The price of frozen orange juice is skyrocketing — and no, Clarence Beeks and the Dukes are not involved.
Unlike when those fictitious scoundrels from "Trading Places" tried to corner the frozen OJ futures market with a fake crops report, the explanation for 2024's soaring frozen prices is a little more complicated.
Among the factors: Orange production is way down worldwide due to bad weather and a spreading tree disease that hurts citrus fruit.
But the prices of the frozen version of the breakfast staple are getting hit harder because of import prices and how companies are divvying up their precious orange supply.
Relief is probably not around the corner, either. Orange juice prices likely will remain high because there's no cure for citrus tree disease, and it takes years for farmers to recover from weather disasters.
All of this offers up a case study in how the price of one grocery item fits into the literal food chain and how a host of factors — global change, consumer preferences, and even weather — converge to establish the sticker price we pay at the supermarket.
'The 1,000-pound gorilla'
The short answer to the runup in frozen juice prices is the global orange shortage.
Last year, sales of orange juice represented about half of sales of all juices in the US. That means whatever happens to oranges plays a major factor in prices of the frozen juice category in the Consumer Price Index, a government measure of price changes across an array of consumer goods.
While the appetite worldwide for all orange juice remains stable — with just a slight increase in consumption — supply is under considerable pressure.
Brazil, which produces 70% of the world's orange juice supply, has faced several seasons of extreme weather — including unusually high temperatures — attributable to the El Nino effect. That has devastated orange harvests.
On top of that, a spreading bacterial tree disease is decimating orange production. Citrus greening swells the channels that move water within the tree. Before the tree eventually dies, the clogs in those channels force the tree to drop fruit early, which can't be processed. About 40% of Brazilian plantations have been affected by the disease.
This week, Brazil said its orange crop volume forecast for this season would be 7.1% lower than its May estimate, which was already 24.36% below the previous season’s production levels.
"Brazil is the 1,000-pound gorilla when it comes to production," said David Branch, the sector manager at Wells Fargo Agri-Food Institute, who noted the country is "keeping more of what they produce to feed the country and keeping it off the export market."
A worker at a citrus fruit farm separates the tangerines for sale on June 6 in Piedade dos Gerais, in Minas Gerais State, Brazil. (Photo by Pedro Vilela/Getty Images) ·(Pedro Vilela via Getty Images)
'Higher cost of production'
That's not all.
Stateside in Florida, the world's third-largest orange juice producer, similar problems are hurting its harvests. The state's orange farms are still recovering from Hurricane Irma seven years ago and Hurricane Ian in 2022, while citrus greening is an even bigger problem there than in Brazil.
Over the past two decades, the disease has slashed Florida's production by 93%, according to the International Fruit and Vegetable Juice Association (IFU), forcing growers to implement costlier measures to blunt the disease.
"The impact of greening is more than just what it does to the tree," Dr. Marisa Zansler, director of economic and market research at the Florida Department of Citrus, told Yahoo Finance. "A lot of producers have higher cost of production, but their yields are going down at the same time."
All these factors make the price of orange juice that much higher.
Orange trees with diseases at the citrus producing farm, Sítio Andrade, on June 6 in Piedade dos Gerais, in the state of Minas Gerais, Brazil. (Photo by Pedro Vilela/Getty Images) ·(Pedro Vilela via Getty Images)
Frozen vs. non-frozen juice
This, of course, doesn't explain why frozen juice price hikes are eclipsing non-frozen price increases. It would stand to reason that any orange production shortage would affect frozen and non-frozen juice in a similar manner.
But that's not the case.
The gap in price growth has widened since April of last year, when they both registered a year-over-year increase of 9.4%.
In August alone, prices of frozen juice jumped 18.3% year over year, marking the 16th double-digit increase in prices, according to the US Consumer Price Index released this week. Meanwhile, non-frozen juice prices increased only 1.1% last month and the last time it logged a double-digit annual increase was in May of last year.
There are two reasons for this gaping disparity.
The first is that most of the frozen concentrate orange juice in the US — 69% — is from imported orange production, according to Branch. For non-frozen, not-from-concentrate OJ, 14% comes from imported oranges.
A good proxy of the price of imported orange production is the FCOJ futures contracts traded on the InterContinental Exchange. These prices reached record highs of more than $5 per solid pound in September and have increased over 70% since January.
"Since the majority of [frozen concentrate OJ] supply in US products is imported, this significant increase in FCOJ futures is the primary reason that the CPI for Frozen Non-Carbonated juices has increased," Branch said.
"Juice manufacturers are now having to replenish their FCOJ inventory with the higher priced produce, which has driven the production cost of frozen orange juice drinks higher."
'That break-even cost'
A second reason behind the hike in frozen juice prices is how OJ producers are choosing to apportion their strained supply.
Not only does frozen orange juice make up a tiny fraction of overall OJ sales in the US at 3.5%, but it's also less profitable. The average price for frozen OJ is about 27% lower than the average price for refrigerated OJ, per data from the Florida Department of Citrus and Nielsen Data.
Part of that price differential is because refrigerated juice is more premium, made from non-from-concentrate juice, or NFC, while frozen is largely made from reconstituted concentrate juice, or recon. Non-concentrate is more expensive per gallon than recon.
"In order for growers and juice makers to have that break-even cost, they are diverting [their orange supply] to the more profitable premium NFC," Zansler said.
Less supply is going to recon products such as frozen OJ and driving up those prices more.
'Consecutive good harvests'
The outlook for OJ — frozen or otherwise — is not exactly orange-y.
"Restoring normal stock levels in Brazil will require several consecutive good harvests," the IFU said this week in a press statement after orange production levels were revised down.
And unfortunately, there is no cure for citrus greening. That makes the chances of multiple years of good harvests difficult to achieve, the IFU said. Florida, too, faces similar odds along with more severe weather events, though the state is investing heavily in replanting and disease mitigation efforts.
"When you replant a tree, it takes three to four years to even bear fruit, but really six, seven, or eight years before full production," Zansler said.
"So we're looking at a six- to 10-year horizon…it's just going to take a little time for our industry to rebound."
Janna Herron is a Senior Columnist at Yahoo Finance. Follow her on X @JannaHerron.
