Citrus Fruits

Industry Snapshot

Citrus fruits include oranges, tangelos, temples, tangerines, lemons, limes, and grapefruits. In 2009, four states accounted for 100 percent of the citrus fruit production in the United States: Florida (71 percent), California (26 percent), and Texas and Arizona (3 percent). The United States produced 12 million tons of utilized citrus fruit that year, a decrease of 33 percent from the record high of 17.8 million tons in 1998. Total value of the U.S. citrus fruit industry in 2009 reached $2.7 billion.

With more than 20,000 U.S. producers of all sizes, no one grower is dominant in the production phase. The industry governs its own marketing orders. Growers heed marketing factors as they specify grade and standard of crop leaving the region. They control the amount of product leaving the region during marketing season and designate periods when no new product can be shipped. Growers also provide market support such as research and price information and provide market development programs. Throughout the first decade of the twenty-first century, the number of citrus fruit acres planted steadily declined. Acres planted in 2009 totaled 845,100, as compared to 1.05 million in 2002.

Organization and Structure

Florida, California, Texas, and Arizona, all subtropical regions, produce the bulk of citrus fruits in the United States. Tropical cultivation is not as productive since seasonal changes are necessary for proper fruit growth. Citrus trees can withstand short periods of light frost, but hard frosts of long duration can be devastating.

The modern citrus industry depends on regular and frequent irrigation, fungicides, herbicides, pesticides, and other fertilizers. Harvesting is still often accomplished through manual means, although mechanical techniques are increasingly being used.

In the fresh fruit market, there is a great deal of competition, especially considering that, since around 1970, the per capita consumption of fresh oranges has declined, and since 1976, the consumption of fresh grapefruit has also decreased. With some fluctuations in between, per capita consumption of oranges has dropped from 16.2 pounds in 1970 to 12.1 pounds in 2002, while grapefruit consumption tapered off from 8.2 pounds in 1970 to 4.8 pounds in 2002. Of the total orange harvest in 2002, only 14 percent was consumed as fresh fruit, while 40 percent of grapefruits were consumed fresh. In the United States, almost all fresh citrus was garnered from domestic sources.

Processed fruit takes two forms: ready-to-serve juice (also known as single-strength equivalent, or SSE) and concentrate. Both forms have become very popular among consumers, mostly for their convenience. The variety of canned, frozen, and ready-to-serve juices in supermarkets is clear evidence of how the public responds to the processed product.

Citrus growers in the United States generally operate under one of three production philosophies. The first of these is to physically hand the fruit over to a packinghouse, processor, or middleman. A second option involves contracting with the packinghouse, processor, or middleman before the fruit is ready for harvest. In both cases, the seller and buyer agree to a satisfactory price before the fruit goes to market. The third option is an arrangement wherein the grower places his fruit along with the fruit of a number of other individual growers into a "pool" for sale on the open market. Profit is then determined by the selling price of the pooled fruit.

Citrus processing is a lucrative business. In addition to the primary products of frozen concentrate, chilled juice, and canned juice, processing also yields a number of by-products such as food additives, pectin, marmalades, cattle feeds (from the peel), cosmetics, essential oils, chemicals, and medicines. The processor can sell all these products to the appropriate industry for a profit.

Background and Development

Until the 1950s, citrus fruits were cultivated and traded on a local basis almost exclusively. Speed and care in shipping the perishable fruits were of great concern. However, the development of citrus concentrate in the late 1940s had a lasting impact on the citrus industry worldwide. Concentrating the fruit permitted the storage, transportation, and transformation of product far from the groves. In contrast to fresh fruit consumption, processed citrus consumption has remained fairly stable since 1972. According to the Florida Department of Citrus's Economic and Marketing Research Department, per capita orange consumption in processed form (frozen concentrated juice, chilled juice, and canned single-strength) has fluctuated little since the early 1970s. Since the 1970-71 growing season, retail prices have risen steadily, in large part because of the healthy market for frozen concentrated orange juice.

