• TABLE OF CONTENTS
HIDE
 Front Cover
 Acknowledgement
 Report team
 Table of Contents
 List of Figures
 List of Tables
 Executive summary
 Introduction
 Historical perspective of citrus...
 Diseases and other factors affecting...
 The economic impact of the Florida...
 Economic assessment of the Florida...
 Citrus price/return analysis
 Long-run production and price forecasts...
 Citrus price/return analysis
 Models used to examine impacts...
 Reference






Title: Economic assessment of the future prospects for the Florida citrus industry
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Title: Economic assessment of the future prospects for the Florida citrus industry
Physical Description: Book
Language: English
Creator: Food and Resource Economics Department, University of Florida
Publisher: Food and Resource Economics Department
Publication Date: 2006
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Table of Contents
    Front Cover
        Front Cover
    Acknowledgement
        Page i
    Report team
        Page ii
    Table of Contents
        Page iii
        Page iv
        Page v
    List of Figures
        Page vi
    List of Tables
        Page vii
        Page viii
        Page ix
        Page x
        Page xi
    Executive summary
        Page 1
        Page 2
        Page 3
        Page 4
    Introduction
        Page 5
        Page 6
        Page 7
        Page 8
    Historical perspective of citrus production in Florida
        Page 9
        Page 10
        Page 11
        Page 12
    Diseases and other factors affecting Florida citrus production
        Page 13
        Page 14
        Page 15
        Page 16
        Page 17
        Page 18
        Page 19
        Page 20
    The economic impact of the Florida citrus industry in 2003-04
        Page 21
        Page 22
        Page 23
        Page 24
        Page 25
        Page 26
        Page 27
        Page 28
        Page 29
        Page 30
        Page 31
        Page 32
        Page 33
        Page 34
    Economic assessment of the Florida citrus nursery industry
        Page 35
        Page 36
        Page 37
        Page 38
        Page 39
        Page 40
        Page 41
        Page 42
        Page 43
        Page 44
    Citrus price/return analysis
        Page 45
        Page 46
        Page 47
        Page 48
        Page 49
        Page 50
        Page 51
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        Page 63
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    Long-run production and price forecasts for processed oranges and fresh and processed grapefruit
        Page 65
        Page 66
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        Page 123
        Page 124
    Citrus price/return analysis
        Page 125
        Page 126
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    Models used to examine impacts on the Florida citrus industry
        Page 149
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    Reference
        Page 165
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Full Text






An Economic Assessment

of the

Future Prospects

for the

Florida Citrus Industry





March 16, 2006




Prepared by:
Thomas H. Spreen
Robert E. Barber, Jr.
Mark G. Brown
Alan W. Hodges
Jordan C. Malugen
W. David Mulkey
Ronald P. Muraro
Robert P. Norberg
Mohammad Rahmani
Fritz M. Roka
Robert E. Rouse

























Acknowledgments


This report was prepared at the request of Dr. Jimmy Cheek, Senior Vice President,
Institute of Food and Agricultural Sciences at the University of Florida. Dr. Cheek provided
financial assistance to the project. Special thanks to the Florida Department of Citrus, Dr. Dan
Gunter, Executive Director. The Department provided support through the assistance of Dr.
Mark Brown, Economist. Manuscript preparation was done by Vera Sodek, Administrative
Assistant with the Florida Department of Citrus in Gainesville. Carolyn Brown, Data Base
Analyst, spent countless hours checking the manuscript for accuracy.

Special thanks to Dr. Robert Behr, Dr. Jim Zellner, Mr. Allen Morris, and Dr. Dan Gunter
who served as a review panel. They made many helpful comments. Thanks also to Dr. Harold
Browning and Dr. Pete Timmer for review and suggestions. The authors, however, are
ultimately responsible for any errors or omissions.











Report Team


Dr. Thomas H. Spreen, Professor and Chair, Food and Resource Economics Department,
University of Florida, Gainesville, FL 32611. Phone: 352-392-1826 (Ex. 209). Email:
tspreen@ufl.edu.

Mr. Robert E. Barber, Jr., Economist, Florida Citrus Mutual, Lakeland, FL 33801. Phone:
863-682-1111. Email: bobb@flcitrusmutual.com.

Dr. Mark G. Brown, Senior Research Economist, Economic and Market Research Department,
Florida Department of Citrus, Gainesville, FL 32611, and Courtesy Professor, Food and Resource
Economics Department, University of Florida. Phone 352-392-1874 (Ex. 501). Email:
mgbrown@ufl.edu.

Dr. Alan W. Hodges, Associate In, Food and Resource Economics Department, University of
Florida, Gainesville, FL 32611. Phone: 352-392-2297 (Ex. 312). Email: awhodges@ufl.edu.

Mr. Jordan C. Malugen, Research Assistant, Food and Resource Economics Department,
University of Florida, Gainesville, FL 32611. Phone: 352-392-1826 (Ex. 228). Email:
jmalugen@ufl.edu.

Dr. W. David Mulkey, Professor and Associate Chair, Food and Resource Economics Department,
University of Florida, Gainesville, FL 32611. Phone: 352-392-2297 (Ex. 406). Email:
nuIlkkc\'a,/ ifl.cd u.

Mr. Ronald P. Muraro, Professor and Extension Economist, Citrus Research and Education Center,
University of Florida, Lake Alfred, FL 33850. Phone: 863-956-1151. Email: rpm@lal.ufl.edu.

Mr. Robert P. Norberg, Director, Economic and Market Research Department, Florida Department
of Citrus, Lakeland, FL 33802. Phone: 863-499-2503. Email: bnorberg@citrus.state.fl.us.

Mr. Mohammad Rahmani, Economic Analyst, Food and Resource Economics Department,
University of Florida, Gainesville, FL 32611. Phone: 352-392-1826 (Ex. 315). Email:
rahmani@ufl.edu.

Dr. Fritz Roka, Associate Professor and Extension Economist, Southwest Florida Research and
Education Center, University of Florida, Immokalee, FL 34142. Phone: 239-658-3400. Email:
fmro@ufl.edu.

Dr. Robert E. Rouse, Extension Horticulturist and Associate Professor, Southwest Florida Research
and Education Center, Immokalee, FL 34142. Phone: 239-658-3400. Email: rrouse@ufl.edu.









Table of Contents

e....

Acknowledgments ......................... ............ ................. ... i

Report Team .......................................................... ii

LIST OF FIGURES ........................................... .......... vi

LIST OF TABLES ...................................... ...... ......... vii

Executive Summary ........................................................ 1

SECTION I: Introduction ............................................... 5

SECTION II: Historical Perspective of Citrus Production in Florida ................. 9

SECTION III: Diseases and Other Factors Affecting Florida Citrus Production ....... 13
Citrus Canker ........... ....................................... 13
Citrus Greening ................. .................. .......... 16
Urban Development and Increasing Land Values ........................ 19

SECTION IV: The Economic Impact of the Florida Citrus Industry in 2003-04 ....... 21
Methods ............ ................................................21
Results and Discussion ................... ............................ 26

SECTION V: Economic Assessment of the Florida Citrus Nursery Industry ........... 35
Current Situation ........... ......................................... 35
Protected Structures ................................. .... ......... 36
Setback Distance .................................. ........... 38
Sanitation .....................................................40
Future Supply and Demand for Citrus Nursery Trees ....................... 41
Summary ............ ............................................... 44

SECTION VI: CITRUS PRICE/RETURN ANALYSIS: An Examination of Investment
Returns to Citrus in a Citrus Canker and Greening Environment ............. 45
Introduction ............ ............................................ 45
Investment Scenarios ................ ................................ 46
Disease Assumptions .................................... ............. 46
Investment Model Assumptions ................ ....................... 47
Investment Model Description ................ ........................ 52
Investment Model Results Summary ................ ................... 53
Scope of Analysis ................ ............................ 53
Accounting for the Effect of Rural Land Prices on the Profitability of Citrus 54









Table of Contents (Cont.)

Page

Effects of Endemic Citrus Canker on Grove Profitability .................. 56
Effects of Greening on Grove Profitability ............................ .60
Conclusions ...............................................61

SECTION VII: Long-Run Production and Price Forecasts for Processed Oranges
and Fresh and Processed Grapefruit ................ ................... 65
A Model of the World Orange-Juice Market ............................ 65
A Model of the World Market for Florida Grapefruit ..................... 68
Empirical Results ........... .........................................70
Base-Run Results ............. .................................. 71
Results from Other Scenarios ................. ................. 77
No Canker Effect- Scenario 2 Results ................................ 78
Higher Negative Yield Effect from Canker Scenario 3 Results ............ 82
Inclusion of Effects from Greening Scenario 4 Results .................. 85
High Greening Impact- Scenario 5 Results ........................... .91
Development and High Land Prices Scenario 6 Results .................. 94
Increased Land Pressure from Development Scenario 7 Results ........... 99
Supply Effects in Sdo Paulo Scenario 8 Results ....................... 101
The Joint Effect of Canker, Greening, Higher Land Costs, and
Higher Sugar Prices Scenario 9 Results ....................... 106
No U.S. Demand Growth Scenario 10 Results ....................... .113
No Demand Growth in the United States and the Rest of the World -
Scenario 11 Results ........................................ 116
Forecast Economic Impacts of the Florida Citrus Industry in 2003-04 ......... 119
Methods .......................................... 119
Results and Discussion ................ ........................ 119
Concluding Remarks ................ .................... ......... 122

APPENDIX A: Citrus Price/Return Analysis ................ ................. 125
Operating Costs Used in Analysis .................................... 125
Investment Model Assumptions ................. ..................... 126
Net Present Value Analysis ................ ..................... 126
Discount and Capitalization Rates ............................... 126
Breakeven Prices with Terminal Grove Value Versus Cumulative Discounted
Cash Flows Only ......................................... 127
Accounting for Uneven Aged Trees in a Grove ......................... 129
Resetting and Young-Tree Establishment Costs ........................ 130
Tree Yields ........... ........................................ 131









Table of Contents (Cont.)

Page

Disease Assumptions ............ ........................................... 131
Citrus Canker ........... ...................................... 132
Citrus Greening ................ ............................ 133

APPENDIX B: Models Used to Examine Impacts on the Florida Citrus Industry ..... 149
Orange-Juice Model ................................................. 149
Conceptual Model .............................................. 150
OJ Supply .................................................... 151
OJ Demand ................................................... 156
U.S. Advertising Goals ................ ........................ 157
Grapefruit Model ........... ........................................ 159
Conceptual Model ............................................. 160
Fresh Grapefruit Price ................. ....................... 161
GJPrice .............. .............................162
Grapefruit Planting Equation .................................... 162
Qualifications to Recognize the Uncertainty of the Future ................... 163

REFERENCES .......................................................165









List of Figures


Figure


2-1 Total Florida citrus production, by variety ................ ................. 10


PaPe










List of Tables


Table Page

3-1 Assumed incidence of citrus canker in Florida citrus groves ..................... 16

3-2 Assumed incidence of greening in Florida citrus groves ......................... 18

4-1 Florida citrus production expenditures, by type and region, 2003-04 season ......... 24

4-2 Industry purchases for Florida citrus fruit production, by IMPLAN sector, 2003-04 ... 25

4-3 Production volume, price and value of fresh and processed Florida citrus fruit,
2003-04 season ................................................... 27

4-4 Value of Florida frozen and canned citrus juice for local consumption and export,
2003-04 season ....................................................... 28

4-5 Volume and value of processed Florida citrus by-products, 2003-04 season ......... 29

4-6 Summary of economic impacts of the Florida citrus industry, 2003-04 season ....... 30

4-7 Economic impacts of the Florida citrus industry, by industry group, 2003-04
season ............................................... 32

6-1 Tree-loss percentages .................................................. 47

6-2 Average grove yields by scenario and disease ................................. 49

6-3 Base scenario grove costs .................................. ............. 51

6-4 Discount and capitalization rates ............... ........................ 52

6-5 Breakeven citrus prices (net cash flow + final value) ........................... 57

6-6 Average grove production costs by scenario and disease ........................ 59

7-1 Scenario 1: Long-run projections of Florida and Sdo Paulo orange production,
U.S. and ROW OJ consumption and U.S. OJ prices, Base assumptions ............ 73

7-2 Scenario 1: Long-run projections of Florida grapefruit production, fresh and
processed prices, U.S. GJ consumption, and Florida fresh grapefruit shipments,
Base assumptions ............... ................................ 74










List of Tables (Cont.)

Table Page

7-3 Scenario 1: FOB Revenues Base assumptions ............................. 75

7-4 Scenario 2: Long-mn projections of Florida and Sao Paulo orange production,
U.S. and ROW OJ consumption and U.S. OJ prices, base assumptions EXCEPT
no canker yield and acre losses .......................................... 79

7-5 Scenario 2: Long-mn projections of Florida grapefruit production, fresh and
processed prices, U.S. GJ consumption, and Florida fresh grapefruit shipments,
base assumptions EXCEPT no canker yield and acre losses .................... 80

7-6 Scenario 2: FOB Revenues Base assumptions EXCEPT no canker yield and acre
losses ................. ........................................ 81

7-7 Scenario 3: Long-mn projections of Florida and Sao Paulo orange production,
U.S. and ROW OJ consumption and U.S. OJ prices, base assumptions PLUS
increased canker yield losses ............................................ 83

7-8 Scenario 3: Long-mn projections of Florida grapefruit production, fresh and
processed prices, U.S. GJ consumption, and Florida fresh grapefruit shipments,
base assumptions PLUS increased canker yield losses ......................... 84

7-9 Scenario 3: FOB Revenues Base assumptions PLUS increased canker yield
losses ........... ................................................... 86

7-10 Scenario 4: Long-mn projections of Florida and Sao Paulo orange production,
U.S. and ROW OJ consumption and U.S. OJ prices, base assumptions PLUS low-
greening-loss rates ............. ....................... ........... 87

7-11 Scenario 4: Long-mn projections of Florida grapefruit production, fresh and
processed prices, U.S. GJ consumption, and Florida fresh grapefruit shipments,
base assumptions PLUS low-greening-loss rates ................ ......... 89

7-12 Scenario 4: FOB Revenues Base assumptions PLUS low-greening-loss rates .... 90

7-13 Scenario 5: Long-mn projections of Florida and Sao Paulo orange production,
U.S. and ROW OJ consumption and U.S. OJ prices, base assumptions PLUS
high-greening-loss rates ................................... ......... 92


-viii-










List of Tables (Cont.)

Table Page

7-14 Scenario 5: Long-run projections of Florida grapefruit production, fresh and
processed prices, U.S. GJ consumption, and Florida fresh grapefruit shipments,
base assumptions PLUS high-greening-loss rates ......................... 93

7-15 Scenario 5: FOB Revenues Base assumptions PLUS high-greening-loss rates .... 95

7-16 Scenario 6: Long-run projections of Florida and Sao Paulo orange production,
U.S. and ROW OJ consumption and U.S. OJ prices, base assumptions PLUS
increased land values impacting planting rates ............................. 96

7-17 Scenario 6: Long-run projections of Florida grapefruit production, fresh and
processed prices, U.S. GJ consumption, and Florida fresh grapefruit shipments,
base assumptions PLUS increased land values impacting planting rates ......... 97

7-18 Scenario 6: FOB Revenues Base assumptions PLUS increased land values
impacting planting rates ................................ .. ......... 98

7-19 Scenario 7: Long-run projections of Florida and Sao Paulo orange production,
U.S. and ROW OJ consumption and U.S. OJ prices, base assumptions PLUS
increased land values impacting planting and acre-loss rates ................. 100

7-20 Scenario 7: Long-run projections of Florida grapefruit production, fresh and
processed prices, U.S. GJ consumption, and Florida fresh grapefruit shipments,
base assumptions PLUS increased land values impacting planting and acre-
loss rates ................ ..................................... 102

7-21 Scenario 7: FOB Revenues Base assumptions PLUS increased land values
impacting planting and acre-loss rates ................................... 103

7-22 Scenario 8: Long-run projections of Florida and Sao Paulo orange production,
U.S. and ROW OJ consumption and U.S. OJ prices, base assumptions PLUS
high-sugar-prices impacting Sao Paulo orange planting rates ................ 105

7-23 Scenario 8: FOB Revenues Base assumptions PLUS high-sugar-prices
impacting Sao Paulo orange planting rates ................................ 107

7-24 Scenario 9: Long-run projections of Florida and Sao Paulo orange production,
U.S. and ROW OJ consumption and U.S. OJ prices, base assumptions PLUS low-
greening-loss rates, increased land values impacting Florida planting rates,
and high-sugar-prices impacting Sao Paulo orange planting rates ............. 108










List of Tables (Cont.)

Table Page


7-25 Scenario 9: Long-run projections of Florida grapefruit production, fresh and
processed prices, U.S. GJ consumption, base assumptions PLUS low-greening-
loss rates and increased land values impacting Florida planting rates .......... 111

7-26 Scenario 9: FOB Revenues Base assumptions PLUS low-greening-loss rates,
increased land values impacting Florida planting rates, and high-sugar-
prices impacting Sao Paulo orange planting rates ......................... 112

7-27 Scenario 10: Long-run projections of Florida and Sao Paulo orange production,
U.S. and ROW OJ consumption and U.S. OJ prices, base assumptions PLUS low-
greening-loss rates, increased land values impacting Florida planting rates,
high-sugar-prices impacting Sao Paulo orange planting rates, and no U.S.
demand growth only ................. ............................. 114

7-28 Scenario 10: FOB Revenues Base assumptions PLUS low-greening-loss rates,
increased land values impacting Florida planting rates, high-sugar-prices
impacting Sao Paulo orange planting rates, and no U.S. demand growth only ... 115

7-29 Scenario 11: Long-run projections of Florida and Sao Paulo orange production,
U.S. and ROW OJ consumption and U.S. OJ prices, base assumptions PLUS low-
greening-loss rates, increased land values impacting Florida planting rates,
high-sugar-prices impacting Sao Paulo orange planting rates, and no U.S.
and ROW demand growth ............................................ 117

7-30 Scenario 11: FOB Revenues Base assumptions PLUS low-greening-loss rates,
increased land values impacting Florida planting rates, high-sugar-prices
impacting Sao Paulo orange planting rates, and no U.S. and ROW demand
growth ......... ..... ................... .. ... ......... 118

7-31 Summary of forecast economic impacts of the Florida citrus industry, 2020-21
season ............................................................. 121

A-1 Base production costs used in analysis (per acre) ............................. 135

A-2 Discount rates for citrus investment analysis ................................. 136

A-3 Built-up capitalization rate method .................................... 137

A-4 Tree-age distribution of solid-set Valencia base scenario ..................... 138










List of Tables (Cont.)

