Required Report - public distribution

**Date:** 12/17/2003

**GAIN Report Number:** BR3024

BR3024

**Brazil**

**Citrus**

**Annual**

**2003**

**Approved by:**

![](media/image1.wmf)Ron Verdonk, Director

U.S. Agricultural Trade Office

**Prepared by:**

Sergio Barros, Agricultural Specialist

**Report Highlights:**

Total Brazilian MY 2004/05 orange crop is forecast at 450 Mbx, up 23
percent from the current crop, assuming that good weather conditions
prevail during the December 2003 to June 2004 period to support fruit
setting and size. The Sao Paulo commercial area should amount to 360
Mbx, up 80 Mbx from the revised estimate for the current season (280
Mbx). Total FCOJ production for MY 2004/05 is projected at 1.26 mmt, 65
Brix, up 255,000 MT from MY 2003/04 due to expected higher availability
of the fruit. FCOJ exports for MY 2004/05 are forecast at 1.195 mmt, up
60,000 MT compared to MY 2003/04.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Annual Report

Sao Paulo \[BR3\]

\[BR\]

Table of Contents

[**FRESH ORANGES 3**](#fresh-oranges)

[PS&D Table 3](#psd-table)

[Production 3](#production)

[PS&D Tables 3](#psd-tables)

[General 4](#general)

[Diseases 5](#diseases)

[Producers' Prices 7](#producers-prices)

[Trends in Orange Production for the state of Sao Paulo
9](#trends-in-orange-production-for-the-state-of-sao-paulo)

[Consumption 11](#consumption)

[Trade 11](#trade)

[FCOJ 12](#fcoj)

[PS&D Table 12](#psd-table-1)

[Production 12](#production-1)

[PS&D Tables 12](#psd-tables-1)

[General 13](#general-1)

[Consumption 14](#consumption-1)

[Trade 14](#trade-1)

[Stocks 15](#stocks)

[NFC (Not From Concentrated) 16](#nfc-not-from-concentrated)

[Policy 16](#policy)

[Exchange Rate 17](#exchange-rate)

# FRESH ORANGES

# PS&D Table

![](media/image2.wmf){width="6.6409722222222225in" height="2.75in"}

# 

# Production

## PS&D Tables

The following tables provide revised data for Sao Paulo and total
Brazilian fresh orange production, supply and demand (PS&D) for
marketing years (MY) 2002/03, 2003/04 (July-June) and the initial
forecast for MY 2004/05.

![](media/image3.wmf){width="6.418055555555555in"
height="2.6791666666666667in"}

![](media/image4.wmf){width="6.418055555555555in" height="3.7in"}

## General

## 

The Agricultural Trade Office (ATO)/Sao Paulo forecasts the total
Brazilian orange crop for MY 2004/05 (Jul-Jun) at 450 million 40.8 kg
boxes (Mbx), up 83 Mbx relative to the revised estimate for MY 2002/03
(367 Mbx), assuming that good weather conditions prevail during the
December 2003 to June 2004 period to support fruit setting and size. The
commercial area of the state of Sao Paulo and the western part of Minas
Gerais should produce 360 Mbx, whereas other growing regions should
account for the remaining 90 Mbx.

The major factors pointing to a projected rise in production for MY
2004/05 in the Sao Paulo and Minas Gerais commercial areas are:

-   Orange trees will be rested from a smaller 2003/04 crop;

-   Enhanced crop management including greater use of fertilizer,
    chemicals, etc. due to good orange prices received by producers in
    the past couple of years;

-   Orange trees being very stressed from a prolonged dry period
    (May-October 2003);

-   Good blossomings that occurred in the October-December period after
    the beginning of the rainy period. Note that historically the first
    big blossoming occurs in September, but in 2003 the first big
    flowering happened in November, when the second blossoming usually
    comes;

-   Many groves showing blossoms in the inner part of the tree;

-   Regular to good weather conditions that have prevailed since
    November 2003, thus supporting the fruit setting;

-   The on-year of the biennial cycle of the Hamlin and Valencia
    varieties;

-   Irrigated groves, which is becoming a common practice for a small,
    yet increasing share of orange growers.

