The Citrus Processing and Byproduct Industry of Argentina
Today, citrus industry in Argentina is the largest fruit industry of this country and the second largest fresh fruit exporting
activity after pear as the number one. 2009 citrus production, on its early estimated, is anticipated to increase to 3.04
million MT, compared to CY 2008, as larger production of all four types of citrus grown in Argentina (lemons, oranges,
tangerines/mandarins and grapefruits) is expected due to higher yields resulting from improved management
techniques, favorable weather and better phytosanitary conditions. However, after freeze conditions suffered in the
Tucuman area, this early estimated will have to be reviewed.
1
ƒ Argentina context
ƒ Historical review
ƒ Citrus processing
ƒ 2009 Outlook
ƒ Future Trends
During this presentation we will review actual Argentina context for producing areas, citrus seasonality, distinctive
grown varieties and its fruit characteristics. We will see how much is being processed, exported as fresh fruit and
consumed on domestic market.
From the historical perspective we will see the weight of lemon byproduct market as the driving force for explosive
growth of citrus production and process in Argentina several years ago and how recent events, including new regulations
such as agricultural residues are resulting in an adjustment of growth and process rates.
The processing industry in Argentina has evolved to introduce newer technology creating new standard for performance
and quality. Industry is more sensitive to environment requirements, and we are seeing the first green certification to
the industry under ISO 14000 and carbon reduction footprint.
The present season, shows an important recovery from adverse climate conditions from last year; however in recent
weeks we have seen a moderate freeze that will affect the original forecast. Byproduct prices are still struggling to find a
fair middle point between supply and demand.
The future looks optimistic with a resurgence on the soft drinks market creating demands and midterm expectations for
lemon oil. On the juice side we are seeing a new acidulant application of lemon juice on fruit juices and derivatives with
acid deficiencies.
2
Just below the Tropic of Capricorn in a flat expanse at the foot of the Andes Mountains lies an area, which is the smallest
in Argentina, which is blessed with abundant natural rainfall in the summer and a basically dry climate in the winter that
enables a bountiful and continual harvest.
Citrus fruits first arrived in Tucumán with the conquistadors in the 1600s. The industry didn’t really get its start, until the
Italian and Spanish immigration (from 1910-1930s), and the introduction of their custom of using lemons as a
condiment. At this time, the citrus industry took hold in the areas of Tafi Viejo and Yerba Buena, west of the city of
Tucumán. The farms were very small: The average farm was 5-10 hectares, and large farms were only 30 hectares. At
the end of the 1940s, Tristeza virus attacked all citrus trees that were grafted on rootstocks of sour orange, resulting in
the death of the trees. Due to this, the national and local governments prohibited the growing of sweet oranges,
grapefruit and mandarins that were grafted on sour oranges.
3
NOA = 65% of total citrus
NEA = 35% of total citrus
REPUBLICA
ARGENTINA
Argentina has been known as the leading lemon producer and processor country in the world, but lemons are less than
half of the total citrus produced in this country. While Argentina is the seventh largest global citrus producing country it
is the fourth largest citrus processor in the world after Brazil, USA and Mexico. Located in the southern hemisphere,
Argentina has taken advantage of the counter season citrus production to strengthen their fresh fruit exports. This
activity drives the production of sweet citrus (oranges, mandarins and grapefruits) producing export quality fruit supplies
to both Western and Eastern Europe, with Eastern Europe the stronger destination. Far East is a growing destination for
oranges and mandarins.
4
• Tucumán is Lemon
• Entre Ríos is Orange and
Tangerine
• Salta is Grapefruit
• Concordia and Misiones
• 65% of total Citrus
• 35% of total citrus
• 65% to process
• 27% to process
Argentina presents two distinctive citrus production areas identified as NOA and NEA, which translates into Argentina
North West and Argentina North East. The first one is predominantly for lemons and most of the grapefruits,
represented 65% of total citrus produced in 2008; the second one is predominately for oranges and most of the
mandarins, and during the same period represented 35% of the total citrus. Tucuman is the largest lemon area and Salta
is the largest grapefruit area, are located on the NOA, and Entre Rios the largest orange and mandarin area is located on
the NEA region.
5
• Tucumán is Lemon
• Entre Ríos is Orange
and Tangerine
• Salta is Grapefruit
• Concordia and Misiones
• 65% of total citrus
• 35% of total citrus
• 65% for process
• 27% for process
Argentina in 2008
• 43.4% for process
• 49.7 % for fresh market
• 6.9% crop lost for different reasons
As a country Argentina processes 43.4% of total crop and uses 49.7% of their crop to serve fresh fruit market, which
includes domestic and exported fruit.