Table Page


A-5 Grove yields for solid-set Valencia base scenario ......................... 139

A-6 Reset tree costs by disease ............... ............................ 140

A-7 Establishment costs for solid-set planted trees, cost per acre .................... 141

A-8 Establishment spray costs for solid-set planted trees ........................... 142

A-9 Per-tree yields used for analysis ............... ........................ 143

A-10 Citrus canker spray programs ............... .......................... 144

A-11 Citrus greening spray programs ................ ........................ 145

A-12 Citrus canker and greening spray programs ............................... 146

A-13 Other disease costs .......... .. ................... ......... ... 147









An Economic Assessment of the Future Prospects
for the Florida Citrus Industry



Executive Summary


This study provides an overview of the current status and future prospects of the Florida

citrus industry. The industry currently faces two relatively new diseases: citrus canker and citrus

greening. It also must compete with increasing urbanization in the state which has resulted in

increasing land values. Citrus canker has also impacted the citrus tree nursery industry in the

state. New regulations will likely result in major changes in how nursery trees are produced in

the state.

The Florida citrus industry remains an important supplier of citrus products to both the

U.S. and world market. Florida is the world's second largest producing region for orange juice.

Along with Sao Paulo, Brazil, these two regions account for over 80% of world orange-juice

production. Despite a major loss in bearing grapefruit trees, Florida is the world's largest

producer of both fresh and processed grapefruit products.

The study consists of four major parts that address various aspects of Florida's citrus

industry. These parts are (1) analysis of the economic impact of the industry on the Florida

economy, (2) assessment of the future structure of the Florida citrus tree nursery industry, (3)

analysis of the future prospects for new investment in Florida citrus, and (4) long-run production

and price forecasts for Florida citrus under varying assumptions that relate to supply issues

including the impact of canker and greening, higher undeveloped land prices, supply issues

confronting Sao Paulo, Brazil and alternative future demand assumptions.







-2-
The citrus varieties that are explicitly analyzed are early and midseason oranges, Valencia

oranges, and red and white seedless grapefruit. For the orange varieties, the analysis focuses on

fruit used for processing. For the grapefruit varieties, both the fresh and processed markets are

considered.

The Florida citrus industry is a major economic force in the state. Using the IMPLAN

input-output model, the total estimated economic impact of the citrus industry on the economy of

Florida in the 2003-04 season was $9.3 billion and generated over 76,000 jobs in the state. The

citrus industry is a prime driver of the economy of many counties in central and south-central

Florida.

The analysis of the Florida citrus tree nursery industry is preliminary in that the Division

of Plant Industry (DPI) of the Florida Department of Agriculture and Consumer Services

(FDACS) will ultimately establish regulations regarding the production of nursery trees in the

state. Based upon preliminary discussions, however, it is estimated that new regulations will

increase the cost of new trees by $2.00 to $2.50 per tree. With the large number of trees

destroyed as a part of the canker eradication effort, new citrus trees will be in short supply for the

next two to three years. The new regulations are tentatively not slated to take effect until

January 1, 2008.

The investment analysis considered three situations: new grove development including

the purchase of land, replanting of property that does not include land costs, and returns to

existing mature groves. With the large increase in the price of undeveloped land, if an investor

needs to purchase land to expand citrus production, inclusion of a land charge increases the

breakeven price for processed oranges by $.40 per pound solids (PS). The effects of citrus

canker do not have a large effect on returns to processed orange production but add







-3-
approximately $2.00 per box on-tree to the breakeven price for grapefruit. The economic costs

associated with greening are estimated in three scenarios in which the death loss resulting from

greening is varied. A high rate of death loss resulting from greening substantially affects the

breakeven price in all land ownership arrangements. All estimated breakeven prices for

processed orange production across all scenarios, however, are $2.00 per PS or less.

In the long run price/production forecast section, processed oranges are evaluated in a

framework that encompasses the world orange-juice market including supply responses in Brazil.

The results suggest that greening under a high-death-loss assumption has strong negative

implications for Florida, with production in Florida decreasing, but stabilizing, at 123 million

boxes. With increased death loss in both Brazil and Florida, however, processed orange prices

would rise substantially. Brazilian citrus growers must not only deal with greening but also face

competition for farmland in Sao Paulo from sugarcane used for ethanol. Simultaneous

imposition of greening, canker, high Florida land values, and higher sugar prices in Sao Paulo

suggests that Florida orange production may be around 152 million boxes at the end of the

15-year projection period considered with Sao Paulo production at approximately 300 million

boxes. This level of production results in FOB FCOJ prices in Florida exceeding $2.00 per

single-strength-equivalent (SSE) gallon (1.029 PS per SSE gallon). With higher prices more

than offsetting lower production levels in this scenario, the estimated total economic impact of

the citrus industry on the economy of Florida in 2020-21 is $10.8 billion, 16% greater than the

2003-04 level. The citrus industry, however, will likely account for a smaller percentage of the

overall Florida economy in upcoming years with the state economy expected to grow relatively

rapidly.








-4-
It is acknowledged that high prices may well stimulate processed orange production in

other regions, but it would take at least 20 years for other regions to develop sufficient

infrastructure to allow them to become a major supplier of orange juice to the world market.

Weaker demand assumptions were also considered. No demand growth for orange juice has little

effect on production over the projection period but does result in the buildup of inventories and

decreases Florida FOB FCOJ prices by about $.14 per SSE gallon. With the various supply

constraints in this study, consumption of orange juice and other citrus products is limited, and

the impact of demand is largely reflected by price as opposed to the quantity consumed. Lower

demand results in lower prices, a factor that becomes important for the present situation where

production costs are increasing as a result of canker, greening and higher land costs- weak

demand may result in prices that do not cover cost increases. Under all scenarios considered,

survival of the Florida citrus industry is suggested although its equilibrium size is affected by

assumptions regarding canker and greening, high land prices, the impact of higher sugar prices in

Sdo Paulo, and demand growth.









An Economic Assessment of the Future Prospects
For the Florida Citrus Industry



Section I
Introduction


Florida is the largest citrus-producing state in the United States and the second largest

citrus-producing region in the world following the state of Sao Paulo, Brazil. Florida has

historically accounted for over 40% of world grapefruit production and dominates the world

market in the trade of both fresh and processed grapefruit ("Citrus Summary," Florida

Agricultural Statistics Service (FASS), and Food and Agriculture Organization (FAO) of the

United Nations). Florida and Sio Paulo collectively account for over 80% of world orange-juice

production with Sio Paulo dominating world trade, but Florida being the primary supplier to

both the United States and Canada (FAO). Florida is also an important supplier to the U.S.

domestic fresh market of specialty varieties including navel oranges, and early and late

tangerines.

Given Florida's importance as a supplier of fresh and processed citrus products to the

world market, challenges facing the Florida citrus industry on several fronts will have major

implications for both the production and price of a number of citrus products. The objective of

this document is to evaluate the implications of both diseases and increases in costs of factors of

production that now confront the industry.

The Florida citrus industry has faced major challenges in the past, most notably, the series

of freezes that struck the industry in the 1980s. Both bearing tree numbers and production

declined by 40% between 1975 and 1986 as freezes destroyed a large portion of the industry in







-6-
Lake, Orange, and Pasco counties. The industry recovered, however, moving south, adopting

micro-sprinkler irrigation, and planting new varieties and rootstocks. As a result, in the 1997-98

season, 13.7 million tons of citrus was produced, easily breaking the old production record of

11.8 million tons established in the 1979-80 season (FASS).

The 2003-04 season saw the second largest citrus crop produced in Florida. With

demand issues affecting orange-juice consumption, grower prices fell to levels not seen since the

1960s. A malaise affected the industry as producers were concerned about their economic

survival. The late summer of 2004 witnessed hurricane Charley, the first hurricane to strike the

main citrus-producing area of the state since 1962. This storm was followed by hurricanes

Frances and Jeanne in September. These three storms served to spread Asian citrus canker into a

large portion of the commercial citrus-producing region of the state.

Citrus canker has been a periodic problem affecting Florida citrus since the early 20th

century. A new infestation found its way to Dade County in 1995 and had spread into southwest

and southeast Florida by 2004. The Florida Department of Agriculture and Consumer Services

(FDACS) had initiated an eradication program in an attempt to rid the state of the disease. The

hurricanes served to thwart the efforts of FDACS. With the spread of citrus canker into new

areas by 2006, the number of acres slated for eradication grew dramatically reaching 90,180 acres

or about 12% of the total production area. Additionally, it has been estimated that, as a result of

hurricane Wilma in October 2005, canker may further spread to more than twice this amount. In

early 2006, the Animal and Plant Health and Inspection Service of the United States Department

of Agriculture (APHIS-USDA) elected to halt its compensation program to growers whose trees

had been eradicated due to the presence of citrus canker. At present, it is unclear what policy

FDACS will implement in its efforts to either eliminate or suppress citrus canker in Florida.







-7-
In August of 2005, citrus greening was detected in dooryard exotic tropicals near

Homestead, Florida. Citrus greening (also known as Huanglongbing) is a destructive disease that

until 2002 was confined to Asia. In the Western Hemisphere, it was first found in Sdo Paulo,

Brazil. Two years later it surfaced in Florida and has now moved into the commercial citrus-

producing area of the state. Given the powerful effect that citrus greening has had on Asian

citrus production, it represents another threat to the viability of commercial citrus production in

Florida.

Citrus canker and citrus greening have also affected the production of new citrus trees in

Florida. The main source ofbudwood for citrus nursery growers in the state has been destroyed

after citrus canker was found. It is estimated that 62% of citrus nursery trees found in Florida in

the late summer of 2005 were eradicated due to exposure to citrus canker. The presence of citrus

canker and greening will require new greenhouse investments and practices to ensure

disease-free nursery trees.

Collectively, citrus canker and citrus greening are major challenges to citrus producers in

the state. Another issue has, however, surfaced which will also serve to increase the cost of

producing citrus in the state. Land values in the state have risen dramatically in response to low

interest rates and population growth. A recent report by John Reynolds, Professor Emeritus,

Food and Resource Economics, University of Florida, indicates that undeveloped land values in

South and Central Florida increased by roughly 80% from 2004 to 2005. This rapid increase in

factor prices has major implications for agricultural production in the state.

In this study, three issues are analyzed: (1) the impact of citrus canker, (2) the impact of

citrus greening, and (3) the impact of increased raw-land values on the economics of producing

citrus in Florida. These threats are evaluated from three perspectives: (1) future directions for the







-8-
Florida citrus nursery industry, (2) analysis of replant/new grove investment, and (3) long-run

price and production forecasts.

In the analysis of future directions for the Florida citrus nursery, this study is preliminary

in that FDACS will issue new regulations related to citrus-nursery-tree production in Florida

after this report has been released. In this study, alternative solutions for the Florida citrus

nursery are discussed and their possible implications on citrus growers are evaluated.

The collective impact of citrus canker and citrus greening is to reduce per-tree yields,

increase cost of production, and increase tree mortality. These effects combined with increased

raw-land costs will adversely affect the profitability of citrus production in the state. An analysis

is conducted to evaluate individually and collectively the effect of canker, greening, and

increased land values on the rate of return on new grove development and replanting.

Both citrus canker and citrus greening will affect the volume of fruit produced in Florida.

Increased raw-land values will also affect the willingness of investors to commit capital to citrus

production in Florida. With both canker and greening present in Brazil, its orange production

will also be impacted. In Section VII of the study, each of the three factors are incorporated into

long-run models of the world, following previous work on the orange-juice market (Spreen,

Muraro and Fairchild; Spreen, Brewster and Brown) and the market for Florida grapefruit (Busby

and Spreen). The output of these models provides estimates of long-run production and price

impacts. In the orange-juice analysis, the competitive position of Florida vis-a-vis Sdo Paulo is

also considered.








Section II
Historical Perspective of Citrus Production in Florida

by
Thomas H. Spreen


Citrus production in Florida dates back to the colonization of the state by the Spaniards in

the 15th century. Issues related to transportation served to restrain the size of the industry until

the early 20th century when railroads provided a means to ship fresh citrus from Florida to

destinations in the Northeast and Midwest regions of the United States. In 1935, the Florida

Department of Citrus was created through a state marketing order and initiated advertising

programs to expand the demand for orange juice and other citrus products in the United States.

By 1950, orange production was 66 million boxes with total citrus production at 105 million

boxes. The advent of frozen concentrated orange juice (FCOJ) after World War II provided a

new impetus for the industry. FCOJ provided a means to (1) store orange juice from the harvest

season into other time periods, (2) provided a way to produce a product with a consistent taste,

and (3) offered new modes of transport and new retail package alternatives to the consumer. By

1970, orange production had grown to 142 million boxes, more than double 20 years earlier, and

with increasing grapefruit production, total citrus production was nearly 200 million boxes. (See

Figure 2-1).

By 1970, however, other factors had surfaced which ultimately would impact the

industry. Retail consumption of orange juice began shifting from purchase of FCOJ towards

ready-to-serve reconstituted orange juice (known as RECON). After the devastating freeze of

1962, Florida citrus interests helped initiate FCOJ production in Sdo Paulo, Brazil. The decade

of the 1970s, however, saw increasing citrus production in the State of Florida with orange











Figure 2-1.

Total Florida Citrus Production, by Variety

Orange Grapefruit Speciaty


250,000

225,000

200,000

175,000

D 150,000
o
C 125,000

100,000

75,000

50,000

25,000

0


-Ln o u O u- o un O u n 0 Ln o Lin O Lin O n
S- m Ii n nD -D r-O CO O h O o o

00 C1O) 0O m O) ON )
c C Ch C, O Cih Se as on

Season








-11-
production peaking at 206.7 million boxes in the 1979-80 season and all citrus production setting

a new production record of 283.6 million boxes in that same season.

The decade of the 1980s saw successive freezes in 1981 and 1982, followed by the

massive freezes of December 1983 and January 1985. As recovery began from those freezes,

another destructive freeze came again in December 1989. Citrus production plummeted. The

orange crop in 1989-90 was 110.2 million boxes and total citrus production was 154.2 million

boxes. Given Florida's dominance in world citrus production at that time, the freezes of the

1980s were followed by an extended period of high prices for all citrus varieties. Florida saw its

industry shift south into the Flatwoods area of southwest Florida. Consequently, tree numbers

rebounded and production recovered. In the 1997-98 season, a new production record was

established at 244 million boxes of oranges and 304 million boxes of all citrus varieties.

During this same period, citrus production in other countries expanded as well.

Production in the state of Sio Paulo, Brazil grew rapidly. By the mid-1990s, Sao Paulo replaced

Florida as the largest producing region for orange juice. Rapid growth in production was also

observed in Mexico, Belize, Costa Rica, and Cuba among others. Belize and Costa Rica

benefited from the signing of the Caribbean Basin Economic Recovery Act (also known as the

Caribbean Basin Initiative or CBI ) which eliminated the tariffs imposed on imports of orange

juice, other fresh and processed citrus products, among other goods, from CBI countries.

According to data from the Food and Agriculture Organization (FAO) of the United Nations,

world orange production increased from an annual average of 40 million metric tons (MT) over

the 1986-88 period to over 58 million MT over the 1996-98 period.

With rapid growth in world orange production, prices declined. These lower prices

served to slow the tree planting process in all major citrus-production regions including Florida








-12-

and Sdo Paulo. With a near record Florida orange crop of 242 million boxes in the 2003-04

season, prices fell to levels not seen in Florida since the 1970s. The hurricanes that visited

Florida in 2004 caused a rapid shift in the opposite direction in the supply-demand balance.

These hurricanes were also responsible for the spread of citrus canker throughout much of the

commercial citrus-producing region of the state. With another hurricane crossing peninsular

Florida again in 2005, prices increased to higher levels with the cash market for processed

oranges reaching levels comparable to the freeze-affected years of the 1980s. The combined

effects of hurricanes and citrus canker reduced the Florida grapefruit crop to levels not seen since

the Great Depression and consequently resulted in record high prices.








Section III
Diseases and Other Factors Affecting Florida Citrus Production

by
Thomas H. Spreen and Ronald P. Muraro


With its humid climate, Florida citrus growers have long dealt with several diseases that

affect citrus trees. Among the more prominent diseases are blight (also known as decline),

greasy spot, and phytophthora (also known as root rot). All of these diseases serve to reduce

yields, and blight and phytophthora can result in tree death. Additionally, citrus tristeza, a viral

disease that affects sour orange rootstock trees and results in rapid decline and tree death, is

present in Florida. The brown citrus aphid, the main vector for spreading citrus tristeza, found its

way to Florida in the late 1990s. The aphid allowed efficient transmission of citrus tristeza

resulting in the death of millions of trees.

The two new diseases, citrus canker and citrus greening, represent new threats to the

viability of citrus production in the state. The state fought a long battle against citrus canker in

the first half of the 20th century, eventually eradicating the disease in 1933. Citrus canker was

re-introduced into Florida in 1995.


Citrus Canker


Citrus canker is a bacterial disease which is mainly spread by human contact and wind

driven rain. After it is introduction into Dade County, Florida, the disease remained undetected

until it found its way into the lime-producing area near Homestead. Through primarily human

contact, the disease was spread sporadically into the commercial-citrus-production area, and

FDACS initiated a policy of eradication in an attempt to eliminate the disease from the state.


-13-








-14-
Eradication efforts met resistance in urban areas especially in Broward County. A focal point of

the controversy was the policy of eradicating all citrus trees in a 1,900-foot radius around any

positive (infected) tree. In a rural setting, this meant that approximately 260 acres of citrus trees

could be destroyed if canker was found in a solid-set area. In a residential setting, the 1,900-foot

rule meant that backyard citrus trees up to 1/3 mile away from a positive tree needed to be

destroyed. Homeowners in Broward County elected to pursue legal means to force changes to or

stoppage of the eradication program. In 2004, the Florida Legislature enacted a law requiring

that the 1,900-foot rule be enforced if a tree infected with citrus canker was found.

The hurricanes of 2004 thwarted the efforts of FDACS. The hurricanes served to spread

the disease throughout much of the commercial-citrus-production area. Over 90,000 acres of

commercial citrus were slated to be eradicated in early January 2006 when APHIS-USDA,

announced that they were discontinuing the compensation to growers whose trees were destroyed

due to the citrus canker eradication program. This announcement resulted in FDACS halting tree

eradication. At the time this paper was being prepared, FDACS had not determined its new

policy regarding the citrus canker eradication program.

Citrus canker attacks citrus trees through its fruit and leaves. Lesions form which serve

to cause premature fruit drop. Disfigurement of the fruit makes it unsuitable for the fresh market.

Quarantines imposed by other citrus-producing regions on fruit imported from canker-endemic

production regions impose additional costs on fresh fruit growers. In addition to lowering yields,

there is likely some increase in tree mortality as canker may open pathways for other diseases. In

order to suppress canker, copper spray is generally considered the best policy. Planting of

windbreaks likely serves to slow the spread of the disease via wind-driven rain. Additional

copper sprays and windbreaks are the two main management interventions observed in








-15-

citrus-production regions with endemic citrus canker (Muraro, et al.). In order to stem the spread

of the disease via human contact and equipment, citrus groves are fenced and security is

established so that all people and equipment are sprayed with copper sulfate upon entry and exit

from the property. These measures impose additional production costs.