The aforementioned factors should result in an expected higher yield for
the Sao Paulo commercial area which is projected at 2.25 boxes/tree, up
28 percent from MY 2003/04, whereas the overall Brazilian orange yield
is forecast at 2.13 boxes/tree, a 22 percent increase compared to the
current Marketing Year.

Area expansion and tree inventory are likely to only marginally
contribute to the expected higher MY 2004/05 production. ATO/Sao Paulo
forecasts total Brazilian orange area for MY 2004/05 at 809,400 hectares
(ha), a one percent increase from the current crop, based on relatively
stable crop inventory for the Sao Paulo/Minas Gerais commercial areas
and updated information from the Brazilian Geography and Statistics
Institute (IBGE). The commercial areas of Sao Paulo/Minas Gerais should
account for 613,000 ha, up 4,000 ha from MY 2003/04. Total Brazilian
tree inventory for MY 2004/05 is projected at 240 million trees (211
million bearing and 29 million non-bearing trees), up 2 million trees
compared to MY 2003/04.

Note that it is still too early to forecast the 2003/04 crop (MY
2004/05) and that more accurate numbers will be available only after
February/March 2004, due to the blossoming delays.

The ATO/Sao Paulo has revised downward the size of the Brazilian crop
for MY 2003/04 to 367 Mbx, down 5 percent from the previous estimate,
due to lower crop yields than previously forecast in the Sao Paulo/Minas
Gerais commercial areas. These areas should contribute 280 Mbx, while
the estimate for the other orange growing areas remains unchanged at 87
Mbx, in accordance with updated information from IBGE.

The warm and dry weather during the crushing season (June-October 2003)
in the commercial areas of Sao Paulo and Minas Gerais resulted in lower
than average size of the fruits, thus reducing the crop volume.
Additionally, fruits from CVC (Citrus Chlorosis Variegated) affected
plants, which are smaller than the healthy ones also contributed to
reduce the overall size of the fruits. Here, we are speaking of 10-15
year old trees, especially in Minas Gerais and the northern part of Sao
Paulo, which resisted the disease through pruning and other crop
management practices. Post contacts also report that the droppage was
higher than average.

The Sao Paulo State Institute of Agricultural Economics (IEA) released
the results of the sixth and last citrus crop survey (September 2003)
for the 2002/03 crop (MY 2003/04). The Sao Paulo crop, including both
commercial and non-commercial areas, is estimated at 327.1 Mbx, down
34.6Mbx compared to MY 2002/03 (361.7 Mbx). Note that IEA takes into
account the entire state of Sao Paulo, while ATO estimates follow the
citrus industry methodology limited to the commercial area of the state
plus the western part of Minas Gerais. IEA also reports that the state
of Sao Paulo orange tree inventory is estimated at 212.5 million trees
(187.5 million bearing and 25 non-bearing trees)

According to the Brazilian Association of Citrus Exporters (Abecitrus),
the size of the MY 2003/04 crop for the Sao Paulo commercial area is
currently estimated at 260 Mbx. Industry sources place the figure
between 260 and 280 Mbx, including both the commercial areas of Sao
Paulo and Minas Gerais.

## Diseases

According to the Sao Paulo State Fund for the Defense of Citriculture
(Fundecitrus), the 2003 CVC field survey (June-July 2003) shows that
43.56 percent of the sampled trees in the Sao Paulo and western Minas
Gerais commercial areas show symptoms of the disease. Results indicate
that 10.38 percent of the sampled trees showed symptoms restricted to
leaves (Grade 1), while 33.18 percent showed leaf and fruit symptoms
(Grade 2). The disease is mostly concentrated in the northern part of
the state of Sao Paulo.

![](media/image5.wmf){width="7.013888888888889in"
height="1.4638888888888888in"}

In spite of the high percentage of trees affected with CVC, the disease
is following its "natural" evolution, and it is reported under control.
Affected trees that are 10-15 years old continue producing due to crop
management practices but productivity is diminished and fruit size is
reduced as producers look to replace these trees within two to three
years time. Newly planted trees, for which seedlings were produced in
protected nurseries, are more likely to become disease-free and result
in healthy mature trees. In fact, trees under two years of age show a
3.9 percent infection level, up 1.1 percent point compared to 2002, but
well below the twenty percent level in 1998-1999. The major methods to
control CVC are: protected nurseries, pruning/eradication of infected
trees, and the chemical control of the vector (sharpshooter). The table
shows the evolution of the disease from 1996 to 2003, according to
Fundecitrus.

