Al len Morr is

Vice-Pres ident Sa les and Market ing

Blue Lake C i t rus Products

Winter Haven, F lor ida

All tech Annual Internat ional Symposium

Lexington, Ky, May 20-23, 2012

The World of Citrus: From a Volatile

Past to a Future of Change and

Challenges

62%

26%

8% 6%

World Citrus Production

2.3 Billion 90-LB. Boxes

Oranges 62%

Tangereines 20%

Lemons/Limes 12%

Grapefruit 6%

Brazil 20%

China 16%

USA 11%

Mexico 7%

Spain 7%

World Citrus

Production By Country

81%

8%

5% 6%

World Citrus Processing

662 Million 90-LB. Boxes

Oranges 81%

Lemons/Limes 8%

Grapefruit 5%

Tangerines 6%

12%

26%

8% 7% 6%

41%

World Orange Production

1.7 Billion 90-LB. Boxes

U.S. 12%

Brazil 26%

India 8%

China 7%

Mexico 6%

Other 41%

30%

58%

5% 4%

3%

U.S. 30%

Brazil 58%

EU-27 5%

Mexico 4%

Other 3%

World Orange Juice Production

3.1 Billion SSE Gallons

Tangerines 56%

Oranges 28%

Pummelos 16%

Citrus Varieties Produced in

China 578 Million 90-Lb. Boxes

Citrus Production in China Year Tangerines Oranges Pummelos

Million 90-Lb. Boxes

2000 167 84 8

2003 159 110 32

2006 324 68 12

2009 239 119 68

Source: Food and Agriculture Organization of the United Nations, FOSTAT

Production Statistics in China Unreliable

Orange production increased

by 76% in three years?

Tangerine Production

doubled in three years?

Pummelo production

increased by over 5- fold in

three years?

China’s Climate Is Not Ideal For Producing Juice Oranges

• The Southwest region is too cool to make high enough

ratio for stand alone juice

• The Jingcheng orange, produced in Chongqing and

Sichuan Provinces in the East, contains juice of high

enough quality for processing

• But a two month harvesting season results in high

processing costs compared to Florida and Brazil

• Strong competition from the fresh market also pushes up

fruit prices to the point that only 10-11% of

China’s limited processing capacity is utilized

Virtually All Citrus is Consumed Fresh in China

• Juice consumption is from imports,

mostly from Brazil

• As the middle class grows,

demand for fresh citrus

will stay strong and likely grow

Orange Production In The Two Countries

That Represent 88% of Global

OJ Production

• USA

Florida

• Brazil

Sao Paulo

Orange Production in Florida and Brazil (Millions of Boxes)

Season Florida Brazil

2011-12F 145 400+

2010-11 140 273

2009-10 134 315

2008-09 163 320

2007-08 170 360

2006-07 129 350

2005-06 148 320

2004-05 150 380

2003-04 242 290

2002-03 203 365

2001-02 230 280

Sources: USDA, National Agricultural Statistics Service; USDA, Foreign Agricultural Service

Florida Orange Production Down While

Brazilian Orange Production Flat

• Between the 2001-04 three-season average and the 2009-12 three-season average, Sao Paulo Orange production increased 5%

• During this same period,

Florida orange production

declined by 38%

• Brazil is planting new higher

density irrigated groves in

areas with little or no HLB

• Florida has no such areas

to move to

Reasons for Florida’s loss

of Orange Production

• Acreage lost to the failed canker eradication

program

• Trees removed to manage HLB

• A real estate market that resulted in the sale of

groves for real estate development

When the real estate market collapsed,

many of these groves were no longer

managed for citrus production

HLB Infection Rates in Florida are Increasing at an

Increasing Rate

• Infection in 2007-08 estimated to be 1.6%

• 2008/09 – 6.4%

• 2009/10 – 11.8%

• 2010/11 - 21.9%

• Sources:

(1) Morris, Robert A., Candice Erick and Mark Estes. “The Incidence of

Greening and Canker Infection in Florida Citrus Groves.” EDIS FE 823,

Food and Resource Economics Department, University of Florida,

December, 2009.

(2) Irey, Michael, Robert A. Morris and Mark Estes. “Survey to Estimate the

Rate of HLB Infection in Florida Citrus Groves.” U.S. Sugar Corporation,

University of Florida, and Florida Department of Agriculture and

Consumer Services. Second International Research Conference on

HLB, Orlando, FL January 10-14, 2011.