Yield impacts resulting from endemic citrus canker are not known. Scientists

acknowledge that the humid conditions found in Florida are conducive to the spread of citrus

canker. Yet, the consensus is that yields will be moderately affected. In this study, it is assumed

that Valencia orange trees will incur yield losses of 5% and all other varieties will experience

losses of 10%. Packout, however, should see a larger effect with packout percentages decreasing

by 1/3. For example, varieties which currently show packout percentages of 60% will decrease

to 40% with citrus canker.

Although increased tree mortality is not the major concern with endemic citrus canker, it

is expected that death losses will increase with the presence of the disease. In this study, it is

assumed that citrus canker will increase tree mortality by 10% above historical loss rates across

all citrus varieties and all age groups.

In the analysis, the incidence and spread of canker is assumed to vary across regions of

the State. Four regions are specified in the model: South, West, Indian River, and the North &

Central. These regions are roughly the same as those for which FASS reports yields per tree.1








1 The regions included the following counties-South: Charlotte, Collier, Glades, Hendry, Lee and
Okeechobee; West: DeSoto, Hardee, Hillsborough, Manatee, and Sarasota; Indian River: Indian River, St. Lucie,
Martin, Palm Beach, Brevard, Volusia, and Flagler (parts of some counties are not included, as defined by FASS);
North & Central: all other counties.








-16-

Initially, the Indian River region is assumed to have the highest incidence of canker, followed by

lower incidences in the South and West regions, and in the North & Central region. See

Table 3-1 for the assumptions across regions and upcoming seasons.




Table 3-1. Assumed incidence of citrus canker in Florida citrus groves.

Region"
Season
Southern West Indian River North & Central
-- --------- ---------- --% of acreage with canker ----------- ----

2005-06 10 10 75 8

2006-07 25 25 100 15

2007-08 50 50 100 25

2008-09 75 75 100 40

2009-10 100 100 100 60

2010-11 100 100 100 80

2011-12 & after 100 100 100 100

"The regions included the following counties-South: Charlotte, Collier, Glades, Hendry, Lee and Okeechobee;
West: DeSoto, Hardee, Hillsborough, Manatee, and Sarasota; Indian River: Indian River, St. Lucie, Martin, Palm
Beach, Brevard, Volusia, and Flagler (parts of some counties are not included, as defined by FASS); North &
Central: all other counties.



Citrus Greening


Citrus greening is a disease which had been confined to Asia. The disease was found in

the state of So Paulo, Brazil in 2003. In August of 2005, it was found near Homestead, Florida

in a farm growing exotic tropical fruit. A survey conducted in November and December of 2005

found greening in a commercial grove in DeSoto County. The disease has since been found in








-17-
several of the commercial-production areas of Florida. In 2005, APHIS-USDA announced it

would not pursue an eradication program similar to that attempted to eradicate citrus canker.

The main vector for citrus greening is a leaf feeding insect known as the psyllid. Psyllids

were present in Florida before the greening inoculum arrived in 2005. Since psyllids appear to

prefer new growth for feeding, citrus greening will likely have a larger affect on young trees.

Previous experience with citrus greening in Asia suggests that this is a potentially devastating

disease for citrus.

In this study, it is assumed that the presence of greening will have several effects. First,

grove care costs will increase due to increased scouting, removal of all positive trees, reset of lost

trees, and additional insecticide costs as growers actively suppress the psyllid population. At the

present time, it appears that Admire is the most effective agent against psyllids for young trees

and Temik offers the best protection for older trees. Even with an active program of psyllid

suppression, two scenarios are analyzed with respect to increased tree mortality. One scenario

considered is that tree mortality increases by 100% compared to base levels in nonbearing trees,

by 75% in trees ages 4 though 11, and 50% in trees 12 years and older. The second scenario is

that tree mortality increases by 2-2/3 to 3 times those of Scenario 1, depending on tree age. This

approach is taken because so little is known regarding the impact of greening on tree mortality in

Florida. The range of tree mortality being considered is less than the levels observed in areas of

Asia that have endemic greening.

Because of the large increases in death loss being considered, no yield effect is factored in

for greening. This is because it is assumed that any tree found with symptoms of greening will

be immediately removed. Therefore, the tree will not be allowed to go through a period of

decline.








-18-
In this study, a logistic function was used to model the spread of greening. In the

immediate upcoming years, the incidence of greening is assumed to be relatively low. The

spread of this disease is then assumed to be relatively rapid, leveling off as the incidence

approaches 100%. See Table 3-2 for the assumptions on the spread of greening over the

projection period.


Table 3-2. Assumed incidence of greening in Florida citrus groves.

Season Percent of Acreage with Greening

2005-06 0.0

2006-07 0.0

2007-08 0.2

2008-09 1.0

2009-10 4.4

2010-11 17.7

2011-12 50.0

2012-13 82.3

2013-14 95.6

2014-15 99.0

2015-16 99.8

2016-17 & after 100.0




The presence of greening in an area does not mean all trees are in the same symptom-

reflecting stage or that all trees necessarily have the disease, but that the Asia citrus psyllid, an

insect vector that spreads the disease, is present and tree-loss rates can be expected to increase as

subsequently discussed.










Urban Development and Increasing Land Values


Since the hurricanes of 2004, the state of Florida has witnessed a rapid increase in the

value of both undeveloped and agricultural land in the state. While one might argue that such a

run-up in land values is a perverse response to hurricanes, it has occurred and has been

documented by Reynolds. In a rural land value survey conducted annually by the University of

Florida, Reynolds reported that agricultural land in South and Central Florida increased in value

between $1,866 per acre and $4,633 per acre from May 2004 to May 2005, depending on the

land use. Since this report, further increases in land values have likely occurred. Cost increases

of this magnitude will have an impact on the economics of agricultural use of that land including

citrus. Grove investment analysis is conducted in this paper to document the effect on the rate of

return associated with new grove investment. Given the impact of urbanization on the location

of citrus production in southern California, it is known that increasing underlying land values

have profound impacts on the location of agricultural production.

A more complicated question relates to the desire of development interests to "inventory"

large tracts of land for future development. There is a belief that a portion of the land price

inflation that has been accruing in Florida is a result of such activity by speculators. There is a

question regarding the planning horizon of these individuals and how best to manage that land

until it is suitable for conversion to development. Given the agricultural use property assessment

in place in Florida, one means to reduce the holding costs of such land is to keep it in agricultural

production. An interesting question arises: is it more profitable to place the land in a more

intensive use, e.g. citrus production and its associated risks or to use the land for cattle grazing?

Answering that question is beyond the scope of this study. It is clear, however, that the approach








-20-

taken by land speculators with respect to management of large land tracts placed in inventory for

future development will affect the supply of land available for citrus production.








Section IV
The Economic Impacts of the Florida Citrus Industry in 2003-04

by
Alan W. Hodges, Mohammad Rahmani and W. David Mulkey



Methods


The total economic impacts of the Florida citrus industry in 2003-04 were evaluated using

published values for citrus fruit, processed juices and by-products, together with a regional

input-output model for Florida. Data for citrus fruits were taken from reports by the

USDA-National Agricultural Statistics Service, and the Florida Department of Citrus, while data

on the value of processed citrus juices and by-products were available from Florida Citrus

Mutual.

The IMPLAN Pro economic impact and social accounting software package, licensed to

the University of Florida by the Minnesota Implan Group, Inc. (MIG) was used to develop a

regional input-output model of the Florida economy with adjustments for the citrus industry.

IMPLAN, which is an acronym for Impact Analysis for Planning, is an input-output modeling

software package that enables the estimation of the overall effects of changes in final demand for

one or more industries in a defined region through the use of economic multipliers. Multipliers

measure total changes in output, income, employment, or value added, for a given change in

direct output or employment, and estimate three components of total change within the local

area: direct effects represent the initial change in the industry in question; indirect effects

represent changes in inter-industry transactions as supplying industries respond to changes in

demands from the directly affected industries; and induced effects reflect changes in local


-21-








-22-
spending that result from income changes in the directly and indirectly affected industry sectors.

Social Accounting Matrix (SAM) multipliers in IMPLAN also account for transfer payments such

as social security, welfare, and retirement pensions, income taxes, and savings by households.

Total effects multipliers usually range from 1.5 to 2.5, meaning that there will be a total change

of 1.5 to 2.5 times for a given unit change.

Regional models may be constructed with IMPLAN for a single county, groups of

contiguous counties, or for an entire state or region. In this case, the region of interest was

defined as the state of Florida. Regional data for the model represent 2003, the most recent

information available from the United States National Accounts and Regional Economic

Information System maintained by the U.S. Commerce Department. Information used in the

model is specific to the state for industry output, employment, income, and trade, while national

averages are used for transactions between industries. The model was constructed with all social

accounts endogenous, including households, governments (state/local, federal), and capital

investment.

Three industry sectors in IMPLAN were used to analyze the Florida citrus industry: fruit

farming (#5), frozen foods (#60), and canned fruit and vegetable juices (#61). These industry

sectors are defined based on the primary product or service produced, under the North American

Industry Classification System (NAICS). The output value of each major form of product was

specified as an impact event in the appropriate industry sector: fresh market citrus fruit in the

fruit farming sector, frozen citrus juices in the frozen foods sector, and chilled citrus juices in the

canned juices sector. The value of processed by-products were entered as impact events to the

two processing sectors in proportion to their primary product values. Also, the export and local

consumption values of citrus juice and by-products were treated separately; only the direct








-23-
impacts were considered for local consumption, since these values do not necessarily represent a

change in overall regional economic activity.

Several adjustments were made to the IMPLAN model to reflect the special characteristics

of the Florida citrus industry, as distinguished from the national economy for fruit farming and

frozen/canned food processing, which includes a variety of other food commodities. The set of

inputs purchased by these industries, known as production functions, are what drives the

estimates of indirect and induced impacts. The production functions for the two processing

sectors were adjusted such that purchases from the fruit farming sector represented 38% of

output, and other agricultural sectors were removed from the model. The production function for

the fruit farming sector was adjusted based on budgeted production costs reported by Muraro,

et al. (2004). Production expenditures for the major types of citrus and various production

regions in Florida are shown in Table 4-1, including both fresh and processed Valencia and

Hamlin oranges, white and red grapefruit, in the Central, Southern and Indian River regions.

Weighted average expenditures in relation to production volume were assigned to appropriate

IMPLAN sectors as indicated in Table 4-2. Industry purchases from other sectors included

financial lenders, fertilizers, agricultural chemicals, greenhouse and nursery products, plastic

pipes and fittings, other state and local government enterprises, and government-non education.

Many of the cultural operations were treated as labor inputs to production, and as such represent

value added rather than industry purchases. Finally, the regional purchase coefficient for fruit

farming was set to the maximum allowable level (0.88), in order to force the processing sectors

to purchase all available fruit from local (in-state) sources. Industry information on value added,

including employee compensation, proprietor income, other property income, and indirect

business taxes, were left at default levels.














Table 4-1. Florida citrus production expenditures, by type and region, 2003-04 season.
Central Indian River Southern
e Processed Fresh Processed Fresh Processed Fresh
Expense -
Valencia White Grapefruit Hamlin Red GF Hamlin Red GF
------------------------------ $ per box -------------------------
Tree replacement: prepare & plant 0.056 0.056 0.134 0.134 0.092 0.064 0.092 0.064
Mechanical mow middles (4/year) 0.086 0.086 0.067 0.076 0.044 0.041 0.044 0.041
Weed control: J ...... .-- I 0.042 0.042 0.025 0.025 0.021 0.020 0.021 0.020
Weed control, gen. grove work (2 hr/A) 0.056 0.056 0.057 0.057 0.049 0.046 0.049 0.046
Herbicide application 0.059 0.059 0.082 0.082 0.050 0.046 0.050 0.046
Weed control: spot treatment (appl + material) 0.032 0.032 0.000 0.000 0.000 0.000 0.000 0.000
Spray summer oil #1 application 0.048 0.048 0.064 0.064 0.000 0.000 0.047 0.043
Spray summer oil #2 application 0.048 0.062 0.064 0.064 0.047 0.043 0.047 0.043
Supplemental fallmiticide application 0.000 0.048 0.064 0.064 0.047 0.043 0.047 0.043
Fertilizer application 0.055 0.055 0.049 0.049 0.030 0.028 0.030 0.028
Dolomite, material & application 0.020 0.020 0.028 0.028 0.023 0.022 0.023 0.022
Pruning/topping 0.030 0.030 0.031 0.031 0.021 0.020 0.021 0.020
Pruning/hedging 0.036 0.036 0.037 0.037 0.024 0.022 0.024 0.022
Chop/mow brush after hedging 0.009 0.009 0.013 0.013 0.008 0.008 0.008 0.008
Raise skirt of trees 0.000 0.000 0.015 0.015 0.000 0.012 0.000 0.012
Tree replacement, remove trees 0.030 0.030 0.053 0.053 0.037 0.026 0.037 0.026
Clean ditches (weed control) 0.000 0.000 0.029 0.029 0.025 0.024 0.025 0.024
Ditch & canal maintenance 0.000 0.000 0.033 0.033 0.029 0.027 0.029 0.027
Water control 0.000 0.000 0.029 0.029 0.025 0.023 0.025 0.023
Supplemental post-bloom spray, application 0.000 0.000 0.000 0.111 0.000 0.000 0.047 0.044
Fall miticide application 0.000 0.056 0.000 0.055 0.000 0.000 0.016 0.014
Management costs 0.101 0.101 0.108 0.108 0.093 0.086 0.093 0.086
Harvesting costs: pick/spot pick, roadside &
Harvesting costs: pick/spot pick, roadside & 2.190 2.190 1.885 2.086 2.217 1.885 2.217 2.086
haul, & canker decontamination
Fruit drenching 0.000 0.000 0.000 0.170 0.000 0.000 0.000 0.170
Fertilizer material 0.295 0.295 0.182 0.226 0.233 0.165 0.233 0.165
Weed management: herbicide material 0.156 0.156 0.200 0.200 0.157 0.146 0.157 0.146
Spray summer oil #1 material 0.127 0.128 0.128 0.128 0.000 0.000 0.051 0.047
Spray summer oil #2 material 0.062 0.138 0.141 0.141 0.110 0.102 0.110 0.102
Supplemental fall miticide material 0.000 0.020 0.046 0.046 0.052 0.048 0.036 0.034
Supplemantal post-bloom spray, material 0.000 0.000 0.000 0.042 0.000 0.000 0.098 0.092
Fall miticide material 0.000 0.069 0.000 0.070 0.000 0.000 0.055 0.051
Canker decontamination costs 0.012 0.012 0.014 0.010 0.009 0.011 0.009 0.011
Irrigation, microsprinkler system 0.319 0.319 0.342 0.342 0.295 0.274 0.295 0.274
Interest on operating (cultural) costs 0.045 0.048 0.047 0.117 0.074 0.032 0.074 0.043
Interest on average capital investment costs 0.675 0.675 0.722 0.722 0.623 0.579 0.623 0.579
Water drainage district tax 0.000 0.000 0.142 0.135 0.000 0.000 0.000 0.099
Fly protocol cost 0.000 0.000 0.123 0.117 0.000 0.000 0.000 0.000
FDOC assessment 0.150 0.150 0.240 0.250 0.150 0.240 0.150 0.250
Property tax & water management tax 0.130 0.130 0.106 0.101 0.118 0.092 0.118 0.092
TOTAL 4.928 5.217 5.402 6.155 4.773 4.224 5.071 4.992
Source: Muraro, et al., 2004.






















Table 4-2. Industry purchases for Florida citrus fruit production, byIMPLAN sector, 2003-04.

IMPLAN Sector Total
(number) Expenditures

---$--- -- %--


Greenhouse & nursery products (6)

Fertilizer mixing, manufacturing (158)

Pesticides & agricultural chemicals (159)

Plastic pipes & fittings (173)

Financial lenders (430)

Other state & local government enterprises (499)

State & local government non-education (504)

Total industry purchases


21,589,880

87,820,996

98,360,748

84,838,081

195,331,379

49,354,411

33,311,668

500,607,163


1.22

4.97

5.57

4.80

11.06

2.79

1.89

32.31











Results and Discussion


The value of citrus fruit production was estimated separately for fresh market fruit and

processed fruit, by citrus variety, as shown in Table 4-3. In the 2003-04 season, total citrus fruit

production in Florida was 291.8 million boxes, including 242.0 million boxes of early,

midseason, Naval and Valencia oranges, 40.9 million boxes of grapefruit, and 8.9 million boxes

of specialty citrus tangeloss, tangerines, temples). Some 32 million boxes were produced for the

fresh market and 260 million boxes were utilized for processing, which represented 11% and

89%, of the citrus crop, respectively. About 53% of the red seedless grapefruit was produced for

the fresh market, while 80% of white seedless grapefruit and 96% of oranges were processed for

juice. Average free-on-board (F.O.B.) prices for fresh market fruit sold from packinghouses

ranged from $13.20 per box for Valencia oranges to $24.50 for tangelos and tangerines. Average

delivered-in prices for processed fruit were $4.14 per box for early, midseason and Naval

oranges, $5.82 for Valencia oranges, and $2.84 to $3.02 for grapefruit. The total value of Florida

citrus fruit in 2003-04 was $1.778 billion, including fresh fruit shipments from packinghouses

valued at $548 million, and fruit delivered to processing plants valued at $1.230 billion. Red

seedless grapefruit and tangerines accounted for 41% and 20%, respectively, of fresh market

value. Valencia oranges represented 53% of the processed fruit market value, while early,

midseason and Naval oranges accounted for 41%.

The value of Florida processed citrus juice product shipments in the 2003-04 season are

shown in Table 4-4. The total value of citrus juice products was $3.00 billion, including $1.93

billion for chilled (canned) juice, and $1.08 billion for frozen concentrate juice. The vast

majority of juice shipments, $2.85 billion or 95%, were for processed orange juice. More than














Table 4-3. Production volume, price and value of fresh and processed Florida citrus fruit, 2003-04 season.

