell to around 56 percent in 1992-94 as consumption in processed form grew more rapidly. At the world level, per caput consumption of fresh and processed grapefruit increased from slightly less than 1.0 kg to nearly 1.1 kg.
37. Consumption of fresh grapefruit rose from about 2.5 million tonnes in 1982-84 to nearly 3.1 million tonnes in 1992-94 (Table 2d). The growth in consumption of fresh grapefruit occurred mainly in developing countries. Among the various regions, the largest absolute increase in volume was in Asia, followed by Latin America. In the developed countries as a whole, consumption of grapefruit fell slightly to about 1.6 million tonnes. Most of the contraction occurred in the United States, where fresh grapefruit consumption declined. On a per caput basis, world consumption of fresh grapefruit rose only slightly, from 0.57 kg to 0.59 kg. By the early nineties, per caput consumption in developing countries, at nearly 0.4 kg, was only around a third of that in developed countries.
38. In the case of processed grapefruit, primarily grapefruit juice and concentrate, consumption takes place mainly in developed countries. Global consumption of processed grapefruit increased from about 1.7 million tonnes to 2.4 million tonnes (Table 3d) between 1982-84 and 1992-94. The increase was concentrated in markets in North America and Europe. Per caput consumption of processed grapefruit rose in developed countries from 1.4 kg to 1.9 kg over this period, underpinned by inter alia consumer preference and convenience factors which favoured the growth in consumption of grapefruit products over fresh grapefruit.
39. Between 1982-84 and 1992-94, net exports of fresh and processed grapefruit remained stable at close to 1.3 million tonnes, with a small increase in exports from developing countries as a group offsetting a slight contraction in those from developed countries. The above was the combined result of a shrinking export trade for fresh grapefruit and increased exports in processed form. Despite lower exports of fresh grapefruit globally, imports by Japan grew significantly. The largest recipient for the increase in processed grapefruit exports was the European Community.
40. In 2005, production is projected to exceed 6.4 million tonnes, which translates into an annual growth rate of nearly 2.4 percent; a substantial increase from that in the previous decade. Most of the growth would take place in developing countries in Latin America and the Caribbean and in Asia, with the most substantial increases occurring in Argentina, Mexico and Thailand. Production in Cuba would also expand from recent levels. Output growth in developing countries to 2005, at 3.5 percent per year, would be slower than that experienced between 1982-84 and 1992-94. Although much slower growth would take place in developed countries, the downtrend of the previous decade would be reversed with output in the United States and South Africa projected to increase.
41. The small production increase projected for the United States is due to the low prices currently received by grapefruit growers there. For the past two years, farm level prices for grapefruit in the State of Florida, the leading producing area in the country, have been well below the cost of production. Thus, it is likely that production in Florida will contract from 1995 production levels. Within the United States, production from California, Arizona, and Texas should show small increases offsetting likely production declines in Florida.
42. The growth in consumption to 2005 would occur mainly in developing countries, and largely in those in Asia. Grapefruit consumption would remain mainly in the form of fresh fruit, although increasing volumes of grapefruit would be consumed in processed form in various producing countries. With trade liberalization having supported expanded grapefruit consumption in both the European Community and Japan over the 1982-84 to 1992-94 period, little additional demand growth is foreseen in either of these markets. Consumption of fresh fruit would grow most rapidly in the economies in transition.
43. Net export availabilities of fresh and processed grapefruit would increase by 4.2 percent per year to 2005, significantly higher than during the previous decade when a larger portion of the crop was consumed domestically in producing countries. By 2005 net exports would amount to about 32 percent of world grapefruit compared to 26 percent in 1992-94, reflecting the increasing share of consumption in non-producing countries. The increase in the volumes traded world-wide would be underpinned by ample availabilities and price levels low enough to encourage some demand growth in emerging import markets.
44. Net exports of fresh grapefruit would grow at an average annual rate of 3.4 percent, mostly as a result of increasing import demand in economies in transition, Japan and Europe. This would contrast sharply with the negative growth experienced during the previous decade. Argentina could substantially increase its export volume, as could South Africa by supplying the Northern Hemisphere during the "off season". The rate of growth in net exports of processed grapefruit to 2005 would be nearly double that of the previous decade. The EC would remain the largest import market for grapefruit products.
45. One of the major problems facing grapefruit producers world-wide is relatively stagnant demand. With little growth foreseen in the main traditional markets, increased intake in those of recent emergence, such as the economies in transition, may not be sufficient to support world grapefruit prices, particularly in the light of expected growth in export availabilities. The foreseen growth in grapefruit imports would be largely induced by lower price levels. Although prices for both fresh and processed grapefruit may rise somewhat from the current depressed levels due to short-term supply shortfalls, with ample supplies and the generally stagnant demand situation in mature markets, any strengthening could be rather limited and possibly short-lived. In the longer-term, firmer prices would only come through more profound structural change (e.g. reduction of areas harvested or a significant expansion in demand).
46. An examination of the underlying trends and prospects in the world citrus economy suggests certain challenges for producers and traders of citrus fruit. The cultivation and commercialisation of the crop has become increasingly competitive. The squeeze on margins has generally favoured low cost producers or those supplying fruit of special quality or at particular periods outside the peak of the marketing season. The use of the processing industry as a residual outlet for surpluses from the fresh fruit market is generally no longer economically viable given the large-scale specialized production of fruit for processing in the major supplying countries which also benefit from economies of scale in the transport, storage and marketing of the resultant products.
47. While there is scope for some advances in consumption over the longer run, on the basis of present indications it appears that supplies of most types of fruit will be more than adequate to meet demand until 2005. Even so, significant challenges regarding investment and infrastructure development for the distribution and processing of citrus in developing country markets would need to be met. Thus, in the longer term, continued efforts will be required to ensure that production growth does not outrun demand increases.
48. Another area which requires continued attention is the adaptation of production to market requirements in both the processed and fresh fruit sectors. In the latter, the development and spread of improved small fruit varieties and the selection of fruit varieties maturing at periods outside the peak marketing season have had important effects in increasing consumption and improving returns to growers.
49. At the same time, measures are required to encourage consumption. Promotion
efforts for citrus juices are systematically undertaken in some of the major
consuming countries, especially for specific brand products, and these have
had positive effects on longer term market growth. The liberalization of
trade, particularly for imports in a number of non-producing countries where
per caput consumption is low, could lead to increased consumption of citrus
fruit and products. Promotion based on the message of concrete health benefits
of citrus consumption could open up new opportunities for market expansion,
particularly in developed countries.
50. In conclusion, the orderly long term development of the world citrus
economy, which annually generates over US$8 billion in export earnings, would
benefit from concerted action in the fields of production planning, agronomic
improvement, consumption expansion and trade policies. Important contributions
are required from growers, exporters, trade associations, private enterprises,
governments and public agencies. But above all, scientific research and the
application of technical advances in the fields of agronomy, pest control,
post harvest technology, handling and storage, and processing technology
would provide the basis for the continued development of the dynamic citrus
sector to the millennium and beyond. Market development and increased
productivity are the keys to the future.
1
United Nations Gross National Product projections were used as a proxy for
income projections.
2
For the purposes of this document, the term lemons also includes limes.