By the 1995-96 growing year, Florida processed about 85 percent of the oranges and grapefruits grown in the United States, including 64 percent of its own orange production and 57 percent of its grapefruit crop. This process effort yielded 94 percent of the nation's frozen concentrated orange and canned orange juice, as well as 76 percent of canned grapefruit juice. However, not all of the fruit processed was domestically grown. In the late twentieth century, nearly half of all processed juices available in America came from imported juice concentrate. Under the North American Free Trade Agreement (NAFTA), for example, the United States had to import 44.1 million (SSE) gallons.

Cooperatives were created in all four citrus-producing states; in Florida they accounted for 22 percent of that state's processing volume in the late 1990s. Conglomerate integration--firms that are subsidiaries of national food conglomerates--was also a significant presence in the industry, processing 35 to 45 percent of all the citrus from Florida.

Total orange-bearing acreage in the United States reached its peak during the early 1970s. After receding for a period following the1979-80 season, the total acreage devoted to citrus production began to rise in 1996-97 but fell off slightly in subsequent years. According to the National Agricultural Statistics Service (NASS), a division of the USDA, in the 2002 growing season, approximately 1.05 million acres were devoted to citrus production, compared to 1.15 million acres in 1997. Among the four major producing states, orange-bearing acreage was as follows: Florida had 70 percent; California had 28 percent; and Texas and Arizona together claimed approximately 5 percent of total orange-bearing acreage. Florida, as the major supplier of grapefruit, held around two-thirds of the acreage of the crop. Texas and California together accounted for nearly 23 percent of grapefruit acreage.

After peaking at 13.6 million tons in 1998, orange production in the United States plunged to 9.8 million tons before rebounding to 12.2 million tons in 2001. Production climbed further to 12.5 million tons in 2002. Grapefruit production saw a more gradual, consistent decline with production falling from 2.6 million pounds in 1998 to 2.42 million pounds in 2002. Tangerine production climbed from 373,000 tons in 2001 to 420,000 tons in 2002, while lemon production dropped from 996,000 tons to 828,000 tons and lime production fell from 11,000 tons to 7,000 tons over the same time period.

In the early years of the first decade of the 2000s, oranges made up about 65 percent of total worldwide citrus production; tangelos, temples, and tangerines, 15 percent; lemons and limes, 10 percent; and grapefruit, 10 percent. Oranges and grapefruit accounted for approximately 90 percent of U.S. citrus production.

The citrus industry was also enmeshed in controversy in the latter years of the twentieth century. Citrus growers had long enjoyed the benefits of Depression-era laws that established quotas governing citrus sales. Deepening concern about reputed abuse of the quotas by Sunkist and a number of its leading cooperative members prompted the government to eliminate 1993 marketing orders for navel oranges. With the quotas effectively blunted, wholesale prices plunged. Sunkist was particularly wounded, both by the allegations that the firm used these quotas to increase retail prices and the financial difficulties brought on by the removal of the quotas. Despite their ongoing tribulations, however, Sunkist remained the world citrus industry's wholesale giant.

Current Conditions

According to the U.S. Department of Agriculture (USDA), Florida continued to grow the great majority of the nation's citrus fruit as the second decade of the twenty-first century began. Florida accounted for about 8.5 million tons of the total 12 million tons produced during the 2008-9 growing season. Production was down from 16.3 million tons in 2002, with the drop in production attributed to fewer acres planted, the result of reduced demand. By 2009 only 845,100 acres were planted in citrus fruits in the United States, as compared to 1.05 million acres in 2002. Of the four citrus-producing states, only California saw a slight increase in planted acres in 2009 as compared to 2008. Production in three out of the four states also declined during that time period, with Arizona experiencing only a marginal increase.

Oranges accounted for 77 percent of the U.S. citrus crop in 2009. That year, 9.2 million tons of oranges were produced, a decrease from the 12.5 million tons produced in 2002. A majority of oranges were consumed as fresh fruit, with about 30 percent processed. The other categories of citrus produced in 2009 included grapefruit (1.3 million tons), lemons (950,000 tons), tangerines and mandarins (443,000 tons), and tangelos (52,000 tons).