The 2003 citrus canker sampling survey indicates that 0.20 percent of
the sampled blocks show citrus canker, compared to 0.11 and 0.083
percent for 2001 and 2002, respectively, as reported by Fundecitrus. The
increase is related to weather conditions favoring the spread of the
disease and not enough field inspectors to monitor the evolution of
canker. In spite of the higher percentage, the disease is considered
under control.

Cumulative 2003 (January-November) tree eradication from commercial
groves (blocks) due to citrus canker is 177,668 trees, up 75,095 trees
for the same period in 2002. Cumulative non-commercial grove eradication
for the January-November 2003 period is 52,749 trees, up 23,388 trees
from the same period in 2002.

Post contacts report that with the migration of citrus groves to the
southern side of the Tiete River, canker could represent a certain risk
in the future. Pasture is the traditional activity for such areas and it
represents the natural habitat for the sharpshooter, the insect that
transmits the disease. Fundecitrus inspectors have already found canker
in that region, and special attention is required.

The leaf miner also represents an additional factor contributing to
spreading the canker at a faster pace. The insect damages the leaves,
making it easier for the bacteria to penetrate the tree. It also
increases the size of the lesion.

![](media/image6.wmf){width="6.497222222222222in"
height="3.0097222222222224in"}

Fundecitrus is currently conducting a survey to ascertain the spread of
"Sudden Death of Citrus" (Morte Subita dos Citros" - SDC) in the
affected areas in Minas Gerais and northern Sao Paulo. It is estimated
that approximately 1.5 million trees are symptomatic (between 80,000 and
100,000 trees in the state of Sao Paulo and the remainder in the state
of Minas Gerais).

Researchers have been trying to identify the pathogen, which has yet to
definitively determined. Alellyx Applied Genomics, a national research
and development company controlled by Votorantim Ventures, has just
discovered a virus that is strongly associated with SDC. The virus was
named Citrus Sudden Death Virus (CSDV). A test was devised using more
than 100 plants and was able to detect the disease in over 90 percent of
the samples. Alellyx has established two hypotheses: SDCV is the only
virus causing the disease or SDCV is awakened by its combination with
mutations of the "Tristeza" virus, since SDC symptoms are very similar
to "Tristeza".

Post contacts report that most growers are not taking immediate action
to combat the potential damage caused by the disease, whereas processing
companies with citrus groves and large scale farmers have been active in
attempting to address the virus. Current options to avoid/control the
disease are acquiring seedlings from protected nurseries and replacing
trees having susceptible rootstock (Rangpur lime) with resistant ones.
In-arching, i.e., introducing a bypass from 1 or 2 resistant rootstock
to an affected tree is another management practice adopted by some
growers. According to post contacts, in-arching represents an additional
US\$1.5-\$2/rootstock and approximately two million trees have already
received this treatment.

## Producers' Prices

The Orange Index price series released by the University of Sao Paulo's
College of Agriculture "Luiz de Queiroz" (ESALQ) for both the fresh
domestic market and product delivered to orange juice processing plants
in the state of Sao Paulo follows. Both series track orange prices since
September 1994. Prices for the fresh market are for fruit on the tree.
Good prices received by producers for the MY 2003/04 crop reflect the
lower availability of the product.

According to post contacts, a significant percentage of current orange
contracts will expire after the end of the MY 2003/04 crop. The
industry, however, has not showed so far any indication toward the
renewal of the contracts for MY 2004/05 and forward, which creates some
uncertainties for orange growers. Post contacts report that orange
prices set in futures contracts should be lower than the current
US\$3-3.5/box, due to the expected higher availability of the fruit.

![](media/image7.wmf){width="6.430555555555555in"
height="3.060416666666667in"}

![](media/image8.wmf){width="6.355555555555555in"
height="3.060416666666667in"}

## 

## Trends in Orange Production for the state of Sao Paulo 

The IEA has recently released a study projecting orange production for
the state of Sao Paulo until 2009. The Institute assumed that 12 million
seedlings were planted for the 2002/03 crop (MY 2003/04) and that 10
million seedlings will be planted for the 2003/04 through 2008/09 crops.
The study considered 3 eradication rates (4, 6 percent and a set rate of
10 million trees per year).