Fresh Market Fruit Processed Fruit All Fruit

Variety F.O.B. Total Delivered- Total Total
Production F. ta Production In Production
Price Output Price Output Output
Price

1,000 1,000 1,000
$/box mil. $ $/box mil. $ mil. $
boxes boxes boxes

Early, Midseason, & Navel Oranges 5,615 15.00 84.2 120,385 4.14 498.4 126,000 582.6

Valencia Oranges 4,287 13.20 56.6 111,722 5.82 650.2 116,000 706.8

White Seedless Grapefruit 3,273 17.00 55.6 12,627 2.84 35.9 15,900 91.5

Red Seedless Grapefruit 13,384 16.80 224.9 11,616 3.02 35.1 25,000 260.0

Tangelos 545 24.50 13.4 455 2.56 1.2 1,000 14.6

Tangerines 4,440 24.50 108.8 2,060 3.04 6.3 6,500 115.1

Temples 342 14.30 4.9 1,058 2.69 2.8 1,400 7.7

TOTAL 31,886 548.3 259,923 1,229.8 291,800 1,778.1

Sources: Citus Fruits, 2005 Summary, September 2005, U.S. Department of Agriculture, National Agricultural Statistics Service, and Florida Department of
Citrus, Economic and Market Research Department, Gainesville, Florida, February 2006.








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Table 4-4. Value of Florida frozen and canned citrus juice for local consumption and export,
2003-04 season.


Export
Product Shipments C
(out of state)


Frozen concentrated orange juice 969.3

Chilled & canned orange juice 1,805.2

Frozen concentrated grapefruit juice 73.9

Chilled & canned grapefruit juice 82.8

Total frozen concentrated citrus juice 1,043.1

Total chilled & canned citrus juice 1,887.9

TOTAL 2,931.1
Source: Florida Citrus Mutual, Annual Statistical Report, 2003-04 Season.


Local To
Total
consumptionn Value
(in state)Value
(in state)


1,000.8

1,844.9

75.6

83.6

1,076.4

1,928.5

3,004.9


97% of citrus juice products were exported outside of Florida to other states or foreign countries,

while only 3% was consumed in the state. The share of juice consumed locally in Florida was

estimated based on the Florida population and U.S. average per-capita consumption.

In addition to orange and grapefruit juices, the citrus processing industry produces several

other important by-products, including citrus pulp and dried meal, molasses and D-limonene.

The essential oil D-limonene, recovered from the distilled extracts of fruit peel and seeds, is used

for a variety of chemical products such as cleaners, disinfectants, flavors and fragrances. Citrus

pulp, meal and molasses are sold as livestock feed ingredients. During the 2003-04 season,

Florida citrus processors produced more than 1.1 million tons of citrus pulp and meal, 38,000

tons of molasses, and nearly 36 million pounds of D-limonene, and the total value of these by-


- million $ ---------

31.5

39.7

1.7

0.9

33.3

40.6

73.8








-29-

products was about $136 million (Table 4-5). Citrus pulp and meal represented about 66% of the

total by-product value.



Table 4-5. Volume and value of processed Florida citrus by-products, 2003-04 season.

By-product Production Units Price Value

$/unit million $

Citrus Pulp & Meal 1,130,601 tons 80.00 90.5

Molasses 38,337 tons 55.00 2.1

D-Limonene 35,782,731 pounds 1.20 42.9

TOTAL 135.5

Sources: Florida Citrus Processors Association, 2003-04 Statistical Summary (production volumes); I .i. r.
magazine, Chemical Market Reporter, Florida Distillers, Inc. (prices).


Total economic impacts estimated for the Florida citrus industry in 2003-04 are

summarized in Table 4-6. The direct output or sales revenue produced by the citrus industry in

2003-04 was $3.69 billion. The total output impact of the industry was $9.29 billion, including

$8.01 billion from processed citrus juice and by-products, and $1.28 billion from fresh market

citrus fruit sales. The indirect output impacts resulting from purchases of inputs from other

industry sectors, including the purchase of round fruit from growers by the processing sector,

were $1.93 billion. The induced output impacts resulting from consumer spending by employee

households were $3.67 billion. The ratio between the total output impact and direct output

implies an overall multiplier effect of 2.52. These multiplier effects are significant because the

export-based nature of the Florida citrus industry brings new money into the state economy.

Total employment impacts of the Florida citrus industry were 76,336 jobs, with 61,307

jobs from the processing sector and 15,029 jobs from fresh fruit. These employment impacts




















Table 4-6. Summary of economic impacts of the Florida citrus industry, 2003-04 season.


Direct-Local Cons.

Direct-Exports

Indirect

Induced

TOTAL


Indirect
Business
Taxes


-mil. $- -jobs- ----------million $ --


77.2

3,063.2

1,804.6

3,061.1

8,006.1


212

8,085

19,775

33,235

61,307


25.8

1,022.3

1,106.3

1,912.0

4,066.3


12.6

495.4

539.4

1,248.3

2,295.6


0.6

25.4

66.5

147.7

240.2


Fresh Direct 547.3 7,566 350.5 145.4 16.3
Market
Citrus Indirect 127.5 865 77.1 41.9 1.9
Fruit Induced 608.0 6,599 379.3 248.4 29.1

TOTAL 1,282.7 15,029 806.8 435.8 47.3

All Direct 3,687.7 15,863 1,398.6 653.4 42.3
Sectors
Indirect 1,932.0 20,640 1,183.3 581.3 68.4

Induced 3,669.1 39,833 2,291.3 1,496.7 176.8

TOTAL 9,288.8 76,336 4,873.2 2,731.4 287.5


Industry
Sector


Citrus
Juice &
By-
products








-31-
represent both full-time and part-time jobs, and are not adjusted to a full-time equivalent basis.

Total value added impacts were $4.87 billion. Value added is a broad measure of total personal

and business net income generated, and is equivalent to industry output less industry purchases.

The value added impact of the citrus industry represented 0.9% of the gross state product of

Florida in 2003 ($548 billion). Labor income impacts amounted to $2.73 billion, which

represents all wages and salary earnings by industry employees and proprietor's income to

business owners. Indirect business tax impacts were $288 million, which includes most forms of

local and state taxes, such as property tax, sales tax, water management district levies, intangible

taxes, motor fuel and vehicle taxes, excise taxes, etc., but does not include federal income taxes.

Total economic impacts of Florida citrus are shown by major industry group in Table 4-7.

Naturally, the largest impacts occurred in the agriculture and manufacturing groups, where the

direct impacts occurred from fruit farms and citrus processing. Output impacts in manufacturing

and agriculture were $3.54 billion and $1.58 billion, respectively. Large output impacts also

occurred in government enterprises ($769 million), construction ($478 million), finance and

insurance ($419 million), health and social services ($369 million), retail trade ($335 million),

wholesale trade ($289 million), professional-scientific and technical services ($288 million), and

real estate and rentals ($225 million). Employment impacts in agriculture (21,814 jobs) were

greater than for manufacturing (9,836 jobs) due to the labor-intensive nature of agriculture,

particularly for fruit harvesting in the citrus industry. Important employment impacts also

occurred in retail trade (5,945 jobs), health and social services (4,897 jobs), and construction

(4,281). These impacts in other industries indicate the significant linkages of the citrus industry

throughout the Florida economy.




















- mil. $- -jobs- -------million $--------


Agriculture, forestry, fisheries & hunting 1,577.1 21,814 1,012.0 420.0 46.7

Mining 9.6 37 2.2 0.9 0.2

Utilities 88.3 163 60.3 18.5 8.8

Construction 478.4 4,281 205.4 168.6 2.5

Manufacturing 3,540.2 9,836 1,172.2 589.0 28.7

Wholesale trade 288.7 2,184 219.6 123.1 47.4

Transportation & warehousing 159.4 1,712 88.4 65.0 3.4

Retail trade 334.7 5,945 249.6 155.5 47.6

Information 131.2 538 61.0 32.1 5.2

Finance & insurance 418.8 2,496 264.6 130.4 8.5

Real estate & rental 224.7 1,537 149.9 39.4 23.5

Professional, scientific & technical services 288.1 2,808 172.0 144.4 2.8

Management of companies 92.5 578 55.2 42.5 0.9

Administrative & waste services 110.6 2,031 67.6 54.9 1.7

Educational services 32.9 684 19.1 18.6 0.4

Health & social services 368.6 4,897 228.2 199.7 2.5

Arts, entertainment & recreation 43.5 741 27.7 19.0 2.9

Accommodations & food services 170.3 3,371 88.0 60.3 9.6

Other services 162.8 3,066 85.1 66.0 6.7

Government & non-NAICS 768.5 7,616 645.1 383.6 37.6

TOTAL 9,288.8 76,336 4,873.2 2,731.4 287.5








-33-
The economic impacts of the Florida citrus industry presented here for the 2003-04

season are consistent with those reported in a previous study for the 1999-00 season (Hodges, et

al., 2001), in which total output impacts were estimated at $9.13 billion, total employment

impacts were 89,778 jobs, and total value-added impacts were $4.18 billion. This would suggest

that the industry grew during the 1999-2003 period. In fact, however, total sales of fresh and

processed citrus juice and by-products have actually declined from $4.07 billion to $3.55 billion.

Although the impact estimates in both studies were made using similar data sources and analytic

procedures, there are important differences that account for this discrepancy. Notably, the earlier

study was done using a previous version of the IMPLAN software, which used the Standard

Industrial Classification (SIC) system, rather than the NAICS. Also, it is possible that the

structure of the Florida economy has become more integrated, leading to greater multiplier

effects. If we use the current (2003) IMPLAN model to evaluate the direct output of fresh and

processed citrus for the 1999-00 period, we get a total output impact of $9.80 billion (in 2003

dollars). This restated result would suggest that the total economic impact of the Florida citrus

industry has declined by about 5% during this period in real terms.

These economic impact estimates are based on well-documented values for citrus

products, however, there are certain limitations of the analysis that should be borne in mind when

interpreting the results. First, the budget information for citrus fruit production was aggregated

into a relatively small number of IMPLAN sectors, which may lead to an underestimate of the

linkages to other sectors of the state's economy. Secondly, there was no specific information

available for the citrus processing sector, other than purchases from the fruit farming sector, that

would enable adjustment of the production function for this sector. To more accurately estimate








-34-

the economic impacts of this large sector would require further details on processing

expenditures.








Section V
Economic Assessment of the Florida Citrus Nursery Industry

by
Fritz M. Roka and Robert E. Rouse



Current Situation


The Florida citrus nursery industry has been shut down since early summer of 2005.

Positive citrus canker finds at seven large nursery operations led to the destruction of more than

4 million trees, two-thirds of the industry's existing inventory. Growers, uncertain as to the

canker status of the remaining nursery stock, either canceled their orders or refused shipment of

the remaining trees.

Simultaneous to the canker finds in nursery operations, crews from the Florida Division

of Plant Industries (DPI) located numerous canker-infected trees spread throughout the

commercial-citrus-production area. Many of these finds were directly attributable to the three

hurricanes that pushed across the citrus belt during August and September of 2004 (Charley,

Francis, and Jeanne). More than 60,000 acres of citrus had been pushed between August 12,

2004 and December 31, 2005. In total, the canker-eradication program had destroyed nearly

80,000 acres and 10 million commercial citrus trees between 1998 and the end of 2005.

On January 11, 2006, the USDA declared an end to the eradication program, fearing that

canker had spread to a point where eradication was no longer feasible. Punctuating the concerns

for tree health was the confirmation by DPI officials in late 2005 that citrus greening

(Huanglongbing) had infected trees in a Southwest Florida commercial grove. While suspension

of the eradication program eased concerns about moving the remaining inventory of nursery


-35-








-36-

trees, orders for newly propagated nursery trees dropped to zero as the nursery and production

sectors of the citrus industry grappled with how to cope with the increasing spread of citrus

canker and other exotic disease threats.

The Florida Citrus Plant Protection Committee (FCPPC) was formed in November 2005

to develop guidelines for the propagation of "clean," disease- and virus-free plant material. Six

nurserymen and six production managers comprised the FCPPC, with IFAS and USDA-ARS

scientists providing technical support. Discussions within the FCPPC centered around three core

issues:

1. Producing plant material within protected structures.

2. Determining if a minimum distance of citrus-free buffer zone surrounding a
nursery facility was necessary, and if so, what distance.

3. Developing sanitary production procedures within the nursery facility.


Protected Stuctures


A strong consensus developed around the concept of a protected structure in which scion

trees, seedlings, liners, increase blocks, and nursery trees would be grown.2 The FCPPC

unanimously agreed that:

"The minimum for structures growing citrus plants shall be fully
enclosed, insect proof and with double entrances with positive
pressure displacement. (FCPPC minutes, January 6, 2006).

FCPPC agreed in concept that DPI officials would regularly inspect the facility. The

Committee further recommended that the nursery operation stock extra screening material to



2Scion trees are budwood sources and considered "mother" trees. Increase blocks allow the rapid
propagation of budwood material. As of January 1, 2006, all budwood scion trees are required to be grown in screen
houses.








-37-
readily repair breeches in the facility's screen and develop a plan to chemically protect the plant

material ahead of an anticipated storm event that could potentially breech the screen house.

FCPPC developed a generic design for a screen house facility. The facility encompassed

47,040 ft2 and included three areas:

1. Production area for seedlings, liners, and budded trees: 6 gcs (gutter connected
structures) (35 x 144 ft)/gcs = 30,240 ft2.

2. Vestibule area for receiving soil, pots, other supplies, and gathering of trees for
transport: 2 gcs (35 x 96 ft)/gcs = 6,720 ft2.

3. Scion area for increase blocks and/or foundation budwood: 2 gcs (35 x 144
ft)/gcs= 10,080 ft2.

The investment into approved structures is estimated to increase production costs of

citrus nursery trees by more than $2.00 per tree over field-grown (unprotected) nursery

operations. This cost estimate is based on the following assumptions:

1. Construction costs $7.75 per ft2. (Initial cost estimates range between $7.50 and
$8.00 per ft2. This cost does not include architectural drawings, permits, site prep,
electrical, irrigation, concrete work, benches, and internal thermostats or
controllers. Further, it was assumed that an irrigation well is currently in place
with enough capacity for anticipated irrigation needs.)

2. Tree/plant capacity 77,000 (4-inch) pots for liners and propagated trees.

3. 85% of all budded trees are sold (15% tree loss).

4. Production cycle 18 months from seed to saleable tree.

5. Assumptions for estimating annual ownership costs of a structure:

a. Service life 10 years
b. Interest on average investment 10%
c. Repairs 5% of original investment
d. Taxes 1.5% of original investment
e. Insurance 1% of original investment
f. Electrical power to run facility 1% of original investment.








-38-
At $7.75 ft2 the initial investment in this facility would be $364,560. Annual ownership

costs, including depreciation, interest, repairs, taxes, insurance, and electrical power, would be

$85,672. Given an 18-month production cycle (seed to saleable tree) and a tree-loss rate of 15%,

the number of trees sold per year is estimated to be 42,633 trees. On an annual per-tree basis,

transferring nursery production from open-field conditions to protected screen-house structures

would increase production costs by $1.96 per tree. Pots (4 in.) and soil mix add another 30 to

40 per tree. Prior to August 2004, budwood "eyes" from screen enclosures at state-owned

facilities in Immokalee and Dundee sold for 15. However, whether 15 fully captures all costs

if grown within a commercial nursery remains unclear. Another cost factor that would be hard to

quantify would be learning how to grow nursery trees under screen enclosures versus under

open-field conditions. Growing inside will require coordination and mixing of soil material,

different irrigation procedures, and new house maintenance routines to name a few management

adjustments a grower would have to make (Jamison, March 8, 2006).



Setback Distance


As a practical reality, the best-engineered facility can be breeched during a violent storm

event. In addition, a "pest-free" structure depends on regular and long-term maintenance

routines. Therefore, the FCPPC concluded that some minimum "setback" distance would add an

additional margin of safety against storms and management lapses. Neither IFAS nor ARS

scientists could provide precise recommendations of setback distances; only to say that greater

distance provides greater security.








-39-
The challenge of establishing a minimum setback distance is balancing safety from

disease and pests against the practical realities of relocating nursery operations. Canker

eradication protocol required quarantine areas of 3,800 feet around an infected tree. A 3,800-foot

citrus-free buffer zone would require a nursery operation to be located in the middle of a

1,000-acre block. Initial recommendations within the FCPPC were to extend a citrus-free buffer

to two miles. The recommendation was later revised to 1/8 mile, or 660 feet. In all likelihood,

the final setback distance, if any, will not be resolved until the DPI rule-making process is

complete.

Any buffer, whether 660 feet or two miles, requires a nursery operation to be in the

middle of a citrus-free area. Of the 50 nursery operations in business prior to August 2004, at

most only 10 would comply with the 660-feet buffer proposal. The prospect of having to

relocate a nursery to a new location has generated considerable concern among nursery growers.

Finding suitable property and uprooting the entire operation could be the single most significant

delay to restarting an operation. Areas in north and north-central Florida, outside the main

commercial-citrus-production region, have been discussed as likely areas for relocation.

Personal issues beyond the nursery business become entangled with the setback provisions. If a

nursery has to relocate, typically a family has to move as well.

One alternative to owning all the land in a buffer area, would be to sign agreements with all

surrounding neighbors in the buffer zone to have existing citrus trees removed and assurances

that citrus will not be replanted within the buffer zone. Such agreements may be difficult to

achieve without some form of compensation to the neighboring property owners. Further, even if

an agreement is reached at a particular nursery site, long-term enforcement could be a challenge,

especially when property ownership changes. Whether existing nurseries physically relocate to








-40-
new property or work toward securing compliance agreements with its neighbors, creating an

eighth-mile buffer zone would add to the costs of protected facility structures.


Sanitation


Developing a sanitary protocol for nursery operations was the third charge of the FCPPC.

Most of the sanitary procedures are common sense recommendations and emphasize how to

decontaminate workers, vehicles, and equipment that enter the facility compound. Many

nurserymen indicate that they already follow most of these recommendations, and it is not clear if

a formalized set of sanitary protocols would increase overall production costs.

The FCPPC will finish developing its production guidelines sometime during spring

2006. The Florida Division of Plant Industries (DPI) will use the FCPPC guidelines as the basis

of new rules that would "certify" citrus nursery operations. After DPI drafts the new rules, there

will be a period for public comment. At the earliest, the new rules will be adopted during fall

2006. The projected implementation of these guidelines will be January 1, 2008.

While canker and citrus greening have accelerated the process, the citrus nursery industry

has been undergoing increasing regulations and moving toward protected facilities. The

mandatory budwood registration program became effective on January 1, 1997. The rule

required all citrus tree propagations to use registered budwood sources. Budwood production

regulations tightened on January 1, 2006, when all scion trees had to be grown in protected

screen houses.








-41-

Future Supply and Demand for Citrus Nursery Trees


The new round of regulations stemming from the FCPPC guidelines will dramatically

change the operational demographics within the citrus nursery industry. Before August 2004,

more than 70% of the industry's capacity resided in "field" nurseries. The consensus within the

nursery industry is that whatever the final rules turn out to be, field nurseries will not be allowed

to continue. For these nursery operations to continue, they will have to invest in a screen

structure and transfer growing operation inside the structure. Undoubtedly, some percentage of

the existing field nurseries will choose not to make this investment, and consequently, to go out

of business prior to January 2008.