6
J
F
M
A
I
II
NOA
NEA
M
J
J
A
S
O
N
D
LEMONS
ORANGES
Hamlins
Pinneapples
Navels
Valencia
GRAPEFRUIT
Marsh
Ruby Red
Star Ruby
NOA
NEA
I
II
NOA
NEA
I
II
NOA
NEA
I
II
TANGERINE / MANDARIN
Okitsu
NEA
Satsuma
Nova
Clementine
Clemenules
Ellendale
Murcott
II
Tucumán, Salta, Jujuy
Entre Ríos, Corrientes, Misiones, Formosa
Fruit seasonality spreads throughout calendar year, with heavier production and process months during their fall and
winter season, extending to some spring weeks, following the same pattern as we have it in Northern Hemisphere. The
difference is our counter season between the two hemispheres.
Lemon, grapefruit and mandarins have a distinctive off season periods, while oranges are produced all year round
between the western and eastern regions of Argentina.
7
Metric Tons X 1000
Source: Fedecitrus
Fruit production has shown an important growth trend in Argentina for the last 15 years and reaching a leveling period
where we can see lower growth rate during the last 4 years, interrupted only in 2008 by adverse weather conditions.
The most important growth out of all citrus grown in Argentina is lemon growth, which we can easily see the yellow
spike, as the stronger contributor to the average growth of this region. Sweet citrus has been stable with no significant
growth through the last few years.
8
ƒ Low juice ratio.
ƒ Good juice color.
ƒ Russia, Netherlands and Spain
major destinations.
ƒ Up to 22% of the total citrus
crop is exported.
ƒ 29% of the lemon crop is
exported in 2008 as fresh fruit.
The highest percentage ever.
Located in the Southern hemisphere, Argentina has taken advantage of the counter season citrus production to
strengthen their fresh fruit exports. This activity drive the production of sweet citrus (oranges, tangerine/mandarins and
grapefruits) to produce fresh export quality fruit that is supplied to Europe with Eastern Europe being the dominant
destination. In 2008, 61.4% of sweet citrus crops was dedicated to fresh fruit market, domestic and export, as opposed
to 32.2% from lemons.
Shipment of citrus was disrupted during the Argentine farm strike, which affected transportation throughout the country
for extended periods during March to June of 2008. Transportation has returned to normal since the end of the farm
strike.
9
Metric Tons X 1000
Source: Fedecitrus
Fresh fruit exports reflect a combination of Argentina crop size and global demand. While 2008 was a year with a
reduced lemon crop; it showed the largest export volume on Argentina records driven by the short supply of other
lemon producing countries, which opened the opportunity for Argentina at record prices. Exports not only affected
industry during this particular year, but the internal fresh fruit market was also affected. Fresh exports for oranges were
not high reflecting short production and average demand.
10
ƒ Oranges present the largest
consumed variety of fresh fruit
in the domestic market
ƒ Tangerines also have large
internal consumption
ƒ Lemons are the lowest volume
variety, however they have an
important consumption rate
per capita for a high acid fruit.
Oranges represent the largest consumed variety of fresh citrus in the domestic market. Domestic prices for fresh lemons
reached several times their historic value last year due to competition with export market; the rest of the varieties stay
within the usual price range. It can be observed that tangerines, grapefruits and lemons have an important fresh
consumption as well.
11
Metric Tons X 1000
Source: Fedecitrus
On recent years, consumption of oranges was more than double that of tangerines, this last variety is coming down
sharply in front of a moderate growth on the fresh export side. Lemons and grapefruits are more consistent with regards
to the fresh consumption trends.
12
ƒ Lemons are the most important
variety for processing.
ƒ “Sweet citrus present product
low ratio specs out of range for
most international acceptance”
acceptance”
ƒ Local soft drink industry is
regulated to include fruit juices.
On the processing industry side, lemons are the citrus fruit that it is dominant for process. The lemon industry has shown
remarkable growth and is one of the main drivers of the economy in Tucuman. This industry employs, both directly and
indirectly up to 100,000 people, with 43 functioning lemon packing houses and nine processing companies in Tucumán
and a total of eleven companies country wide.
Sweet citrus is about 27% of the total processed sweet citrus in Argentina for 2008. Their product specs are related to
the maturity and seasonality that the fresh fruit market demands, then low ratio is dominant and this puts juice out of
range for most international acceptance. As a counterbalance, the soft drink industry is regulated to include fruit juice
on its formulation.