The table below illustrates the relative share of trees by age, showing
a relative increase of trees older than 10 years for the 2002 to 2009
period. The relative share of trees between 8 and 10 years in the tree
inventory should be reduced during this period, whereas the share of
young bearing trees (4 to 7 years) is likely to decrease up to 2004, and
increase from 2005 onwards. The share of non-bearing trees in the total
tree inventory should remain stable.

![](media/image9.wmf){width="6.583333333333333in" height="2.34375in"}

The study indicates that according to the tree inventory breakdown by
age, State of Sao Paulo production should vary from 368 Mbx in 2002 to
346 Mbx in 2009, assuming different productivities by age (see table
below).

![](media/image10.wmf){width="6.749305555555556in"
height="1.226388888888889in"}

The study also calculates projected production for average yields as
shown in the following table. If an average yield of 2 boxes per tree is
assumed, total production could vary from 366 Mbx in 2002 to 352 Mbx in
2009. Higher average yields (2.1 and 2.2 boxes per tree) will clearly
lead to higher projected production.

![](media/image11.wmf){width="6.751388888888889in"
height="0.9756944444444444in"}

The IEA study did not take into account the effects of SDC, since the
propagation of the disease has yet to be fully understood. However, SDC
in addition to canker, CVC and weather stress have represented
challenges to Sao Paulo commercial citriculture.

In response, trees are becoming more productive as a consequence of
technological improvements such as new planting densities (380-400
trees/ha); the use of new SDC-resistant rootstock varieties (Cleopatra,
sunki and swingle) to replace Rangpur lime, which is susceptible to the
disease; the use of seedlings from protected nurseries and irrigation.

Although growing in use, irrigation still represents less than 10
percent of the orange area in the citrus commercial belt. The new
rootstock varieties need water for irrigation, whereas the traditional
Rangpur lime is pretty much adapted to water stress. Water, however, as
reported by post contacts, is likely to be a constraint in the future.
According to post contacts, some studies show that only 15 percent of
the citrus commercial area could be irrigated.

Therefore, oranges groves have been geographically migrating from the
traditional and weather-stressed areas in the northern part of the state
to the southern part of Sao Paulo, which offers better weather
conditions for crop management and where irrigation is not a requirement
for production.

Large-size producers are usually the ones who can adapt to the
aforementioned changes, since high costs are associated with them.
Economies of scale are a fact: post contacts report that operational
costs of production are US\$1/box for large groves, US\$1.3/box for
mid-sized groves and up to US\$2/box for small groves. The initial
investment necessary to have a productive grove is about US\$10/tree
over a 3-year period.

Indeed, many small and mid-sized growers have gone out of business in
recent past, replacing their orange groves with sugarcane and pasture.
The concentration of the orange production sector is quite clear.
Traditional growers are becoming bigger and bigger. During the
mid-nineties, Fundecitrus, IEA and the processing companies registered
approximately 29,000 orange growers. Current figures reported by
Fundecitrus and processing companies show 10,000 to 15,000 active
growers. It is estimated that 20 percent of the orange growers
(including the FCOJ processors groves) represent 80 percent of total
orange production in the commercial citrus belt.

As reported by Fundecitrus, a total of 574 nurseries were inspected in
November 2003. The results show that 539 nurseries were in operation.
Protected nurseries, in which seedlings are kept within screened
enclosures, represent 97.2 percent of total in operation (524
nurseries), showing that seedling producers adapted themselves to the
new legislation that does not allow unprotected nurseries. The number of
inspected seedlings totaled 11,406,046 (only 14,527 from unprotected
nurseries). The number of inspected rootstock totaled 14,503,215 (only
4,789 from unprotected nurseries). Total nursery protected area is
currently estimated at 800,000 square meters, which enables a potential
production capacity of 24 million seedlings per year. Note that new
plantings are estimated at 15 million seedlings per year.