A serious insect-borne disease was a concern for Florida citrus growers at the start of the 2010s. According to Western Farm Press, a tiny insect called the Asian citrus psyllid was spreading citrus Huanglongbing disease (HLB), also known as citrus greening disease because it makes the fruit turn green and inedible. Citrus greening disease can kill a tree in as little as two years, and, as of early 2010, more than 1 million trees had been removed in the state of Florida in an effort to control the spread of the disease. Researchers at the Agricultural Research Service and other agencies worked frantically to find ways to combat the disease, which had not yet spread to California, Arizona, or Texas.

Industry Leaders

Leading establishments in the citrus fruit production industry are located in Florida and California. Companies such as A. Duda & Sons Inc., Lykes Bros., Inc., Orange-Co Inc., and Ben Hill Griffin Inc. are among the leaders in Florida, while leading companies in California include Royal Citrus Co., Limoneira Co., and Pandol Brothers.

The best-known distributor of citrus fruits in the United States is Sunkist Growers, Inc. of Sherman Oaks, California. For more than 100 years it has been the dominant force for citrus growers in California and Arizona, who farm some 300,000 acres. It operates a cooperative of about 6,000 members and accounts for 65 percent of the growers in California and Arizona.

America and the World

By the late years of the first decade of the 2000s, Florida had become a world player in the world citrus fruit market. It, along with Brazil, produced most of the world's orange juice concentrate. Brazil provided 58 percent of the orange juice imported into the United States in 2008; however, a U.S. anti-dumping order against imports of orange juice from Brazil was enacted shortly thereafter and was still in effect as of 2010. Mexico was the second largest market for U.S. imports of orange juice and the largest market for U.S. imports of grapefruit juice in the early 2010s. Mexico also supplied more than half of the fresh citrus fruit imported into the United States.

Although the U.S. fresh and processed orange industry is domestically oriented, imports were expected to grow largely due to two factors: the heightened demand for chilled orange juice and improved port facilities. At the same time, these improved facilities allow for more exports, a facet of the industry that growers are trying to enhance. The United States exports citrus fruit mainly to Canada, Japan, and the United Kingdom. Orange concentrate is sent to both Canada and Mexico. These exports account for less than 10 percent of the total American domestic supply. Demographically and in price structure, the Canadian market differs little from the United States, and before 1986, Canada was the major purchaser of U.S. exports of orange concentrate. In the decade following implementation of the NAFTA guidelines in 1994, frozen concentrated orange juice (FCOJ) exported to Mexico quintupled, whereas the importing of SSE orange juice gradually decreased about 20 percent. Also due to NAFTA, which gives products from the United States preferential treatment, all citrus juices made from only one fruit must come only from NAFTA-grown fruit.

In contrast, the European market is very different demographically from the United States. European imports from other suppliers, such as Spain, are priced substantially lower than the American product. To alleviate the disparity, the industry proposed a two-price system in an attempt to maintain the price of concentrate sold domestically (already higher relative to the rest of the world) and export the concentrate at a lower price and successfully compete.

To further interest in concentrate produced in the United States, which has been steadily declining in popularity, growers have advanced programs in quality control, packaging innovations, and cross-merchandising. An example of the latter is when frozen concentrated orange juice was paired and successfully marketed with other breakfast foods such as waffles. The Duty Drawback Program was another program designed to encourage processors to develop foreign markets. It stated that if within a three-year period a processor or importer exported a specific quantity of concentrate, duties paid on imports of "like concentrate" were refunded, or "drawn back."

The export of fresh grapefruit is also of concern to U.S. growers, especially when dealing with Japan. Trade restrictions, import quotas, embargoes, and tariffs have resulted in substantially higher prices for American grapefruit in the Japanese market; yet even with home-grown grapefruit available, the demand in Japan for fresh grapefruit allows U.S. growers to capitalize on the market.

Citrus exports to Korea grew 41 percent in the 2001 growing season due to lower duty fees there. As part of the Uruguay Round Agreement, Korea established a quota of 15,000 tons for citrus fruit in 1995. As stipulated by the agreement, this quota increased by 5,000 tons in both 1996 and 1997. Thereafter, it increased by 12.5 percent annually through 2004. U.S. exports to Korea that meet the quota requirements are charged significantly less duty that non-quota imports.