U.S. Citrus Growers Face Third Wave of Challenges

November 12, 2018

 

 

After recovering from extensive damages as a result of Hurricane Irma and then considerable losses due to citrus greening (according to the USDA the production of oranges in the U.S will increase by 36 million boxes in 2018-19), Florida’s orange producers’ next challenge is not meteorological or ecological but political.

 

Graph courtesy of: https://www.nass.usda.gov/Charts_and_Maps/Citrus_Fruits/orgmap.php.

In the midst of U.S. President Donald Trump’s tariff wars, American orange exporters are finding it more difficult to pedal their wares on international markets. Nowhere is this more evident than in China.

 

About 10% or $600 million of oranges produced in the U.S. are exported, and a growing portion of that has been destined for China in recent years.  For example, in 2017, China became the fifth largest international customer for U.S. oranges when it reached a new high of $50 million of imports.  And that rise in sales was helpful in sustaining U.S. growers as they found themselves with a shrinking domestic market and market share in the U.S. – in particular as American consumption of orange juice declined to nearly half of its 2001 level and domestic producers were undercut by Brazilian farmers.

 Graph courtesy of: https://qz.com/176096/how-america-fell-out-of-love-with-orange-juice/

 

In U.S. President Donald Trump’s efforts to balance trade and improve U.S. access to foreign markets, he has placed additional tariffs on $50 billion of Chinese goods. The Chinese have responded in kind by raising the duties on goods including fruits and nuts. It is entirely possible the White House considers this less than half-a-billion dollar market an acceptable casualty in the struggle to fix the overall trade imbalance which is in the hundreds of billions of dollars.

 

Nevertheless, now that Chinese tariffs are up (to 51%!), the U.S. orange producers are at a distinct disadvantage when competing with other major suppliers to China like South Africa and Egypt who are facing a taxation rate of 11%.  There are already reports that orange producers in Egypt and Australia have not wasted any time in filling the gap left by the U.S. in the Chinese market. At the same time, some domestic Chinese producers that have traditionally focused on exports are now turning to the increasingly profitable local market. 

 

While it seems possible that the trade war between the U.S. and China will end sooner rather than later, as many have much to lose if it continues, the damage to U.S. orange growers may not be short-lived.  U.S. exporters are being replaced by counterparts from other countries and it is entirely feasible that Chinese companies will not rush to return to their American suppliers due to the efforts that would require and continued concerns regarding the stability of the U.S.- China trade relationship. That being the case, we can expect U.S. orange growers to have less expendable income for the foreseeable future and therefore be less inclined to adopt new high-tech farming solutions.

 

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