According to information provided by post contacts, in 2002, 80 to 90
percent of the rootstock produced was Rangpur lime, whereas this variety
represented less than fifty percent in 2003. The need for seeds to
produce SDC-resistant rootstock could be a constraint for some
nurseries, but not for the large ones. Cleopatra seeds are in sufficient
supply, whereas sunki and swingle seeds will need to be
imported/multiplied in the next couple of years to reach
self-sufficiency. Total production capacity is currently estimated at 24
million seedlings per year.

# Consumption

Total Brazilian orange consumption for MY 2004/05 is projected at 135.5
Mbx, an 8 percent increase compared to the revised figure for MY 2003/04
(125 Mbx), due to higher expected availability of fruit for the upcoming
crop. Note that these figures include actual domestic consumption plus
losses from natural drop, harvesting, transportation and packing. Fruit
delivered to processors for "not from concentrated (NFC)" orange
production for the domestic market is also included in these figures.
Domestic consumption estimates are taken as the difference between
production estimates and the volume of oranges delivered to processors
for FCOJ and NFC produced for exports.

## 

# Trade

ATO/Sao Paulo forecasts total fresh orange exports for MY 2004/05 at 2.5
Mbx, up 0.5 Mbx from the revised estimate for MY 2003/04 (2 Mbx), based
on updated information from the Brazilian Secretariat of Foreign Trade
(SECEX). The table below shows official fresh orange exports (NCM
080510.00) by country of destination, for MY 2001/02, 2002/03 and
2003/04, according to SECEX

![](media/image12.wmf){width="5.791666666666667in"
height="2.8256944444444443in"}

# FCOJ

# PS&D Table

![](media/image13.wmf){width="6.657638888888889in"
height="2.3208333333333333in"}

[]{.mark}

# Production

## PS&D Tables

The following tables provide revised data for Sao Paulo and total
Brazilian frozen concentrated orange juice (FCOJ) production, supply and
demand (PS&D) for marketing years (MY) 2002/03, 2003/04 (July-June) and
the initial forecast for MY 2004/05.

![](media/image14.wmf){width="6.418055555555555in"
height="2.2736111111111112in"}

![](media/image15.wmf){width="6.418055555555555in" height="3.7in"}

## 

## General

Post projects total Brazilian FCOJ production for MY 2004/05 (July-June)
at 1.26 million metric ton (mmt), 65 Brix, up 255,000 mt compared to our
revised figure for MY 2003/04 (1.005 mmt), due to expected higher
availability of fruits for processing. The Sao Paulo industry is likely
to contribute 282 Mbx of orange for FCOJ processing, which should yield
1.215 mmt of the product. Other producing states should deliver 12 Mbx
for processing (45,000 mt of FCOJ). Note that that the MY 2004/05
crushing season should be initially delayed by 45 days, as a result of
the delay in the blossomings during the second semester of 2003.

Total Brazilian FCOJ production for MY 2003/04 has been revised downward
to 1.005 mmt, 65 Brix, a 16,000 mt decrease from the previous projection
due to expected lower production in Sao Paulo state. The Sao Paulo
industry is expected to crush 215 Mbx, down 25 Mbx from previous
estimates, whereas other FCOJ processing states should crush 9 Mbx, down
1 Mbx compared to the former forecast. Note that in spite of the lower
amount of fruit delivered for processing in Sao Paulo, excellent
industrial yields are expected due to the dry weather that prevailed
along the crushing season. Therefore, FCOJ production in Sao Paulo is
not expected to drop significantly and is currently projected at 970,000
mt, 65 Brix.

The MY 2003/04 crushing pace has not been uniform as a consequence of
the irregular blossomings in 2002. Some plants reduced operations in
September and early October due to lower availability of fruit ready for
harvesting (fruit did not show adequate ratio for picking). The crushing
returned to a regular pace afterwards. FCOJ processing companies are
expected to close plants during the end of the year holidays. Plants
should reopen in mid-January and the crushing season is expected to
extend through February, as a consequence of the late blossoming that
occurred in December 2002.

# Consumption

ATO/Sao Paulo forecasts FCOJ domestic consumption for MY 2004/05 at
18,000 mt, 65 Brix, similar to the revised number for MY 2003/04 (18,000
mt), according to updated information from post contacts.

