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Storms Follow Bugs to Florida as Orange Crop Slumps

June 8, 2014
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After a disease-spreading bug wreaked havoc on Florida citrus groves this year, growers like Maury Boyd are seeing a new threat from the weatherman that would mean "pure hell" for orange-juice supplies.

As many as six hurricanes are forecast to develop in the Atlantic from now until November, increasing the risk of losses to Florida’s 2015 harvest, after citrus greening disease made this year’s orange crop the smallest in 29 years. Florida is the world’s largest grower after Brazil and the target for more hurricanes than any other U.S. state over the past century.

While Americans have been drinking less orange juice since the 1990s, a faster drop in supply has kept prices high as disease spread among Florida groves in the past decade. Futures are up 34 percent since October and may jump 23 percent further by yearend to $2.0175 a pound, a Bloomberg survey of analysts showed. Tight supplies will boost costs for buyers including Coca-Cola Co.’s Minute Maid and Pepsico Inc.’s Tropicana.

"This can be depressing," said Boyd, 69, who expects a 20 percent drop in output this year on the 1,500 acres of groves his family has farmed for a century. "The disease is throwing curves at us all the time. If we have a major weather event, that’s going to become the perfect storm, just pure hell."

As many as 13 named storm systems may develop from June 1 to Nov. 30 in the Atlantic, the National Oceanic and Atmospheric Administration forecasts. The bulk of the orange crop in Florida is harvested from October to June. From 1900 to 2010, southeast Florida was hit at least 30 times by major storms, or more than one every four years on average, compared with 20 for Louisiana, according to MDA Information Systems Inc.

 

Damage Risk

 

The U.S. hasn’t been struck by a major hurricane with winds of 111 miles per hour or more since Wilma crashed into Florida in 2005, the longest such period in modern records.

Prices will be "supported pretty well by the lack of incremental supply and the weather risk," said Peter Sorrentino, who helps manage $3.8 billion at Huntington Asset Advisors in Cincinnati.

Even though this season’s storm forecast is below the 10- year average of 16 storms, 1992’s Hurricane Andrew "caused significant damage to southern areas of the citrus belt in what was otherwise a quiet season," said Kyle Tapley, a meteorologist at Gaithersburg, Maryland-based MDA.

Orange juice rose 18 percent this year to $1.6395 today on ICE Futures U.S. in New York, after touching a two-year high of $1.68 on April 23 as drought in Brazil compounded concern over supply. The Standard & Poor’s GSCI gauge of 24 raw materials advanced 2.3 percent since the end of 2013, while the MSCI All- Country World Index of equities rose 3.9 percent. The Bloomberg Treasury Bond Index gained 2.8 percent.

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RELATED TOPICS: Crops, Other Crops, Citrus

 
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