How to keep it on the breakfast table

As the world emerges from the tea crisis, another breakfast staple, orange juice, is in the spotlight. Supply constraints have led to a price increase of more than 20% in one year.

The main cause of this orange juice shortage is the significant impact on Brazil’s orange harvest, which accounts for almost 70% of the world’s orange juice supply. This year’s harvest is expected to be down 24% from last year – and it’s the third consecutive difficult harvest.

Orange trees in Brazil, as well as in the United States, have been affected by citrus greening disease. This incurable disease is caused by sap-sucking insects that turn the fruit bitter before killing the tree.

Florida’s trees have been affected by a series of hurricanes as well as greening disease, both of which are attributed to climate change. In terms of disease, trees would be more vulnerable in regions where temperatures remain around 25°C most of the year.

Short-term “solutions” present major challenges

Growers considered blending the new crop with frozen juice, which has a shelf life of about two years. And the International Fruit and Vegetable Juice Association has lobbied for UN food regulations to be relaxed to allow other citrus fruits, such as tangerines, to be added to orange juice.

But these “solutions” would present major challenges for the industry in the long term. Blending the juices requires additional processing, and the logistics and transportation of tangerines and other fruits to processing facilities would increase costs, ultimately raising the price of the juice.

At the same time, consumers could expect blended juice prices to drop. Thus, this mismatch between expected and actual prices could stifle demand, thus limiting investments in new orange trees.

Labor costs in places like Florida are already high, and the lack of additional investment would make manual labor unaffordable. Taken together, these factors could even bankrupt the market for one of the world’s staple drinks.

How to keep orange juice on the table

Solving this problem requires long-term strategic thinking. The orange juice supply chain includes sourcing and harvesting, cleaning and sorting, juice extraction, pasteurization, packaging and sometimes further processing.

Many companies are involved: growers, food handlers, fruit processors, blending houses, juice packers and soft drink producers. They all work differently. For example, in Florida, orange producers are diversifying into agribusinesses, while in Brazil, large processors still source part of their supplies from their own land.

In the short and medium term, retailers and wholesalers must take an interest in their networks. This could involve identifying untapped suppliers to develop alternative sources: Europe has started importing some of Egypt’s oranges, for example.

And current supplier contracts should be amended to lock in prices for the life of the transaction. Anticipating shortages, companies such as Coldpress Juices have maintained safety stock in 2023 and have contracts with suppliers until December 2024. Such arrangements create a level of certainty for everyone in the supply chain .

In the long term, retailers and wholesalers must develop new approaches to improve the resilience of their supply chains to climate threats.

First, investing in agricultural research to develop more resilient orange varieties would help mitigate the impact. Infrastructure research and development, including water-saving technologies, better land management practices and improved processing methods, would also help guard against disruption.

Second, digital technologies such as drones to monitor crops and harvests, transparent sharing of data across the network and improved forecasting would strengthen supply chain governance, control and coordination. However, the need to invest in research and technology poses a barrier to supply chain innovation.

Recent data suggests that downstream businesses (wholesalers and retailers) in the agri-food supply chain are investing more in digital and other technologies than smaller upstream businesses such as farmers, small and medium enterprises, cooperatives and small farmers. But supply chain innovation requires progress across the entire network. This means that wholesalers and retailers in particular would have to absorb the initial cost of any investment.

Finally, supply chain transparency and visibility could be improved by purchasing companies forming consortia and buying clubs, where they share information to help assess customer demand. This approach helps avoid the “bullwhip effect,” thereby reducing accidental overproduction and waste.

This strategy of cooperation among competitors, known as “coopetition,” can also help them jointly absorb logistics and innovation costs.

By implementing long-term strategies like these, retailers and wholesalers can create a more resilient and efficient food supply chain. As climate change poses increasing challenges to harvests, this will be vital if we are to ensure a stable supply and keep orange juice on the breakfast table.

This article is republished from The Conversation under a Creative Commons license. Read the original article.