## 

# Trade

ATO/Sao Paulo forecasts total Brazilian FCOJ exports for MY 2004/05 at
1.195 mmt, 65 Brix, up 60,000 mt relatively to revised figure for MY
2003/04, due to higher expected availability of fruit for processing.
The Sao Paulo industry should account for 1.15 mmt, 65 Brix, whereas the
reminder should come from other FCOJ producing states.

FCOJ exports for MY 2003/04 were revised downward to 1.135 mmt, 65 Brix,
down 3 percent from our previous estimate. With the expected record crop
in Florida, Brazil is likely to export less product to the U.S. In
addition, Florida should become a net FCOJ exporter and compete at least
marginally in Brazilian export markets. In spite of lower orange juice
production in Brazil for MY 2003/04, export levels should not drop
sharply, sustained by high MY 2002/03 carry over stocks (240,000 mt, 65
Brix).

Current FCOJ export prices are reported at US\$ 1,050 -- 1,100 per
metric ton (bulk). However, post contacts report that the market is
weak, and European bottlers purchase only on a spot basis.

FCOJ exports for MY 2002/03 were revised upward to 1.25 mmt, 65 Brix, up
5 percent from the previous estimate, based on updated information from
the Brazilian Secretariat of Foreign Trade (SECEX) and post contacts.
The hot summer in Europe stimulated orange juice exports to those
countries.

The tables below show official FCOJ exports (NCM 2009.11.00 and
2009.19.00) by country of destination for MY 2001/02, 2002/03 and
2003/04, according to SECEX. Orange juice exports by NCM and state also
follows. Note that the "Others" category includes both FCOJ and Not From
Concentrated (NFC) exports.

[]{.mark}

![](media/image16.wmf){width="6.247222222222222in"
height="2.8645833333333335in"}

![](media/image17.wmf){width="6.247916666666667in" height="3.04375in"}

![](media/image18.wmf){width="5.780555555555556in"
height="2.8027777777777776in"}

# Stocks

Total ending stocks for MY 2004/05 are projected at 139,000 mt, 65 Brix,
up 47,000 mt compared to our revised MY 2003/04 forecast, due to
expected higher availability of fruits for crushing. Brazilian owned
FCOJ carry over stocks worldwide for MY 2002/03 and 2003/04 are reported
at approximately 705,000 and 575,000 mt, respectively.

# NFC (Not From Concentrated)

There is no official estimate for NFC supply and demand in Brazil.
ATO/Sao Paulo projects that approximately 18 Mbx will be crushed for MY
2004/05 NFC exports, up 2 Mbx from our unchanged number for MY 2003/04
(16 Mbx). Note that current PS&D tables consider NFC production for
exports as a different entry (see Tables in PS&D section).

Also note that not all boxes of oranges reported for processing are
actually exported. Part of the NFC produced returns to the processing
plant and is converted to FCOJ due to quality problems or
specifications. Post estimates that approximately 175,000 and 255,000
metric tons of NFC, 11.8 Brix, were exported for MY 2001/02 and 2002/03,
respectively. Post forecasts that 350,000 mt should be exported for MY
2003/04.

The following table shows "Orange Juice, Not Concentrated and Brix under
20" (NCM 2009.12.00) exports by country of destination for MY 2001/02,
2002/03 and 2003/04, according to SECEX. Note that part of the NFC
exports is included in the "Others" category (see FCOJ Trade section).

![](media/image19.wmf){width="5.860416666666667in"
height="2.8229166666666665in"}

# Policy

On November 12, the Spanish Ministry of Agriculture issued an order
banning the import of fresh citrus from Argentina and Brazil. The
Ministry reported that phytosanitary inspections of fruit imported from
these countries detected the presence of several organisms including the
bacteria Xanthomonas campestris, which causes citrus canker.

An official mission of the Brazilian Ministry of Agriculture, Livestock
and Supply (MAPA) is visited Spain December 17-19, 2003 to discuss the
situation, to illustrate the Brazilian phytosanitary procedures and
negotiate the end of the ban. Spain, the major European citrus producer
usually depends on Brazilian citrus during the off-season.

# Exchange Rate

![](media/image20.wmf){width="6.406944444444444in"
height="3.189583333333333in"}