Capacity within the citrus nursery industry has been declining since 1998 (DOACS).

According to statistics from the Budwood Registration Office, 75 nursery operations propagated

6.0 million trees in 1998. By August of 2002, the number of nurseries had fallen to 65 and total

propagations to 5.2 million trees. During the fiscal year ending June 30, 2004, 50 nurseries

produced 4.0 million trees. For the year ending June 30, 2005, the Budwood Registration Office

reported only 2.1 million propagations and an estimated inventory of 6 million trees. Canker

eradication destroyed nearly two-thirds of the inventory, or 4.1 million trees. More significantly,

the eradication actions and the general cloud of uncertainty hanging over the citrus industry,

suspended the propagation of any new nursery trees.

Once the existing tree inventory (- 2 million trees) has been depleted, leaders within the

nursery industry predict few if any new trees being available for the next two years and limited

production for the next three to five years. Existing nursery operations have to decide whether to

remain in business. That decision will be strongly influenced by the final rules that will emerge








-42-
from the DPI rule making process. Given the significant investments for protected structures and

possible relocation requirements, nursery operations are not likely to restart their operations until

DPI rules are finalized. How fast the DPI rule making process can proceed is uncertain, but

officials believe that final rules can be established sometime during the fall of 2006. Once the

rules are in place, nursery growers who choose to continue in the business can start their

investment plans. Relocating nursery operations and building protected structures will likely

require at least a year to complete. Once the facility has been reestablished, the propagation

process will require another 18 to 20 months before a new crop of nursery trees is ready to be

planted in commercial groves.

Budwood supplies are likely to be scarce for the next three years. Commercial nursery

operations were responsible for at least 93% of all budwood material. The eradication program

eliminated at least two-thirds of the budwood material in commercial nurseries. Commercial

nurseries maintained both scion trees and increase blocks. Increase blocks are planted with

budwood from certified scion trees. Under the existing DPI protocol, a nursery can cut budwood

from an increase block for up to 24 months. The block can be re-certified to continue cutting for

a third year. Under the proposed regulations, a nursery will be able to cut budwood within a

screen structure for up to 36 months, and if re-inspected, for an additional 12 months.

State-owned foundation groves have also been affected, limiting budwood availability.

Hurricanes destroyed the screen house structures at the DPI Budwood office in Dundee, Florida.

DPI officials elected not to cut budwood until a new protected facility can be rebuilt. The DPI

Dundee facility is being relocated to state land near Chiefland, Florida. If the state legislature

appropriates the money, a facility could be completed by the end of 2006. Another two years

would be required, however, before budwood would be available in substantial quantities. The








-43-
Foundation Budwood Grove at the Southwest Research and Education Center near Immokalee,

Florida, is another state-owned certified budwood source. This site has been under screen

protection since 1999 and the nearest canker finds to date have been more than 2 miles away.

However, the screen houses are adjacent to existing citrus trees and would be out of compliance

if any setback requirements were established.

The decline in nursery tree propagations has mirrored the level of commercial grove

acreage. Following the freezes in the 1980s, bearing-citrus acreage in Florida peaked at 815,000

acres during the 1996-97 season. By 2004 total bearing acreage had fallen to less than 680,000

(FASS, Citrus Summary 2003-04). Prior to August 2004, acreage declines were attributable to

diseases, notably blight and the citrus tristeza virus, and land conversion from citrus to urban

development. In addition, low market prices forced growers to abandon less productive groves

and limit planting to resets in more highly productive areas. The canker eradication program was

not a major factor in overall acreage decline. Between 1995 and August 12, 2004, less than

16,000 total citrus acres were destroyed as part of the eradication program.

From August 12, 2004 to the lifting of the eradication program in early January 2006,

nearly 64,000 acres and 10 million commercial trees were destroyed (DOACS). Nearly one-third

of the canker eradicated area occurred in the rapidly urbanizing Treasure Coast region of Florida.

The percentage of this acreage that will be replanted to citrus will depend on the robustness of

the real estate market. There are some early signals that the real estate market is beginning to

cool down. With delivered-in prices for processed oranges at more than $1.20 per PS and fresh

grapefruit commanding more than $15 per box, interest in replanting lost citrus acreage is likely

to accelerate. Adding pressure on depleted tree supplies is the annual demand for resets. Annual








-44-
attrition rates of mature commercial trees average 3%, creating an annual, ongoing demand for

resets of nearly 3 million trees (700,000 ac 130 trees/ac 3%).


Summary


Hurricanes and the canker-eradication program have depressed Florida citrus production

to its lowest levels in the past 15 years. With the suspension of the canker-eradication program

and the presence of the citrus greening disease, the citrus industry is in a state of turmoil as it

collectively tries to chart a course into the future. Citrus prices, however for both processed

oranges and fresh grapefruit, have pushed higher and are beginning to encourage growers to

replant lost acreage. A significant constraint to replanting efforts over the next three to five years

will be the availability of citrus nursery trees. As of January 1, 2006, the citrus nurseries were

closed down as new rules and guidelines were being developed to insure the propagation of

"clean" plant material. The rules should be in place by the end of 2006 with full implementation

expected by January 2008.

The cost of new citrus trees is likely to increase by more than $2.00 over current levels

($4.50 to $5.50 per tree) to cover added costs of growing within a screen-house facility.

Availability of trees will depend on the number of nursery operations that choose to make the

necessary investments under the new rules.








Section VI
CITRUS PRICE/RETURN ANALYSIS:
An Examination of Investment Returns to Citrus
in a Citrus Canker and Greening Environment

by
Ronald P. Muraro and Jordan C. Malugen


Introduction


This analysis attempts to determine the relationship between citrus prices and grove

profitability for new and mature plantings, and illustrate the effects of historically high land

prices, endemic citrus canker, and citrus greening on investment returns. These scenarios

attempt to quantify investment decisions faced by citrus growers and landowners across the state.

First, investment scenarios are determined based on either new plantings (with and

without land costs), or mature plantings without land costs. Then, base production costs are

established for Hamlin and Valencia sweet oranges grown for the processing (juice) market on

both "Ridge" and "Flatwoods" locations, and colored (red or pink) grapefruit grown for the fresh

fruit market on an "Indian River" location.3 Finally, assumptions are applied for additional costs,

yield decline, and tree losses due to the different diseases. The return on investment is

determined at different price levels for citrus using a net present value (NPV) framework over a

15-year planning horizon. The breakeven prices reported are the lowest prices where the NPV of





3Ridge refers to the well-drained and sandy soils of Central Florida and encompasses citrus production in
Polk, Highlands, Lake, Orange, Hardee, and Hillsborough counties. Flatwoods refers to the wet and/or muck soils of
Southwestern and South Central Florida and encompasses citrus production in Charlotte, Collier, Hendry, Glades,
Lee, DeSoto, Okeechobe, and Sarasota counties. Indian River refers to parts of citrus-producing counties on
Florida's east coast, such as: Brevard, Indian River, Palm Beach, and St. Lucie counties. These classifications are
general and individual grove characteristics in these geographic areas may differ.

-45-








-46-
the investment is positive over the 15 year period of analysis. All calculations are performed on

a per-acre basis.


Investment Scenarios


S New Plantings Scenario: Represents the situation of a grower who intends to
plant a new citrus grove and must purchase land at current market prices. The
land cost is assumed to be improved pasture already zoned for agricultural use as
reported in the IFAS 2005 Rural Land Value Survey for the respective areas of the
state. This scenario attempts to gauge investment returns for new entrants into the
citrus industry or current growers looking to expand their operations by
purchasing additional land.

S Replantings Scenario: Representative of a grower or landowner who already
owns land and intends to plant citrus. This land may be new to citrus, the grower
may be replacing an unproductive grove, or replanting a grove previously
eradicated due to citrus canker. No opportunity costs are assumed for alternative
uses for the land, either agricultural or non-agricultural. This scenario would
especially apply to large citrus operations with continuous properties and vacant
land due to canker eradication, or those wishing to replace other agricultural
operations (i.e., livestock, forestry, sod, etc.) with citrus.

Mature Grove Scenario: Based on a grower/landowner who owns a mature
(15-year old) grove at the beginning of the planning horizon. This scenario
applies to established growers who did not suffer losses from citrus canker
eradication, and want to examine the long-term profitability of their groves.


Disease Assumptions


Base (No Canker or Greening): Uses actual production costs by geographical
area for the 2004-05 season as reported in the IFAS Citrus Budgets collected by
Muraro, et al. It reflects common cultural practices in different areas of the state
for a custom managed operation. Tree loss rates reflect an estimated state
historical average, excluding the effects of development and eradication (Table
6-1).










Table 6-1. Tree-loss percentages.


-years -----------------------------% -----------------------------

1 -3 1.00 2.00 2.50 4.00 1.10


4-11

12+


1.50

3.50


2.63

5.25


3.00

6.13


4.50

8.75


1.65

3.85


aEstimated average state historical tree loss (excluding effects of development and eradication).


Canker-Only: Uses estimates for increased costs due to endemic citrus canker
within the state. A yield penalty of 10% is applied to Hamlin orange and colored
grapefruit varieties because of their increased susceptibility, and 5% to Valencia
oranges. A slight increase in tree loss (10%) is added to base loss rates across all
varieties and ages.

Greening-Only: Uses estimates for increased costs due to intensive control of the
Asian citrus psyllid insect vector of citrus greening. This incorporates additional
spray costs based on IFAS Integrated Pest Management guidelines. This analysis
uses the low rate of tree loss due to greening.

Canker and Greening (low, medium, high): Uses combined estimates for costs
due to each disease. This reflects some amount of overlap between management
programs. Due to a lack of certainty about exactly what effects greening will have
in Florida, the analysis is calculated for three different levels (low, medium, and
high) of tree loss.



Investment Model Assumptions


For numerical data used in the investment model assumptions, please consult

Appendix A.


Citrus Varieties: Valencia and Hamlin sweet oranges grown for the processing
market. Colored (pink and red) grapefruit grown for the fresh market.








-48-
* Location: Scenarios were run for Valencia and Hamlin groves on the Ridge area
(Northern & Central Florida), and on the Flatwoods (Southern Florida).
Grapefruit is assumed to be located on the Flatwoods (Indian River).
Geographical differences in costs and returns were incorporated into the
investment model.

* Area: All costs and returns are on a one-acre-of-planted-citrus basis. This
adjusts for the different uses of space between Ridge and Flatwoods plantings.
Ridge plantings assume 95% planted in citrus. Flatwoods plantings assume 75%.
Per acre land costs are then divided by the percent planted in citrus to establish a
comparable cost per acre of planted citrus.

* Tree Density: For new plantings, densities are assumed to be 198 trees per acre
(22' X 10' spacing) for Valencia and Hamlin varieties, and 134 trees per acre
(25' X 13') for grapefruit. For mature groves, densities are assumed to be 112
trees per acre for Valencia and Hamlin on the Ridge, 145 trees per acre for
Valencia and Hamlin on the Flatwoods, and 95 trees per acre for grapefruit.
While the new planting densities used in this analysis are higher than the
historical averages, we believe they reflect an apparent trend towards higher
density plantings.

Resetting: All scenarios use a bi-annual resetting policy (replacing
dead/unproductive trees every other year) until year ten, and bi-annual resetting of
50% of tree loss for years 11 to 15. This reflects two realities of resetting: (1)
when pursuing a continuous reset policy, under field conditions, growers do not
always have the opportunity to reset every season, and may wait until there is
enough tree loss to justify the expense of removing and replacing trees, and (2)
with the higher density plantings in this model, a grower most likely would reset
at a lower density (space trees farther apart) after the original trees are mature
(about 10 years old) to avoid shading-out the young trees.

Yields: Yield estimates were calculated by assuming a box yield per tree
according to the age of the tree. This illustrates the impact of tree loss rates on
production by adjusting the total per acre yield by the mix of trees of different
ages. Peak boxes per acre production occurs when the trees are at 11 years of
age, and peak pound solids for processing oranges is reached at year 7. Table 6-2
reflects yield per acre, adjusted for the number of planted trees per acre and the
age distribution of the trees due to the tree loss rates of the different scenarios.
For example, while a mature grove of Valencia oranges on the Ridge with 100%
of its original trees may produce about 550 boxes per acre, because of tree loss,
resetting, and the resulting number of non-bearing and immature young trees, it
will produce about 416 boxes per acre under base rates, and only about 329 boxes
with the highest tree loss rates of an endemic canker and greening environment.
















Table 6-2. Average grove yields by scenario and disease.

Canker & Greening
Base Canker Greening-Low
Low Medium High
Type Variety Location
boxes/ boxes/ % change boxes/ % change boxes/ % change boxes/ % change boxes/ % change
from
acre acre from acre from base acre from base acre from base acre from base
base

Valencia Ridge 416 392 -6 390 -6 370 -11 361 -13 329 -21

New Hamlin Ridge 491 438 -11 460 -6 414 -16 403 -18 369 -25
Plantings/ Valencia Flatwoods 416 392 -6 390 -6 370 -11 361 -13 329 -21
Replant-
ingsa Hamlin Flatwoods 491 438 -11 460 -6 414 -16 403 -18 369 -25

Grapefruit Indian River 416 371 -11 390 -6 350 -16 341 -18 312 -25

Valencia Ridge 290 271 -7 268 -8 255 -12 246 -15 220 -24

Hamlin Ridge 342 303 -11 317 -7 285 -17 275 -20 246 -28
Mature b Valencia Flatwoods 376 351 -7 347 -8 330 -12 318 -15 285 -24
Plantings
Hamlin Flatwoods 443 393 -11 410 -7 369 -17 355 -20 319 -28

Gapefruit Indian River 363 321 -12 335 -8 302 -17 291 -20 261 -28

aNew plantings/replantings yield averages for tree age 4 to 15.
bMature orange plantings assume 112 trees per acre for Ridge, 145 trees per acre for Flatwoods, and 95 trees per acre for grapefruit in the Indian River.








-50-
Orange Prices: Grove profitability was evaluated using price ranges to
determine at what price level a grove is profitable given the different cost
scenarios. The price used to calculate a gross revenue for oranges for processing
is the delivered-in price per pound solid.4 Then picking, roadsiding, and hauling
costs are subtracted to arrive at the net revenue. The price range for oranges is
$1.00 to $2.50 per PS, evaluated in 100 increments.

Grapefruit Prices: The price used to calculate revenue for grapefruit is an on-tree
price for all methods of sale. The "on-tree price" is the value of a box of fruit net
of the costs of picking, roadsiding, and hauling. "All methods of sale" is the
combined average of grapefruit destined for the fresh and processed markets.
Grapefruit grown for the fresh market will have a certain number of fruit graded
unfit for fresh sales (eliminated) and sent for processing into juice instead. The
percentage of the total amount of fruit delivered to the packinghouse and sent to
the fresh market is referred to as the "packout" rate, and these receive a much
higher price than fruit sent for processing. This model makes no assumptions
about an individual grove's packout rate. The price range for grapefruit is $5.00
to $20.00 per box evaluated in $1.00 intervals.

Base Scenario Production Costs: Production costs for the base scenario (no
canker or greening present) use the IFAS 2004-05 Citrus Budgets by Ronald
Muraro, adjusted for the respective grove locations. However, all scenarios use a
$7.50 per new tree price to reflect a general shortage of nursery citrus trees over
the next couple years. Spray programs reflect historic costs for citrus production
(Table 6-3).

Canker-Only Scenario Production Costs: In addition to the base scenario
production costs, costs are assumed for citrus leafminer control, field inspections,
and fresh market canker-free certification for grapefruit. Spray programs reflect
additional costs for two additional sprays for leafminer on Hamlin oranges, one
additional spray for Valencia oranges, and five additional sprays for fresh market
grapefruit (Table A-10).

Greening-Only Scenario Production Costs: In addition to the base scenario
production costs, costs are assumed for psyllid control and greening inspections.
A psyllid control program assumes the maximum use as permitted by law of
Temik systemic insecticide for 5+ year-old trees (Admire for 1 to 4 year-old
trees). Also, two additional psyllid control sprays for processing oranges, and
three additional psyllid control sprays for grapefruit (Table A- 1).



4Pound solid (abbreviated P.S.) is the weight of sugar solids extracted from orange juice. For example, 1
gallon of single-strength orange juice has about 1 pound solid (1.0291bs.). Oranges destined for the processing
market are paid by the pound solid, and a box of oranges will have a certain amount of pounds solid that varies by
environment, tree age, and variety.












Table 6-3. Base scenario grove costs.
Valencia Valencia Hamlin Hamlin Grapefruit
General Grove Information
Ridge Flatwoods Ridge Flatwoods Indian River
Total Land Acres 1 1 1 1 1
Percent Land Planted to Citrus 95% 75% 95% 75% 75%
Effective Age of Mature/Original Trees 15 15 15 15 15
Mature/Original Tree Density (trees per acre) 112 145 121 145 95
Reset/Solid-set Tree Density (trees per acre) 198 198 198 198 134
Land/Grove Purchase Price/Acre (per planted acre of citrus) 6,764 7,860 6,764 7,860 7,860
Irrigation Cost New Plantings (with well) 1,350 1,000 1,350 1,000 1,000
Irrigation Cost Replantings (without well) 1,000 1,000 1,000 1,000 1,000
Land Preparation (per acre) for New Plantings 615 1,422 615 1,422 1,422
Land Preparation (per acre) for Replantings 615 1,251 615 1,251 1,251
New Planting/Replanting Beginning Annual Property Tax (acre) 30 30 30 30 30
Mature Grove Beginning Annual Property Tax (acre) 70 70 70 70 70
Expected Interest Rate on Operating Expenses 6.0% 6.0% 6.0% 6.0% 6.0%
Interest Rate for Calculation of New Present Value 11.0% 11.0% 10.0% 10.0% 9.0%
Capitalization Rate for 15-Year Grove Value 13.3% 13.3% 12.2% 12.2% 11.2%
Miscellaneous Costs Percentage Rate 2.0% 2.0% 2.0% 2.0% 2.0%
Supervision and Overhead Costs Percentage Rate 5.0% 5.0% 5.0% 5.0% 5.0%
Year Analysis Begins 2006 2006 2006 2006 2006
Grove Care Costs for a Mature Grove (15+ Years Old)
Cultivation and Herbicide 189.17 189.17 189.17 189.17 189.17
Spraying 132.24 141.19 132.24 141.19 383.17
Fertilization 204.77 204.77 204.77 204.77 157.00
Hedging and Pruning 40.06 40.06 40.06 40.06 52.13
Irrigation and Ditch Maintenance 166.17 208.63 166.17 208.63 208.63
Miscellaneous 14.65 15.68 14.65 15.68 19.80
Supervision and Overhead 36.62 39.19 36.62 39.19 49.51
Total Grove Care Costs 783.68 838.69 783.68 838.69 1,059.41








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Canker & Greening Scenario Production Costs: In addition to the base
scenario production costs, costs are assumed for psyllid control, leafminer control,
canker and greening inspection costs, and fresh market certification for grapefruit.
Some overlap of psyllid and leafminer control spray programs is recognized
(Table A-12).

