The Citrus Market is Getting Squeezed

After years of declining demand, orange juice sales have hit their highest level since 2016. Health-conscious consumers, who had previously shied away from OJ due to concerns of its high sugar content, are turning back to the drink because of its high Vitamin C content, which is believed to help fight off viruses. While this would seem like good news for Florida’s citrus farmers, they have long been facing declines in production. The primary culprit is a plant disease known as citrus greening, which reduces the size of the fruit and causes it to fall from the tree prematurely. Farmers also suffer damage from extreme weather like hurricanes and freezing temperatures, and many are selling their land to real estate developers as the state’s population grows.

As a result, customers are seeing orange juice prices nearly 20 percent higher than they were in 2020, while production is at its lowest level since World War II. State agriculture officials are opposing the USDA’s decision to allow more imported oranges, and are offering subsidies to citrus farmers for research and to compensate for crop loss. Overall, revenues in the Florida citrus industry is down by approximately one-third of where they were a few years ago and employment in the industry is down by half.

Discussion Questions:

1. The orange juice industry is facing simultaneous changes in supply and demand. Use a graph to show this change and predict how equilibrium price and quantity will change.
2. Orange juice is an input in mimosas, a popular drink for Sunday brunches. How does the increase in price affect the supply and/or demand for mimosas in the restaurant industry?
3. How does rising orange juice prices affect supply and/or demand for other juices, such as cranberry or apple juice? Show this in a supply and demand graph.

Sources:

The Washington Post: The next big squeeze: Florida orange juice could skyrocket in price, Photo by: RaquelxBaires on Pixabay.com