Enhanced Foliar Nutrient Programs

Anecdotal evidence indicates that about 70% of Florida

citrus growers are now using enhanced foliar nutrient

programs to manage HLB

Similar information indicates that about the same

percentage of Brazilian citrus growers are also using

enhanced foliar nutrient programs to manage HLB

IFAS researchers conclude that these

programs work by feeding nutrients to the

tree through its leaves, by-passing the roots

and blocked phloem of a tree infected with HLB

A grove in Southwest Florida that is 100% infected with HLB and has been

using an enhanced foliar nutrient program since 2006. This grove is A-typical

but shows what is possible with enhanced foliar nutrient programs.

An example of waiting too late to begin an

HLB management Program

The Following Florida and Brazil Orange

Forecasts Are My Opinion

Based on discussions with

knowledgeable growers and

citrus researchers

Based on the assumptions behind

the scenarios

The forecasts could be wrong

Four Variables Primarily Determine Future

Orange Production in Florida and Sao Paulo

• Available trees from citrus nurseries

• Available land at reasonable prices

• Adoption of high density advanced

production systems technology for

new groves

--- Gives groves a perpetual life

as they had before HLB was

discovered

• Fruit prices that enable earning a

competitive return on the investment

of planting

Availability of Orange Trees

Florida citrus nurserymen estimate that at

current capacity, Florida citrus nurseries

can produce 3-5 million trees per year

At 4 million trees a year and a density of

270 trees per acre, that’s 14,800 acres a

year or 148,000 acres in 10 years

At a traditional density of 145 trees per

acre that’s 27,600 acres per year or

276,000 acres in 10 years

---That restores Florida’s lost 151,000

acres since 2000

Availability of Land at Reasonable Prices

According to the 2010 Florida Land Value Survey,

unimproved pasture land had an average price of $3,000

per acre

According to the National Agricultural statistics service,

there are 136,534 acres of abandoned citrus groves in

Florida

--- This already has the infrastructure to support a citrus

grove

Advanced Production Systems (APS) Groves

• Groves planted at a density of 225-350 trees per acre

--- Water and nutrients precisely monitored

• Analysis of data from a commercial grove planted at 270 trees per acre in 1989 shows that the return on the investment of planting the grove over its life is 12% at orange prices of $1.35 per pound solids

--- Not strictly an APS grove because there are no APS groves that are over three years old

--- But this grove was planted at APS tree densities and provides actual data

APS -Type Groves

If the land to plant the grove is purchased for $3,000 per

acre, a fruit price of $1.45 per pound solids gives a 12%

return

Even though it costs $2,100 more an acre to plant an APS

grove

Traditional Groves Planted

at 145 Trees Per Acre

If the land is already owned

by the grower, a fruit price of

$1.40 gives a 12% return on

investment

If the land is purchased for

$3,000 per acre, a fruit price

of $1.50 per pound solids

gives a 12% return on

investment

APS-Type Grove Versus Traditional Grove

APS-type grove achieves a 12%

return on investment at processed

orange prices that are $.05 per

pound solids less than for a

traditional grove

If resets can’t survive HLB, APS-

type groves have an economic life

of over 20 years, compared to 15

years or less for a traditional grove

APS - Type Groves

A problem researchers are finding with APS groves is

protecting newly planted trees from HLB

-- Young trees more susceptible to HLB than

older trees

-- They have more shoot flushes which attracts

psyllids

The per acre limitation for systemic insecticides

(imidacloprid) can result in too little insecticide to

adequately protect young trees planted at APS

densities

APS -Type Groves

Florida Citrus Mutual is lobbying to change use of

imidacloprid from a per acre to a per tree limitation

Until then, some growers are planting at higher densities,

but not APS densities

-- 198 and 207 trees per acre

-- Still gives higher ROI than traditional densities

-- 15% versus 12% at $1.50 per pound solids

Processed Orange Prices of $1.35-$1.50

Required For Increased Production

Processed Florida orange prices for the 2010-11 season

were $1.53 for early-mids and $1.84 for Valencias

For the 2009-10 season, prices were $1.32 and $1.59 for

early-mids and Valencias, respectively.

Three Scenarios of Future Processed

Florida Orange Production are Developed

Scenario I: Orange production stays flat

Assumes that the enhanced foliar nutrient program enables

the industry to survive endemic HLB

APS and/or higher density groves predominate re-plantings

No cure for HLB is found during this period

Fruit prices are above costs of production, but only enough

to encourage replanting most of the acreage lost from

2011-12 onward, not enough to buy land for planting

Projected Florida Processed Orange Production: Scenario I Flat Production – Estimated Likelihood 34%