Young & Reset Tree Establishment Costs: Adjustments were made to certain
production costs for the first nine years of a solid-set (replanted) grove, and the
first three years of reset trees. These adjustments reflect additional care costs for
young trees, such as staking, planting, tree wraps, Ridomil treatments for foot/root
rot, and additional cultivation maintenance. These adjustments also reflect a
reduction in other care costs for an immature grove, such as reducing hedging and
topping costs, and materials costs for spray and fertilization programs (Tables A-6
and A-7).


Investment Model Description


Investment Period: Scenarios are evaluated over a 15-year (period) planning
horizon, where mature plantings are assumed to be in production in the first year,
and new plantings are assumed to require one year for regulatory approval and
land preparation, with planting at the beginning in year two. For example, at the
end of year two of the analysis, the trees are one-year old. Returns to mature
plantings are assumed to accrue at the end of the first period.

Net Present Value: The model uses the returs-to-assets net present value (NPV)
technique of adding together the discounted cash flows over the investment
period, plus a discounted terminal grove value, minus the non-discounted initial
investment. The end of period cash flows are discounted using discount rates
specific to each variety of citrus (Table 6-4) derived from previously published
research (Table A-2).

Net Cash Flows: Operating revenues minus operating costs. This investment
model calculates cash flows as earnings before interest, taxes, depreciation, and
amortization (EBITDA). The returns are a cash return per acre of planted citrus.


Table 6-4. Discount and capitalization rates.

Rate Valencia Hamlin Grapefruit
-------------------- o/o ---------------

Discount 11.00 10.00 9.00

Capitalization 13.30 12.20 11.20










Terminal Grove Value: In addition to the above cash flows, a final grove value
is calculated by dividing the average cash flow of the last two periods by the
capitalization rate, adding this back to the last period cash flow, and discounting
to the present value.5 The capitalization rate is specific to each variety of citrus
and derived from previously published research (Table A-3). This values the
grove on an income-producing basis, does not include land price appreciation, and
may reflect a conservative estimate of grove value. In some disease scenarios ,the
average last two period cash flow is dramatically reduced, and when the terminal
value is calculated on an income producing basis, it is significantly smaller than
the original purchase price. To correct for this unlikely outcome, the terminal
grove value is assumed to never fall below the beginning per acre price for
cropland/improved pasture.

Breakeven Prices: The breakeven price is the lowest delivered-in price ($ per
PS) for oranges, or on-tree ($ per box) for grapefruit at which the NPV of the
15-year investment period is positive A higher average price would mean the
grove would break even in less time. For example, while a new planting of
Valencia on the Ridge in the base scenario requires an average price of $1.30 per
PS over 15 years to break even, an average price of $1.80 per PS would mean the
grove breaks even within 13 years.


Investment Model Results Summary

Scope of Analysis


Under field conditions, citrus production is not nearly as deterministic as portrayed in this

analysis. Citrus trees are biological organisms and thus respond (sometimes unpredictably) to

changes in their environment. Climate and individual grove site characteristics have important

and widely divergent effects on production and costs. Also, strong evidence shows that alternate

bearing patterns exist for some varieties, and may significantly affect tree yields in a given

season. Production costs and technologies change over time and affect operating budgets.

Moreover, growers practice a range of cultural care programs, and their individual costs may be

different.


5See Appendix A for discussion.








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Individual growers, landowners, or investors have different asset/liability positions, tax

rates, capital gain/loss carry forwards, and risk preferences that change the dynamics and

profitability of a citrus investment. This analysis follows common practices and standards across

the Florida citrus industry. This information was gathered through publicly available data and

extensive consultations with growers, other industry professionals, and citrus scientists and

academics. We observe earnings before interest, taxes, depreciation, and amortization

(EBITDA) in order to focus on cash flows attributable specifically to citrus operations. Also, by

excluding land value appreciation we attempt to remove distortions caused by surges in Florida

rural land values, and arrive at a true value for growing citrus in Florida.

The scenarios and assumptions presented attempt to illustrate important aspects of the

decision-making process faced by those involved in citrus production across Florida. Citrus is an

investment where an up-front cost is incurred (buying and preparing the land and planting the

trees) with operating profits delayed several years until the trees become productive, and sunk

costs being recouped after that, all depending on volatile fruit prices. The NPV framework

discounts these uncertain future returns using discount rates dependent upon the historical

variability in citrus returns.6 Due to the discounting factor, cash flows become smaller the

farther out they are in an uncertain future. Therefore, changes in the up-front investment costs

have a disproportionate effect on a grove's NPV.


Accounting for the Effect of Rural Land Prices on the Profitability of Citrus


According to the IFAS 2005 Florida Land Value Survey, rural land prices increased from

50% to 88% in one year across the state, depending on their use (Reynolds 2005). Due to


6For a discussion of the discount rates and capitalization rates used in this analysis, please see Appendix A.








-55-
commercial development and related speculation, strong non-agricultural demand for rural

properties appears not to be focusing on the income producing potential of agricultural activities.

The prices used in this analysis for improved pasture were $6,426 per acre for Central Florida

Ridge plantings, and $5,895 per acre for Southwestern and Indian River Flatwoods plantings

(Reynolds). These prices are proxies representative of agricultural land costs for areas available

for expansion of citrus plantings. These prices were reported as of May 2005, and may have

significantly appreciated since then, which would understate the negative effects of land costs on

new plantings. The current rural land price market in Florida constitutes a relatively large and

disproportionate upfront cost for a grower who wishes to purchase land and plant citrus.

In reality, all citrus growers have incurred a land cost at some point, the assumption of

zero land cost is not realistic, and some portion of this land cost should be charged against the

returns of a citrus investment. As in any commercial real estate investment, many

growers/landowners/investors look not only at the income generated by the property, but also

appreciation of the underlying land. Since this analysis values only the returns associated with a

citrus investment, and not land price appreciation, these scenarios establish upper and lower

bounds on the profitability of the replanting decisions facing the Florida citrus industry.

At the upper extreme, some growers/landowners/investors may evaluate a citrus grove as

an investment in isolation, and only care about the returns to the citrus operation. Therefore, they

may apply the entire land cost against the profitability of the grove. This is illustrated by the new

plantings scenario, and could represent those growers considering citrus as their primary

business. At the lower extreme, some growers/landowners/investors are purely interested in

returns from land price appreciation, and view citrus as an interim income producing activity

until they opt to realize their gains on the land. These owners would not apply any of the land








-56-

cost against the profitability of the grove. This is illustrated by the replantings (without land

cost) scenario, and could represent investors acquiring land for future non-agricultural

development. The replanting scenario (without land cost) also includes growers who may have

had sections of groves eradicated due to canker, but do not have the ability to sell the area due to

effects on their entire grove.

The reality is that most people involved in growing citrus are somewhere in the middle;

neither charging the entire land cost against the citrus investment, nor expecting the entire return

on investment to come from land price appreciation. In weighing the results of this analysis, one

should view the breakeven prices for new plantings (with land costs) and replantings (without

land costs) as a price range between which one can expect some planting of citrus. According to

this analysis for a Valencia orange grove on the Ridge soil type, even with the presence of

endemic canker and a high rate of tree loss due to greening, a citrus investment is profitable in

the range of $1.30 per PS (for replantings without land cost) to $1.80 per PS (for new plantings

with land cost) (Table 6-5). This range incorporates our conservative estimate for the residual

value of the grove.7


Effects of Endemic Citrus Canker on Grove Profitability


With the end of the government-mandated citrus canker eradication program, Florida

citrus is now entering an environment where citrus canker is likely to become endemic, and

control is in the hands of the individual grower. Canker may be managed by grove sanitation





Please refer to the "Terminal Grove Value" section of the Investment Model Description for a discussion
of the method of incorporating an ending grove value into the NPV analysis.














Table 6-5. Breakeven citrus prices (net cash flow + final value) (Price" at which NPV of grove
cash flows over 15-year period is positive).

Ridge Flatwoods Indian River
Type Scenario
Valencia Hamlin Valencia Hamlin Grapefruit
-- ------------------------ $ ----------- ------- ------

New Base 1.30 1.20 1.30 1.30 7.00
Plantings
s Canker 1.40 1.40 1.60 1.50 9.00

Greening-low 1.50 1.40 1.60 1.50 9.00

G&C-low 1.60 1.60 1.70 1.70 9.00

G&C-med 1.70 1.60 1.80 1.70 10.00

G&C-high 1.80 1.70 1.90 1.90 11.00

Replantings Base <1.00 <1.00 <1.00 <1.00 <5.00

Canker <1.00 1.00 1.00 1.10 6.00

Greening-low 1.10 1.10 1.20 1.10 6.00

G&C-low 1.20 1.20 1.20 1.20 7.00

G&C-med 1.20 1.20 1.30 1.30 8.00

G&C-high 1.30 1.30 1.40 1.40 9.00

Mature Base <1.00 <1.00 <1.00 <1.00 <5.00
Grove
Canker <1.00 <1.00 <1.00 <1.00 <5.00

Greening-low <1.00 <1.00 <1.00 <1.00 <5.00

G&C-low <1.00 <1.00 <1.00 <1.00 <5.00

G&C-med <1.00 <1.00 <1.00 <1.00 <5.00

G&C-high <1.00 1.00 <1.00 <1.00 <5.00

aPrice in $/PS for oranges, and $/on-tree box for grapefruit.
Threshold price for profitability less than scenario range, i.e., profitable at lower price than $1.00.








-58-
practices, removal of infected trees, and control of the citrus leafminer insect, which causes

damage to citrus leaf tissue where the canker bacteria might enter. This analysis estimates the

effect of canker in two ways: (1) increased production costs for managing canker, and (2)

decreased yields due to infected trees. The degree and cost of canker management practices will

mostly vary by the destination of the fruit. Because of canker's negative effect on the peel and

visual desirability, a higher level of control, and therefore higher costs, is anticipated for fresh

market fruit. Fruit destined for processing is not affected as much, due to the fact that canker has

little effect on internal juice quality.

The marketing of the fruit and differing levels of susceptibility to canker across varieties

results in the production costs being proportionally higher for grapefruit grown for the fresh

market than oranges grown for the processing market (Table 6-6). The change in costs from the

base scenario is the greatest (+25%) for grapefruit because of significantly increased spray and

canker-free certification costs. The increase in costs for Hamlin oranges (+12% to 14%)

compared to Valencia oranges (+9% to 10%) reflects Hamlin's increased susceptibility to canker

and need for more intense management. Yield decreases of 10% for Hamlin oranges and

grapefruit, and 5% for Valencia oranges were incorporated into the analysis to estimate canker's

effect on per tree production, and tree loss rates were increased 10% over the base rates across

varieties to account for the removal of infected trees.

In our analysis, canker does not dramatically increase the breakeven prices for citrus.

Although breakeven prices for new plantings are high ($1.40 to $1.60 per PS for oranges, and

$9.00 per box for grapefruit), once land costs are excluded, the breakeven prices attributable

exclusively to canker increase slightly for the susceptible varieties, Hamlin oranges and

grapefruit, and less for Valencia oranges. Replanting of grapefruit for the fresh market requires a
















Table 6-6. Average grove production costs by scenario and disease.

Canker & Greening
Base Canker Greening-Low
Low Medium High

Type Variety Location % % % %
cost/ cost/ change cost/ change cost/ change cost/ change cost/ % change
acre acre from acre from acre from acre from acre from base
base base base base

Valencia Ridge 811.48 893.45 10 1,085.38 34 1,104.85 36 1,116.37 38 1,155.18 42

New Hamlin Ridge 811.48 924.44 14 1,085.38 34 1,134.56 39 1,145.49 41 1,182.39 46
Plantings/ Valencia Flatwoods 853.15 927.13 9 1,117.54 31 1,137.01 33 1,147.84 35 1,184.38 39
Replant-
ingsa Hamlin Flatwoods 853.15 958.12 12 1,117.54 31 1,166.71 37 1,176.96 38 1,211.59 42

Grapefruit Indian River 1,008.25 1,256.15 25 1,365.72 35 1,378.90 37 1,375.46 36 1,364.89 35

Valencia Ridge 898.10 980.38 9 1,170.93 30 1,193.06 33 1,194.21 33 1,198.77 33

Hamlin Ridge 898.10 1,014.70 13 1,170.93 30 1,225.65 36 1,225.82 36 1,227.67 37
Mature
Matub Valencia Flatwoods 974.88 1,055.36 8 1,260.23 29 1,283.10 32 1,290.23 32 1,311.89 35
Plantings
Hamlin Flatwoods 974.88 1,089.68 12 1,260.23 29 1,315.69 35 1,321.83 36 1,340.79 38

Gapefruit Indian River 1,133.47 1,393.81 23 1,503.77 33 1,520.82 34 1,508.90 33 1,477.73 30

"New plantings/replantings production costs exclude year 1 establishment costs.
bMature grove averages production costs for 15- to 30-year-old trees.








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breakeven on-tree price of $6.00 per box, which is high for the recent past, but appears

reasonably sustainable given recent events in grapefruit supply. Mature plantings continue to

create significant cash flows even below $1.00 per PS and $5.00 per box for grapefruit. While

increasing production costs and decreasing yields, canker in isolation does not require high prices

in order to break even.


Effects of Greening on Grove Profitability


The effects of the citrus greening bacteria, or Huanglongbing (HLB), in Florida are still

largely uncertain. Other countries' experiences with greening are extremely negative, but none

of the other locations where greening is established practice the intense degree of grove

management and advanced cultural techniques of the Florida citrus industry.8 Also, many other

countries did not implement greening control and integrated pest management programs until

long after the disease was established and pervasive. Greening is spread by the vector of the

Asian citrus psyllid insect. The psyllid feeds on the growth flushes put out by citrus trees as they

grow. Citrus trees will die within a 1- to 4-year period after infection. In the greening-only

analysis, we assume greening increases tree loss to 2% per year for trees aged 1 to 3, 2.63% for

trees aged 4 to 11, and 5.25% for trees 12+ years. This is compared to the historic state-wide tree

loss rate of 1%, 1.5%, and 3.5%, respectively. Since young trees have more growth flushes, we

expect greening to have a disproportionate effect on younger, vigorous trees. Note: these results

are based on assumptions formed from greening's effects on other countries citrus industries and

the current body of scientific literature, and may not reflect the reality of the disease in Florida.



8Although Greening has been present in Brazil, the world's largest producer of citrus, longer than Florida
and is the subject of extensive scientific research, results from Brazil are still inconclusive.








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Controlling for psyllids, resetting more trees, and field inspections for greening increase

production costs significantly across all varieties and grove age. Production costs for oranges

increase 31% to 34% for new plantings/replantings and 29% to 30% for mature plantings.

Production costs for grapefruit increase 35% for new plantings/replantings and 33% for mature

plantings. The difference between new plantings/replantings and mature plantings reflect the

disproportionate effect of greening on young tree loss, and the need to incur additional reset

costs. However, mature groves suffer larger reductions in average per-acre yields due to the

absolute increase in the loss of older, highly productive trees.

Greening appears to increase breakeven prices significantly more than canker. Breakeven

prices for new plantings move into the range of $1.40 to $1.60 per PS for oranges, and $9.00 per

box for grapefruit. Breakeven prices for replantings are $1.10 to $1.20 per PS for oranges, and

$6.00 per box for grapefruit. Breakeven prices for mature groves are still less than $1.00 per PS

and $5.00 per box for grapefruit. This indicates that while greening by itself does boost

production costs significantly, its effect on replantings (without land cost) and mature groves

given current price levels shows that citrus remains a profitable investment.


Conclusions


The Florida citrus industry faces significant barriers to entry. Increasing commercial and

residential development of rural lands and Florida's expanding population are resulting in high

land prices that increase up-front costs to establishing new citrus groves. The NPV analysis

shows that disproportionate up-front costs make it difficult for a citrus investment to recoup the

purchase price for vacant agricultural land. Citrus is currently in a high price environment, but,

unlike the period following the freezes of the 1980s, investment in citrus by new entrants who do








-62-
not already own land is not expected. Most expansion in citrus acreage may come from existing

growers and landowners converting land to citrus from other agricultural uses.

Increased risks due to canker and greening also act as a barrier to entry. Uncertainty

about exactly what effects these diseases will have raises the return required to compensate for

this additional risk. In our analysis, canker does not significantly alter the risk/return profile for

processed citrus. Also, the expected future prices for grapefruit are favorable, and even with

higher production costs, the expected returns appear to compensate risks due to canker.

Unfortunately, there is much uncertainty about what risks growers will face from

greening. It is known that greening may significantly raise costs, but by how much depends on

psyllid control, tree loss rates, and the effectiveness of the management program. Greening

appears to have less of an effect on the profitability of mature groves and replantings for growers

who already own their land.

The assumptions and scenarios in this analysis use the current body of information and

opinions available to predict the future direction of Florida citrus. This includes high density

plantings and constant resetting because of higher tree loss rates due to greening. This analysis

adopts the strategy of pushing as many trees as possible through the vulnerable immaturity

period, although this is yet to be scientifically validated. Also, the high tree loss rates may result

in a lack of uniformity in groves which may create difficulties for mechanical harvesting. At this

time, not enough is known about the way greening kills trees to effectively project what a future

Florida citrus grove will look like.

We determine price ranges in order for citrus to be profitable. The predicted prices in

other sections of this report indicate that, for certain participants, citrus may be highly profitable

over the next decade. Barring significant changes in the price environment, assumed effects of








-63-
diseases, or rural property values, preexisting citrus may remain profitable because of the

constraints on production. Those who own citrus groves or agricultural land will stay in the

business and may even expand plantings, however, Florida citrus may not expand in response to

high prices as it once did.










-64-









Section VII
Long-run Production and Price Forecasts for Processed Oranges
and Fresh and Processed Grapefruit

by
Mark G. Brown and Thomas H. Spreen


In this section of the paper, long-run production and price forecasts for Florida processed

oranges and fresh and processed grapefruit are presented. This is accomplished through two

quantitative models: one that relates to the world orange-juice market and another model of the

market for Florida grapefruit.

Model simulations are conducted to provide input to answering key questions about the

Florida citrus industry. Will prices be high enough to cover costs? What will be the size of the

Florida citrus industry in the future? What will be the impact on the Florida economy? Answers

to these questions are critical for planning, but such answers can only be provided in a

probabilistic sense. The future of a complex industry such as Florida citrus simply can not be

reliably predicted. Thus, in this context, a range of scenarios are examined here based on current

industry expectations on spread of citrus diseases, costs, land development and other factors.


