The squeeze is on

Hurricane Wilma could batter Fla.’s oranges, meaning higher juice prices
By Joseph R. Perone –
Hurricane Wilma could further damage the orange juice crop in Florida this weekend and boost prices at your breakfast table during the next few months, analysts said.

A state of emergency was declared in Florida, where Wilma probably will hit the western coast by midday Sunday, according to the National Hurricane Center. Wilma is an unusually large storm, with winds spreading 260 miles from its center.
The hurricane’s potential damage raises the specter that orange juice prices will soar this year because of the double whammy of storm damage and crop infestation.
“If we have a Category 3 or 4 hurricane that does damage, consumers can expect to pay 15 to 20 percent higher at the grocery store for their orange juice,” said Jim Byrne, president of Byrne Investment Services, a commodity futures and options brokerage in Fairview Park, Ohio. “If it’s a Category 2 hurricane, prices will probably stay the same, or they might rise about 5 percent.”
The United States could import oranges from Brazil if the Florida crop is destroyed, although that would be extremely expensive because of the shipping costs, he said. Florida and Brazil are the top orange juice producers for the United States, with California a distant third, he said.
This year’s crop is quite different from 2003, when the nation was awash in juice because both Brazil and Florida had bumper crops, he said.
The price per pound of orange juice has reached $1.12 Wednesday due to concerns about Wilma, a near doubling of the price of 61.6 cents in 2003. The price for November frozen orange juice concentrate futures closed down a penny yesterday, at $1.11.
“The market is saying it seems less likely that Wilma will be as much of a problem as it appeared the day before,” said Judy Ganes, president of J. Ganes Consulting, a commodity research firm in Katonah, N.Y. “It has given back some of the gains, but at this point, you don’t know exactly how strong it will be and where it will hit.”
Orange juice prices soared prior to hurricane season because of the canker infestation that has affected Florida’s citrus crop, said Rich Holcombe, a statistician for the U.S. Department of Agriculture.
Citrus canker is a bacteria that disfigures and weakens citrus trees. Trees within a wide area surrounding an infected tree have to be burned to save the grove, according to citrus growing associations.
“Even before the hurricane, there were supply problems because the Florida crop last year was severely damaged,” Holcombe said. “Foreign supplies last year were lower, too.”
Most of Florida’s orange groves are concentrated in the central and southern parts of the state. Wilma is expected to hit Florida’s Gulf Coast first, forecasters said, although the Atlantic Coast cities of Miami, Fort Lauderdale and West Palm Beach could face heavy winds and rain.
“We still don’t have the track of the hurricane,” said Casey Pace, a spokesman for Florida Citrus Mutual, the state’s largest growers’ association. “After the hurricanes last year, we had to burn 65,000 acres, so the actual crop loss has been reduced by one-third.”
The state has a total of 750,000 acres of orange groves.
“The main area of concern is the southwest coast in the Naples area,” she said. “But all growers are concerned because it looks like will have a lot of rain and wind, which can spread the canker.”
Florida’s citrus industry produced just 149.6 million boxes of oranges for 2004-2005, the lowest level since the 1991-92 season. The USDA expects the 2005-2006 crop to reach 190 million boxes, which would be an increase of 27 percent from the previous year.
Investors in beverage stocks probably won’t see much of a dramatic change in the shares of companies they own, according to Daniel Popowicz, analyst for Fifth Third Asset Management in Cincinnati. PepsiCo owns Tropicana, the No. 1 orange juice brand in the nation, and Coca-Cola owns Minute Maid, the runner-up.
It is more likely that Tropicana will try to pass along price increases to consumers, Popowicz said, because Coca-Cola has more modest growth targets for its orange juice line.
“Minute Maid is a competitor that has not raised prices as aggressively as Tropicana, which has a more loyal buyer,” he said.
He said sales of Tropicana juice are down slightly this year because, “price increases have tempered volume,” but sales of Minute Maid juice are up slightly.
“Orange juice is a relatively small portion of revenue for these two companies,” he said.

The Associated Press contributed to this story. Joseph R. Perone may be reached at jperone@starled or (973) 392-4262.

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