Season Million Boxes 2011-12 145

2012-13 150

2013-14 140

2014-15 135

2015-16 142

2016-17 151

2017-18 143

2018-19 137

2019-20 133

2020-21 146

2021-22 148

2022-23 139

2023-24 145

2024-25 149

2025-26 152

Scenario II: Declining Orange Production

Assumes that the enhanced foliar nutrient program works for less than 10 years and that young trees can’t be protected from HLB infection

When trees begin to succumb to HLB, since groves are over 50% infected, production is lost more rapidly than the nurseries can provide trees to stop

Due to reduced supplies, fruit prices stay in the $1.75-$2.00 range in 2011 dollars, but that doesn’t enable stopping declining orange production

Projected Florida Processed Orange Production: Scenario II Declining Production – Estimated Likelihood 33%

Season Million Boxes 2011-12 145

2012-13 150

2013-14 140

2014-15 135

2015-16 132

2016-17 130

2017-18 126

2018-19 128

2019-20 122

2020-21 115

2021-22 110

2022-23 112

2023-24 105

2024-25 100

2025-26 92

Scenario III Increasing Orange Production

A cure for HLB is discovered

within the next five years

OJ demand grows

Processed orange prices

average $1.50-$1.75 per pound

solids in 2011 dollars, even with

increasing OJ production

APS groves predominate

plantings

All 137,000 acres of abandoned

groves are replanted plus some

new groves are planted

Projected Florida Processed Orange Production: Scenario III Increasing Production – Estimated Likelihood 33%

Season Million Boxes 2011-12 145

2012-13 150

2013-14 146

2014-15 140

2015-16 142

2016-17 151

2017-18 155

2018-19 159

2019-20 162

2020-21 168

2021-22 174

2022-23 178

2023-24 176

2024-25 180

2025-26 185

The Same Three Scenarios are Modified for

Projected Brazilian Orange Production

New plantings are higher density groves in areas with little

or no HLB inoculum pressure

-- At densities of 200-240 trees per acre

-- No per acre restriction on use of imidacloprid

Scenarios I and II assume that Eastern European OJ

demand declines in favor of juice blends and nectars as

household penetration of OJ increases, resulting in fewer

new households trying OJ

The Same Three Scenarios are Modified for

Projected Brazilian Orange Production

Scenario II, declining production, also assumes

sugarcane becomes increasingly attractive as an

alternative to citrus for Brazilian growers due to growth

in ethanol needs

Scenario III assumes that, in addition to

increasing OJ demand in the U.S. market,

new OJ consumers from Eastern

Europe prefer OJ to juice blends

and nectars keeping

demand strong

Projected Brazil Processed Orange Production: Scenario I Flat Production – Estimated Likelihood 40%

Season Million Boxes 2011-12 400+

2012-13 340

2013-14 360

2014-15 350

2015-16 320

2016-17 290

2017-18 345

2018-19 365

2019-20 348

2020-21 315

2021-22 308

2022-23 336

2023-24 342

2024-25 364

2025-26 358

Projected Brazil Processed Orange Production: Scenario II Declining Production – Estimated Likelihood 40%

Season Million Boxes 2011-12 400+

2012-13 340

2013-14 350

2014-15 325

2015-16 330

2016-17 310

2017-18 300

2018-19 280

2019-20 290

2020-21 273

2021-22 282

2022-23 270

2023-24 268

2024-25 276

2025-26 270

Projected Brazil Processed Orange Production: Scenario III Increasing Production – Estimated Likelihood 20%

Season Million Boxes 2011-12 400+

2012-13 340

2013-14 350

2014-15 360

2015-16 358

2016-17 365

2017-18 372

2018-19 380

2019-20 378

2020-21 390

2021-22 395

2022-23 405

2023-24 372

2024-25 385

2025-26 410

Conclusions

Over the past two years, the likelihood that orange

production in Florida and Brazil will remain at current

levels or increase has improved

--- Impact of better HLB management such as Citrus

Health Management Areas in Florida and planting

groves in areas with little or no HLB in Brazil

--- Impact of enhanced foliar nutrient programs

Conclusions: There Are Risks to Future

Orange Production

If the recent growth in the European OJ market is

fueled mainly by Eastern European consumers

trying orange juice before settling on a substitute,

Brazilian and possibly Florida orange prices will

suffer

Conclusions:

Risks To Future Orange Production

If, as some plant pathologists warn, enhanced foliar

nutrient programs are only a temporary way to keep

citrus trees productive, future production could decline

substantially

--- For example, if trees started succumbing over a

short time period, say 5-7 years, citrus production

would decline faster than nurseries could supply the

trees for replanting, regardless of fruit prices

Conclusions The likelihood of the Florida and Brazil citrus

industries surviving HLB is better than it was

when HLB was first discovered in these

regions

The final conclusion is cautious optimism