A Model of the World Orange-Juice Market


A model of the world orange-juice market was originally developed by McClain in 1989.

Since that time it has been modified and updated several times including Spreen, et al. (1992) in

an analysis of the impact of the North American Free Trade Agreement (NAFTA) on U.S. citrus

growers and Spreen, et al. (2003) who analyzed the effects of the proposed Free Trade Area of

the Americas (FTAA).








-66-
That model is modified and adapted for this study. The world OJ model is comprised of

general relationships between OJ supply, demand and prices in the world. Econometric estimates

of these relationships are then used to simulate the model. The model includes explicit supply

relationships for orange juice produced in Florida and Sdo Paulo, Brazil.

The model used herein is a modification of the Spreen, et al. (2003) model in that it does

not explicitly consider not-from-concentrate orange juice as a distinct product from reconstituted-

from-concentrate orange juice. Aggregation of these two products into a single product greatly

simplifies the calculation of a price equilibrium. Demand for orange juice in the United States

and the rest of the world are included in the model as well as inventory adjustments (juice

inventories represent a demand for the present season and supply to the next season). Prices in

the model are based on aggregate world supply and demand relationships. The current price is

determined by (1) calculating the change in aggregate supply from the previous to current period,

(2) calculating the assumed shift in aggregate demand (price constant) from the previous to

current period, and (3) adjusting price to equate these supply and demand changes: if the supply

change equals the demand change, price is unchanged; if the supply change is greater than (less

than) the demand change, price is decreased (increased) until quantity demanded increases

(decreases) sufficiently to eliminate the excess supply (excess demand), using demand elasticities

across markets to determine the quantity responses to price. Although the model is based on one

OJ price (the Florida FOB for bulk FCOJ), other OJ prices across markets and product forms

would generally be expected to differ from the Florida FOB price, depending on transportation

costs, tariffs, quality premiums and other factors. The margins between the Florida FOB price

and the other prices, however, are assumed to be constant, and a change in the Florida FOB price

results in the same change in the other OJ prices. This modeling approach is the same as taken








-67-
by McClain. Prices are dollars per single-strength-equivalent (SSE) gallon (1.029 pound solids

per SSE gallon).

The model takes as input the existing tree inventory in Florida and uses yields on a per-

acre basis and by tree age to predict the Florida orange crop for the present season. Fresh

utilization is deducted and using historical juice yields, the remaining orange production is

converted to juice. A similar process is used to predict orange and orange-juice production in

Sao Paulo, Brazil. Brazilian juice is allocated between the United States and the rest of the world

(ROW) (primarily the European Union). Juice from Florida and Sao Paulo constitute the bulk of

the supply to the U.S. market. Orange-juice production from Mexico, Costa Rica, Belize and

other countries are part of aggregate world supply and some of this supply may be imported to

the U.S. market, although not specifically tracked here-U.S. imports are calculated as a

residual: U.S. consumption minus Florida beginning inventory minus U.S. production (from

Florida and other U.S. citrus-producing states) plus U.S. exports plus Florida ending inventory.

Based on demand relationships estimated by Brown, et al. (including updates), current

year U.S. supply is allocated between current-year consumption and inventory. The demand

equations include a 1% annual increase in U.S. orange-juice demand and 2% annual increase in

demand in the ROW. In recent years, U.S. demands for OJ and a number of foods have been

adversely impacted by low-carb diet concerns of consumers. With these concerns having strong

impacts over several years, the demands for OJ and various other foods declined. Historically,

U.S. demand for OJ, however, has grown with support from advertising (see "Generic

Promotions of Florida Citrus," by a Panel of Citrus Economists). Over the projection period,

generic and brand advertising is assumed to occur and support a growth rate of 1% in U.S.

demand for OJ. An alternative assumption of zero growth in U.S. demand is also considered.








-68-
Once an FOB price for FCOJ in the United States is determined, this price is used to

predict new plantings in Florida in the next season. The tree inventory is aged one year and

adjusted for death loss. A similar set of calculations is conducted for Sao Paulo. A major

distinction between new plantings in Florida and Sao Paulo is that in the Sao Paulo equation, a

ratio of orange prices and sugar prices is used to predict new plantings to account for the strong

competition between oranges and sugarcane for agricultural land in Sao Paulo.

After the tree inventory has been adjusted, the model moves to the next season and the

process outlined above is repeated. Inventory accumulated from the previous season represents

supply to the following season.

To account for the presence of citrus canker and greening, modifications to the model

were made to per-acre yields (canker) or death loss (greening). The new tree planting equation is

also modified to reflect shifts in the revenue stream resulting from the presence of these diseases.

Increases in grove care costs due to canker and greening are subtracted from grower prices to

obtain net prices for predicting new planting levels. This adjustment can be viewed as a shift in

the intercept of the new planting equation (Appendix B). Likewise, increased prices for

undeveloped land are handled through a shift in the new tree planting equation.


A Model of the World Market for Florida Grapefruit


In 1988, Pana completed the first attempt to construct a model of the world market for

Florida grapefruit. The grapefruit market differs from the orange-juice market in three

fundamental ways. First, Florida is the dominant supplier to the world fresh and processed

grapefruit market. Before the production decline in Florida following the hurricanes of 2004,

Florida accounted for over 40% of world grapefruit production. Therefore, it is not necessary to








-69-
consider alternative suppliers of grapefruit. Second, there is fungibility between grapefruit sent

to the fresh versus the processed market. A market model of grapefruit should take into

consideration that a market allocation process takes place that establishes the proportion of the

crop processed and sold fresh. Third, there are two main varieties of grapefruit: red seedless and

white seedless.

In this study, a modification of Pana's model is used. Pana used a spatial equilibrium

approach. In this study, a deterministic simulation model that is similar to the Pana model is

developed. It begins in a fashion similar to the world orange-juice model. The grapefruit tree

inventory for Florida is input to the model. Using average yields on a per-acre basis, the number

of acres in an age category is multiplied by average per-acre yields and summed across age

categories to generate the total production of white seedless and red seedless grapefruit. Total

production is allocated between the fresh and processed markets. Equilibrium prices are

determined in each market using demand equations estimated by Lee (2004), Brown (2004),

Brown and Lee (2002). No growth in demand is assumed for both fresh and processed

grapefruit. The model also deals with domestic versus export fresh sales. After packing costs

and processing costs are deducted, delivered-in prices for both fresh and processed sales are

established. Subtracting pick and haul costs gives on-tree prices. On-tree prices are then used to

predict new plantings. The existing tree inventory is aged and adjusted for tree mortality. The

model is then solved for the next season.












Empirical Results


Eleven scenarios are presented as outlined below.

1. A base run of the model with citrus-canker yield and acre-loss penalties.

2. No citrus-canker yield and acre-loss penalties are imposed.

3. Imposition of citrus canker with higher yield losses (30% for early-mid varieties and 15%
for Valencia).

4. Imposition of citrus canker plus citrus greening assuming a low rate of tree mortality
(100% increase in nonbearing death loss, 75% increase in death loss for trees ages 4
through 11, and 50% increase in death loss for trees 12 years and older).

5. Imposition of citrus canker plus citrus greening at a high rate of tree mortality (300%
increase in death loss for nonbearing trees, 200% increase in death loss for trees ages 4
through 11, and a 150% increase in death loss for trees 12 years and older).

6. Imposition of citrus canker plus an increase in raw-land values (cost of raw land is
assumed to increase by $3,500 per acre and impact tree planting levels).

7. Imposition of citrus canker plus a high development impact (cost of raw land is assumed
to increase by $3,500 per acre and impact tree planting levels; in addition, an annual loss
of orange acreage of 2% and an annual loss of grapefruit acreage of 4% are assumed).

8. Imposition of citrus canker plus an adjustment in the sugar price in Brazil to reflect
increased prices.

9. Simultaneous imposition of citrus canker (Scenario 1), citrus greening (Scenario 4),
higher raw-land prices (Scenario 6), and high sugar prices in Brazil (Scenario 8).

10. Simultaneous imposition of citrus canker citrus (Scenario 1), greening (Scenario 4),
higher raw-land prices (Scenario 6), and high sugar prices in Brazil (Scenario 8), plus no
demand growth in the United States.

11. Simultaneous imposition of citrus canker citrus (Scenario 1), greening (Scenario 4),
higher raw-land prices (Scenario 6), and high sugar prices in Brazil (Scenario 8), plus
pessimistic assumptions regarding future worldwide orange-juice demand.









Base-Run Results


A base run of the orange-juice model was completed in order to (1) validate the model for

the 2005-06 marketing years and (2) provide a reference point for the other scenarios to be

evaluated. In this run, the FASS citrus inventory has been updated by adjusting for the 2005

hurricane losses, acres lost due to canker eradication and other factors. The yields used in the

model are a weighted average of 11 seasons (1993-94 through 2003-04) which excludes

hurricane affected years. A separate set of yields were estimated based on the 2004-05 hurricane

season. Future production is based upon the assumption that a hurricane will strike the Florida

peninsula once every 10 years. It should be noted that historically, relatively large variations in

yields have occurred. In this report, future production is based on average yields, and indicates

trends in production over time, as opposed to actual production in any given season which may

vary substantially from the trend. The 95% confidence intervals based on yield variation alone

indicate orange and grapefruit production could vary roughly plus/minus 20% and plus/minus

10% around their trends, respectively. Similarly, assumed trends in acres lost over time may

also be smoother than will actually occur, as acres lost in a given season may vary from the

assumed acre-loss trend due to unforeseen events such as hurricanes, freezes, and the rapid

spread of diseases such as canker .

Planting levels over the next two seasons, 2005-06 and 2006-07, are assumed to be 1/6

the level of plantings in the 2003-04 season and zero in 2007-08 due to the limited availability of

nursery stock. In 2008-09 and after, constraints on nursery trees are removed and planting levels

are determined by the model's planting equations.

Given the current level of citrus canker found in the four main citrus-production areas, it

is assumed that the disease will not disperse evenly throughout the state. The disease will not be








-72-
present in 100% of all production regions until the 2011-12 season. In the base model, the

presence of citrus canker is assumed to reduce per-acre yields by 5% in Valencias and 10% for

all other varieties. These yield penalties are adjusted by the percentages of assumed infected

acres noted earlier. The other impacts of canker, increased tree mortality and increased cost of

production are also adjusted in a similar manner.

The base scenario does not include the effects of greening, increases in Florida land

values and increases in sugar prices in Brazil (before the oil-price spike).

The results of the base run are shown in Tables 7-1, 7-2, and 7-3. The simulation period

is 15 years beginning in 2006-07 through 2020-21. Note the projected production levels. Based

upon adjustments in the existing tree inventory, the projected crop in the 2006-07 season,

assuming average yields, is 196 million boxes, a level considerably higher than the 2004-05 and

2005-06 seasons which were adversely affected by hurricanes. At this level of production, prices

are expected to ease from present levels with all processed oranges averaging $3.98 per box on-

tree. With the lack of new trees for the next three seasons, total acres (bearing and non-bearing)

are projected to decline to less than 500,000 by the 2008-09 season. Loss rates reported in the

tables reflect acre losses (bearing and non-bearing) from the previous to current seasons, and do

not include newly planted trees in the current season. Florida orange production is projected to

decline to 175 million boxes by 2014-15, at which point it stabilizes and increases to 181 million

boxes by the 2020-21 season. Over this same period, production in Sio Paulo is projected to

steadily increase, exceeding 400 million boxes in 2013-14 season and reaching 468 million boxes

in 2020-21. Despite increasing production in Sio Paulo, bulk FCOJ prices















Table 7-1. Scenario 1: Long-run projections of Florida and Sio Paulo orange production, U.S.
and ROW OJ consumption and U.S. OJ prices, Base assumptions.1
ORANGE

SSo Price OJ Consumption
Season Florida Acre
Season Total Paulo
Produc- Loss Florida
tion Acreage Rate Produc- Bulk Processed U.S. ROW
tion Rate Bulk U.S. ROW
tion J n-Tree
FCOJ
million 1,000 million $/SSE
mllon 1000 ml- $/box million SSE gallons -
boxes acres boxes gal.
2006-07 196 523 -3.9 360 1.19 3.98 1,391 2,167
2007-08 194 504 -3.5 360 1.18 3.95 1,408 2,217
2008-09 191 498 -3.4 365 1.20 4.08 1,412 2,237
2009-10 187 504 -3.4 371 1.23 4.26 1,414 2,249
2010-11 183 509 -3.4 377 1.26 4.41 1,418 2,267
2011-12 179 515 -3.4 384 1.28 4.57 1,422 2,286
2012-13 178 521 -3.3 392 1.30 4.66 1,430 2,315
2013-14 176 527 -3.3 401 1.31 4.73 1,440 2,349
2014-15 175 534 -3.3 409 1.31 4.77 1,452 2,389
2015-16 175 541 -3.2 419 1.32 4.80 1,464 2,432
2016-17 175 548 -3.2 428 1.32 4.81 1,479 2,480
2017-18 176 555 -3.1 438 1.32 4.80 1,494 2,531
2018-19 177 562 -3.1 448 1.31 4.77 1,511 2,586
2019-20 179 569 -3.1 458 1.31 4.74 1,528 2,643
2020-21 181 576 -3.0 468 1.30 4.71 1,545 2,702
Assumes (a) presence of canker will increase acre-loss rates by 10%, and decrease acre yields for Valencia oranges
and other citrus varieties by 5% and 10%, respectively; (b) acre yields are weighted averages of historical yields:
90% times non-hurricane yields (averages from 1993-94 through 2003-04) plusl0% times hurricane yields (2004-
05), (c) U.S. and ROW OJ demands grow by 1% and 2% annually, respectively; and (d) ROW OJ supplies grow by
1% annually.














Table 7-2. Scenario 1: Long-run projections of Florida grapefruit production, fresh and
processed prices, U.S. GJ consumption, and Florida fresh grapefruit shipments, Base
assumptions.1

GRAPEFRUIT

Price Florida
SA U.S. Certified
Season Florida Total Florida Florida Fresh/ GJ Fresh
Production Acreage Rate Fresh Buk Processed Consump- Grapefruit
FOB J On-Tree tion Utiliza-
(White) _tion

million 1,000 million million
% $/box $/PS $/box SSE
boxes acres gallons boxes
gallons
2006-07 24 57 -9.0 19.85 2.34 7.09 52.3 9.9
2007-08 23 53 -6.0 20.84 2.22 7.26 53.1 9.4
2008-09 22 53 -4.2 21.54 2.28 7.74 52.6 9.2
2009-10 21 54 -3.4 22.21 2.39 8.32 51.9 8.9
2010-11 21 56 -3.1 22.80 2.52 8.90 51.1 8.7
2011-12 20 58 -3.0 23.29 2.63 9.40 50.3 8.5
2012-13 20 60 -2.9 23.46 2.69 9.62 50.0 8.5
2013-14 20 63 -2.8 23.45 2.71 9.68 49.9 8.5
2014-15 20 66 -2.6 23.30 2.69 9.56 50.0 8.5
2015-16 21 69 -2.5 22.87 2.62 9.17 50.4 8.7
2016-17 21 73 -2.4 22.29 2.50 8.62 51.1 8.9
2017-18 22 76 -2.3 21.50 2.34 7.86 52.1 9.2
2018-19 23 79 -2.2 20.58 2.16 7.00 53.3 9.6
2019-20 24 82 -2.2 19.64 1.97 6.10 54.7 10.0
2020-21 25 84 -2.2 18.70 1.78 5.20 56.2 10.4
Assumes (a) presence of canker will increase acre-loss rates by 10%, and decrease acre yields byl0%; (b) acre
yields are weighted averages of historical yields: 90% times non-hurricane yields (averages from 1993-94 through
2003-04) plusl0% times hurricane yields (2004-05), and (c) no growth in domestic and export demands for GJ and
fresh grapefruit.


















Table 7-3. Scenario 1: FOB Revenues Base assumptions.1
FOB Revenue
Season Fresh Processed
Orange Grapefruit ISpecialty Total OJ GJ Total
--------------- ------------ million $ ----------------------------

2006-07 137 196 85 418 3,027 207 3,234
2007-08 137 197 82 416 3,072 201 3,274
2008-09 137 197 79 414 3,095 204 3,330
2009-10 137 198 77 412 3,105 209 3,314
2010-11 137 199 74 410 3,115 214 3,329
2011-12 137 199 72 408 3,120 218 3,338
2012-13 137 199 69 405 3,133 220 3,353
2013-14 137 199 67 403 3,148 221 3,370
2014-15 137 199 65 401 3,166 221 3,386
2015-16 137 199 63 398 3,185 218 3,402
2016-17 137 198 61 396 3,206 213 3,419
2017-18 137 197 59 393 3,230 206 3,436
2018-19 137 197 57 391 3,258 198 3,456
2019-20 137 196 55 388 3,288 188 3,476
2020-21 137 195 54 386 3,322 177 3,499
Assumes (a) presence of canker will increase acre-loss rates by 10%, and decrease acre yields for Valencia oranges
and other citrus varieties by 5% and 10%, respectively; (b) acre yields are weighted averages of historical yields:
90% times non-hurricane yields (averages from 1993-94 through 2003-04) plusl0% times hurricane yields (2004-
05), (c) U.S. and ROW OJ demands grow by 1% and 2% annually, respectively; (d) no growth in domestic and
export demands for GJ and fresh grapefruit, and (e) ROW OJ supplies grow by 1% annually.








-76-
exhibit an upward to flat trend over the forecast period, reaching $1.32 per SSE gallon in

2015-16. On-tree prices show a similar pattern, exceeding $4.00 per box over all but two years of

the forecast period. These results are based on the assumption that OJ demands in the United

States and the rest of the world grow annually by 1% and 2%, respectively. (A 1% growth rate in

U.S. demand would keep per capital consumption relatively constant, with the U.S. population

growing at about 1%; a 2% growth rate in the rest of the world is based on estimates of growth in

world demand in recent years made by the Florida Department of Citrus; China and Russia have

been experiencing the largest growth; Brown, Staff Report 2004-6.)

Projections for grapefruit are shown in Table 7-2. With the large decrease in bearing

acres due to the canker eradication program, Florida grapefruit production is projected to be 24

million boxes in 2006-07. While this level is higher than the depressed production levels of

2004-05 and 2005-06, it is far below the levels realized in the past decade. Production is

projected to decline to 20 million boxes by the 2011-12 season, stabilize and recover to 25

million boxes by 2020-21. With Florida being the largest supplier of grapefruit to the world

market, production at these levels translates to exceedingly high prices for grapefruit, assuming

the demand for fresh grapefruit and grapefruit juice remain stable. FOB fresh grapefruit prices

are projected to exceed $20.00 per box ($10.00 per carton) over nearly all of the forecast horizon.

Frozen-concentrated-grapefruit-juice (FCGJ) prices are also projected at high levels of over

$2.00 per PS over the most of the forecast horizon.

At these persistent high price levels, it is possible that other production regions will

respond by increasing production. In Florida's marketing window, possible competing regions

are Mexico, Cuba, Israel, and Turkey. Each of these regions, however, face other issues (e.g., the








-77-
Mexican fruit fly is endemic in Mexico) that may constrain their ability to significantly expand

production.

In Table 7-3, projected FOB revenue is presented for the base run of the models. As a

point of reference FOB revenue from fresh citrus sales was $159 million in the 2003-04 season

and from processed sales was $2,846 million for a total of $3,005 million. Compared to these

figures, FOB revenue is projected to be higher throughout the forecast horizon with processed

FOB revenue increasing from $3,234 million in 2006-07 to $3,499 million in 2020-21. Processed

FOB revenue includes a premium for NFC sales and adjustments for product sold in bulk versus

retail packages. Higher FOB revenue results from lower production and proportionately higher

prices due to the inelastic nature of demand for citrus products at the FOB level. Based purely

upon FOB revenue, this industry is not facing a dire future. FOB revenue, however, can be

misleading if production costs substantially increase. The presence of citrus canker will increase

production costs for growers and packinghouses.


Results from Other Scenarios


Ten alternative scenarios were analyzed. The intent of these scenarios is to evaluate the

incremental effect of greening and high raw-land prices in Florida on production and prices.

Another scenario is analyzed which is intended to account for the competition between sugarcane

and citrus for agricultural land in Brazil. Alternative assumptions related to demand growth for

citrus products are also evaluated.











No Canker Effect Scenario 2 Results


In this scenario, yield penalties of 5% for Valencias and 10% for all other varieties are

removed. A 10% increase in tree-death loss is also removed. Projected orange production and

prices under these assumptions are shown in Table 7-4. Compared to the base run, Florida

orange production is consistently higher with the increase ranging from 4 million boxes in the

2006-07 season to 23 million boxes in 2020-21. Higher production results in a modest decrease

in prices of about 10 to 70 per SSE gallon. On-tree prices are decreased by a similar proportional

magnitude. These results provide a rough estimate of the impact of citrus canker on the

processing sector over the next 15 years. Lower prices in Florida also affect adversely Sao Paulo

orange production, although the magnitude of the production decrease is relatively small.

Projected Florida grapefruit production and prices under no canker effect is shown in

Table 7-5. The impact on grapefruit production is modest, averaging about 11% per year over

the forecast horizon. Florida production in 2020-21 is projected at 27 million boxes in this

scenario compared to 25 million boxes in the base run. Both fresh and processed prices decrease

modestly.

In Table 7-6, projected FOB revenue for fresh and processed citrus products is shown. It

is assumed that pack-out rates are the same as in the base scenario, and the FOB revenue from

fresh sales for the base scenario and this scenario are similar. FOB revenue from processed sales

shows a small increase reflecting increased market share for Florida versus Brazil.

















Table 7-4. Scenario 2: Long-run projections of Florida and Sdo Paulo orange production, U.S.
and ROW OJ consumption and U.S. OJ prices, base assumptions EXCEPT no canker
yield and acre losses.1


million 1,000
boxes acres


200
201
201
201
199
197
196
195
195
195
196
197
199
202
204


523
506
501
508
516
523
531
539
547
556
564
573
582
591
599


-3.8
-3.3
-3.2
-3.1
-3.1
-3.1
-3.0
-3.0
-3.0
-2.9
-2.9
-2.9
-2.8
-2.8
-2.8


million $/SSE $/SSE


Sboxes
boxes


360
360
365
371
377
384
392
399
407
415
424
432
441
449
458


gal.
1.17
1.16
1.16
1.18
1.19
1.21
1.23
1.24
1.25
1.25
1.26
1.26
1.26
1.26
1.25


gal.
3.89
3.78
3.83
3.92
4.02
4.14
4.23
4.29
4.35
4.38
4.41
4.42
4.42
4.41
4.40


- million SSE gallons -


1,397
1,419
1,429
1,437
1,445
1,451
1,459
1,469
1,480
1,493
1,506
1,520
1,536
1,551
1.568


2,182
2,246
2,281
2,310
2,337
2,363
2,393
2,429
2,468
2,510
2,555
2,604
2,657
2,712
2.768


SSame as base scenario, Table 7-1, except no decrease in acre yields and no increase in acre-loss rates are assumed.


2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
2020-21


N/















Table 7-5. Scenario 2: Long-run projections of Florida grapefruit production, fresh and
processed prices, U.S. GJ consumption, and Florida fresh grapefruit shipments, base
assumptions EXCEPT no canker yield and acre losses.1

GRAPEFRUIT

Price Florida
U.S. Certified
Season Florida Total Ace Florida G J Fresh
Loss Florida Fresh/
Production Acreage Rate Fresh Bulk Processed Consump- Grapefruit
FOB FCGJ On-Tree tion Utiliza-
__(White) _____ tion
million .
million 1,000 -bx million
-% $/box -$/PS -$/box SSE
boxes acres gallons boxes
gallons
2006-07 25 57 -8.8 18.32 2.06 5.69 55.5 10.6
2007-08 24 53 -5.8 19.00 1.87 5.55 57.1 10.3
2008-09 24 54 -3.9 19.39 1.87 5.72 57.2 10.1
2009-10 24 55 -3.1 19.71 1.91 5.99 56.7 9.9
2010-11 23 56 -2.8 20.10 1.98 6.34 56.1 9.8
2011-12 23 58 -2.8 20.38 2.05 6.63 55.5 9.6
2012-13 23 60 -2.7 20.46 2.08 6.75 55.2 9.6
2013-14 23 62 -2.6 20.41 2.09 6.77 55.1 9.6
2014-15 23 64 -2.5 20.28 2.08 6.68 55.2 9.7
2015-16 23 67 -2.4 19.96 2.03 6.40 55.6 9.8
2016-17 24 69 -2.3 19.56 1.96 6.03 56.3 10.0
2017-18 24 71 -2.2 19.00 1.86 5.53 57.2 10.3
2018-19 25 73 -2.2 18.38 1.74 4.95 58.3 10.6
2019-20 26 75 -2.1 17.73 1.62 4.35 59.5 10.9
2020-21 27 77 -2.1 17.09 1.50 3.76 60.8 11.3
Same as base scenario, Table 7-2, except no decrease in acre yields and no increase in acre-loss rates are assumed.



















Table 7-6. Scenario 2: FOB Revenues Base assumptions EXCEPT no canker yield and
acre losses.1
FOB Revenue
Season Fresh Processed
Orange Grapefruit Specialty Total OJ GJ Total
--------------------------- million $ ----------------------------
2006-07 137 194 85 417 3,041 192 3,232
2007-08 137 195 82 415 3,099 182 3,281
2008-09 137 196 80 412 3,138 182 3,320
2009-10 137 196 77 410 3,166 184 3,350
2010-11 137 196 75 408 3,186 188 3,374
2011-12 137 196 73 406 3,202 191 3,392
2012-13 137 197 70 404 3,221 192 3413
2013-14 137 196 68 402 3,242 193 3,435
2014-15 137 196 66 400 3,267 192 3,459
2015-16 137 196 64 397 3,293 190 3,483
2016-17 137 196 62 395 3,321 186 3,507
2017-18 137 195 61 393 3,353 181 3,534
2018-19 137 195 59 391 3,389 175 3,563
2019-20 137 194 57 388 3,427 168 3,594
2020-21 137 193 56 386 3,467 160 3,627
Same as base scenario, Tables 7-1 and 7-2, except no decrease in acre yields and no increase in acre-loss rates are
assumed.










Higher Negative Yield Effect from Canker Scenario 3 Results


In Scenario 3, yield penalties associated with citrus canker are increased to 15% for

Valencias and 30% for other varieties. Yield penalties of this magnitude are more consistent

with those realized in China where citrus canker has been present for many years. While the

climate in China is more humid than other production regions with endemic citrus canker (e.g.

Argentina), the intensity of management in Florida is generally higher compared to China. There

is some belief that yield effects from citrus canker on the order of 5% to 10% is too low for

Florida's climatic conditions.

Projected production and prices assuming larger citrus canker yield penalties are shown in

Table 7-7. In this scenario, production is lower compared to the base run throughout the forecast

horizon with production decreasing from 188 million boxes in 2006-07 to 145 million boxes in

2015-16. At that point, production stabilizes and recovers slightly to 148 million boxes in the

2020-21 season. With these levels of production, FOB FCOJ prices are generally higher than the

base run, increasing from $1.22 per SSE gallon in 2006-07 to $1.42 per SSE gallon in 2012-13.

The price increase, however, is tempered by increased production in Sao Paulo. Sao Paulo

orange production is projected to reach 485 million boxes in 2020-21 compared to 468 million

boxes in the base run.

Decreased yields also have a strong effect on grapefruit production as shown in Table 7-8.

Projected grapefruit production is 20 million boxes in 2006-07 and decreases to 15 million boxes

in 2013-14. Production recovers modestly to 19 million boxes in 2020-21. At these production

levels, prices remain exceedingly high over the forecast horizon, with FOB prices for fresh fruit
















Table 7-7. Scenario 3: Long-run projections of Florida and Sdo Paulo orange production, U.S.
and ROW OJ consumption and U.S. OJ prices, base assumptions PLUS increased
canker yield losses.1


million 1,000 million $/SSE
o/ %;-- /ho million SSp -llrno -


2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
2020-21


boxes
188
180
171
161
156
150
148
147
146
145
145
145
146
146
148


acres
523
504
498
501
505
509
513
518
523
528
533
537
542
547
551


-3.9
-3.5
-3.4
-3.4
-3.4
-3.4
-3.4
-3.4
-3.3
-3.3
-3.2
-3.2
-3.2
-3.1
-3.1


boxes
360
360
365
371
377
385
394
403
414
425
437
449
461
473
485


gal.
1.22
1.23
1.28
1.34
1.37
1.41
1.42
1.42
1.42
1.42
1.41
1.40
1.39
1.37
1.36


4.16
4.27
4.56
4.91
5.14
5.34
5.42
5.45
5.45
5.42
5.37
5.30
5.22
5.15
5.07


1,380
1,387
1,381
1,372
1,371
1,373
1,381
1,393
1,407
1,423
1,441
1,459
1,479
1,499
1,519


2,140
2,164
2,156
2,139
2,145
2,156
2,186
2,225
2,270
2,321
2,375
2,433
2,495
2,559
2,623


SSame as base scenario, Table 7-1, except canker
citrus varieties by 15% and 30%, respectively.


is assumed to decrease acre yields for Valencia oranges and other


Eg


- U -















Table 7-8. Scenario 3: Long-run projections of Florida grapefruit production, fresh and
processed prices, U.S. GJ consumption, and Florida fresh grapefruit shipments, base
assumptions PLUS increased canker yield losses.1

GRAPEFRUIT

Price Florida
U.S. Certified
Season Florida Total Ace Florida G J Fresh
Loss Florida Fresh/
Production Acreage Rate Fresh Bulk Processed Consump- Grapefruit
FOB FCGJ On-Tree tion Utiliza-
__(White) _____ tion
million .
million 1,000 -bx million
-% $/box -$/PS -$/box SSE
boxes acres gallons boxes
gallons
2006-07 20 57 -9.0 23.67 2.89 10.21 46.0 8.4
2007-08 19 53 -6.0 25.44 2.99 11.27 45.5 7.9
2008-09 18 53 -4.2 27.02 3.23 12.59 44.5 7.5
2009-10 17 53 -3.4 28.74 3.52 14.10 43.3 7.1
2010-11 16 55 -3.1 29.79 3.77 15.21 42.5 6.8
2011-12 16 57 -3.1 30.81 4.00 16.23 41.7 6.6
2012-13 16 59 -3.0 31.20 4.11 16.70 41.4 6.6
2013-14 15 62 -2.8 31.37 4.17 16.91 41.2 6.5
2014-15 15 65 -2.7 31.34 4.17 16.88 41.2 6.5
2015-16 16 69 -2.5 30.90 4.08 16.45 41.5 6.6
2016-17 16 73 -2.4 30.18 3.93 15.74 41.9 6.8
2017-18 17 77 -2.3 29.10 3.72 14.71 42.6 7.0
2018-19 18 81 -2.2 27.80 3.46 13.48 43.4 7.3
2019-20 18 85 -2.1 26.39 3.19 12.16 44.4 7.6
2020-21 19 88 -2.1 24.96 2.90 10.81 45.5 8.0
Same as base scenario, Table 7-2, except canker is assumed to decrease acre yields by 30%.








-85-
exceeding $30.00 per box ($15.00 per carton) for several years before declining to $24.96 per

box ($12.48 per carton) in 2020-21. FCGJ prices also remain extremely high over the forecast

period.

Projected FOB revenue for fresh and processed citrus products is shown in Table 7-9.

Imposition of larger yield penalites for citrus canker negatively affects FOB revenue, but the

effects are not large. FOB revenue for processed sales decreases as Sao Paulo production

increases and Florida loses market share. FOB revenue from fresh sales increases modestly.


Inclusion of Effects from Greening Scenario 4 Results


In this scenario, the impact of greening is incorporated into the base scenario. Greening

is assumed to increase tree mortality in Florida. Tree mortality for nonbearing trees increases by

150% compared to the base, 100% for trees ages 4 through 11 and 75% for all older trees. The

assumed spread of greening in Florida is described in Section III of this paper. It is assumed in

the greening scenarios of this study that means will be developed to identify this disease, control

the psyllid and growers will aggressively remove infected trees. Projected processed orange

production and prices associated with this scenario are shown in Table 7-10.

One can clearly see the effect of greening on bearing acreage and hence production and

prices. In this scenario, total acres decline to just under 500,000 acres, but recover slowly in

spite of persistently high prices. Increased death loss associated with greening results in higher

overall death loss; the base level of tree death has increased from approximately 3% per year to

over 4% annually. As a result, Florida orange production declines to 155 million boxes by

2018-19, at which time production stabilizes.


















Table 7-9. Scenario 3: FOB Revenues Base assumptions PLUS increased canker yield
losses.1
FOB Revenue
Season Fresh Processed
Orange Grapefruit ISpecialty Total OJ GJ Total
--------------------------- million $ ----------------------------
2006-07 137 199 85 422 3,000 229 3,229
2007-08 137 201 82 420 3,019 233 3,252
2008-09 137 202 79 418 3,011 241 3,252
2009-10 137 203 77 417 2,985 250 3,235
2010-11 137 204 74 415 2,977 257 3,234
2011-12 137 204 72 413 2,966 262 3,228
2012-13 137 204 69 411 2,973 265 3,238
2013-14 137 205 67 409 2,983 266 3,249
2014-15 137 204 65 406 2,993 266 3,259
2015-16 137 204 63 404 3,004 264 3,268
2016-17 137 204 60 401 3,016 260 3,277
2017-18 137 203 59 399 3,032 255 3,286
2018-19 137 202 57 396 3,050 247 3,297
2019-20 137 201 55 393 3,071 238 3,309
2020-21 137 200 53 391 3,094 227 3,321
Same as base scenario, Tables 7-1 and 7-2, except canker is assumed to decrease acre yields for Valencia oranges
and other citrus varieties by 15% and 30%, respectively.
















Table 7-10. Scenario 4: Long-run projections of Florida and Sao Paulo orange production, U.S.
and ROW OJ consumption and U.S. OJ prices, base assumptions PLUS low-greening-
loss rates.1
ORANGE

Price OJ Consumption
Season Florida Total Acre Sao Paulo
Produc- Ac Loss Produc- Florida Proc
PAcrease .rocessed U ROW
tion Acreage Rate tion Bulk U.S. ROW
FCOJ On-Tree
FCOJ
million 1,000 million $/SSE .
million 1,000 % $/box million SSE gallons -
boxes acres boxes gal.
2006-07 196 523 -3.9 350 1.19 3.98 1,391 2,167
2007-08 194 504 -3.5 342 1.24 4.31 1,383 2,151
2008-09 191 497 -3.4 337 1.31 4.71 1,370 2,125
2009-10 186 499 -3.5 334 1.37 5.14 1,356 2,097
2010-11 183 501 -3.7 332 1.44 5.54 1,345 2,076
2011-12 177 502 -4.2 331 1.50 5.96 1,333 2,053
2012-13 172 502 -4.7 332 1.57 6.34 1,324 2,039
2013-14 167 502 -4.8 335 1.62 6.68 1,318 2,032
2014-15 163 503 -4.8 338 1.67 6.97 1,316 2,033
2015-16 160 506 -4.7 343 1.70 7.20 1,316 2,043
2016-17 157 511 -4.6 350 1.73 7.37 1,320 2,062
2017-18 156 516 -4.5 357 1.75 7.47 1,328 2,090
2018-19 155 522 -4.4 366 1.75 7.50 1,340 2,128
2019-20 155 528 -4.3 375 1.75 7.49 1,354 2,172
2020-21 156 535 -4.2 385 1.74 7.44 1,370 2,222
Same as base scenario, Table 7-1, except greening is assumed to increase base-scenario, Florida acre-loss rates by
100% for non-bearing trees, by 75% for 4 through 11 year old trees, and 50% for trees over 11 years old; and
increase tree-loss rates in Sao Paulo by 50% (5% to 7.5%).








-88-

Prices for processed oranges show an upward trend over the forecast horizon with FOB

bulk FCOJ prices reaching $1.70 per SSE gallon in 2015-16 and leveling off at $1.75 per SSE

gallon in 2017-18. Prices exhibit this upward trend because the impact of greening is also

proportionately imposed on Brazil. The underlying tree-death loss in Brazil in this scenario is

7.5% compared to 5% in the base run (the increase in this death-loss rate is imposed over the

entire projection period with greening having apparently spread relatively widely in Sao Paulo).

Higher death loss also limits production growth in S o Paulo although Brazilian orange

production increases from a low point of 331 million boxes in 2011-12 to 385 million boxes in

2020-21.

The combination of lower production in Florida and Sao Paulo impacts consumption in

both the United States and the rest of the world. In 2020-21, consumption in these two markets

decreases 175 million and 480 million SSE gallons, respectively, compared to the base run.

Florida grapefruit production is also impacted by greening. Projected production declines

to 19 million boxes by 2012-13 and recovers only slightly to 22 million boxes in 2020-21 as

shown in Table 7-11. Projected prices are high throughout the forecast horizon. FOB prices for

fresh grapefruit exceed $20.00 per box ($10.00 per carton) over nearly all of the forecast horizon

and FOB FCGJ prices range from $2.22 to $3.05 per PS.

Projected FOB revenue associated with this scenario is shown in Table 7-12. Because of

higher prices associated with decreased production, FOB revenue for both fresh and processed

products is only minimally affected. Total processed FOB revenue is estimated to be $3,580

million in 2020-21 compared to $3,499 million in the base run.




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