13
Metric Tons X 1000
Source: Fedecitrus
On this chart we can visualize the dominant role of lemon processing in Argentina over any other citrus variety that it is
processed down there. The trend is maintained through the years. The participation in the processing of the other citrus
varieties is up and down depending on the demand and spot market conditions.
14
2008 Argentina Fruit Distribution
Year
Lemon
Orange
Mandarin
Grapefruit
Total
Industry
65.3%
23.1%
20.8%
37.6%
43.4%
Export
29.1%
14.2%
22.4%
13.3%
22.1%
Domestic
3.1%
52.8%
46.9%
34.3%
27.6%
Lost
2.5%
9.9%
9.9%
14.8%
6.9%
65% Lemons
27% Sweet citrus
The ratio of fruit in 2008 for process versus fresh is inverted on lemon and sweet varieties, while lemon process 65% of
the fruit, sweet varieties process 27% of their fruit crop. It is important to remark that there are important pre and post
harvest loses of fruit on each crop for different reasons; weather, price and quality among them.
15
In the 1960’s with the importation of more advanced technologies from overseas, lemons began to be grown
commercially in Tucumán. It was during this time period that the first facilities that processed lemons were opened in
the area. At this point I am going to focus on the lemon industry and start the historical review from 1995; back then all
lemon oil production was on the open market.
16
Total World Lemon Production (P&F)
Million Metric Tons
1.224
60%
Fresh
Processed
40%
1.812
Total = 3.036 Million Metric Tons Lemons
Let’s take a look at the total world lemon production in 1995. The total at that time was 3.036 million metric tons which
was about 60% for the fresh market and 40% for the processing industry.
17
Division of Industries by Country
600
500
Metric Tons X 1000
400
Processed
300
Fresh
200
100
0
Argentina
Italy
Spain
USA
Turkey
Here we have the division between fresh and processing industries in these five important lemon producing countries
(Argentina, Italy, Spain, USA and Turkey) back in 1995. In Argentina 25-30% of the crop went to fresh which is also the
case today. In Italy the ratio can be as high as 50% but they usually process around 60-65% of the total crop. In Spain,
they are focused primarily on the fresh market and around 20% of the crop goes to processing. In the USA, 60-70% of
the crop will be sent to the fresh market depending on the year. I mention Turkey because although they do not process
any lemons or provide us any lemon oil, their crop does impact the global situation.
18
Distribution of Total Processed Lemons
28%
37%
Argentina
Italy
Spain
USA
10%
25%
Total Processed = 1.23 Million Metric Tons Lemons
= 5,200 Tons of oil
Shown differently now, of the lemons processed into lemon oil, Argentina is the leader at 37%, followed by USA at 28%,
Italy at 25% and Spain at 10%.
19
After a vigorous growth of lemon processing from 1995 through 2006, particularly in Argentina, an adjustment period of
the industry took place and market share changed.
20
ƒ Lemon cultivation is stable
ƒ Lemon oil available on the open market has begun to stabilize
ƒ Industry adjusted to new suppliers / origins
ƒ Weather has been a huge factor
ƒ Increased energy and labor costs
ƒ Worrisome currency & credit issues
ƒ Prices have increased dramatically
Lemon cultivation is stable in traditional growing regions and the lemon oil available on the open market has stabilized.
Weather has been a huge factor in every part of the world. Small reductions in crop size from one or two areas can have
a significant impact on supply. All of our costs are increasing. The currency and credit issues are affecting all of us and
impacting the way we do business. Prices have increased dramatically.
21
9000
8000
Metric Tons
7000
6000
5000
Total
4000
Open Market
3000
2000
1000
0
95 96 97 98 99 00 01 02 03 04 05 06 07 08
However, translating that into lemon oil production, you can see two things. First the lemon oil production has increased
slightly. That can be attributed to improved technology. Many factories are moving towards more efficient oil extraction
equipment which greatly improves the oil yield. Second, the oil available on the open market decreased again in 2007
and 2008 because of weather related issues.
22
ƒ Conflict between fresh and processed industries
ƒ Fresh fruit clients want aesthetically pleasing fruit which
requires use of agrochemicals
ƒ Lemon oil clients require low AR’
AR’s
ƒ Some farmers/processors focused on fresh have difficulty
producing “clean”
clean” oil
I want to briefly discuss agricultural residues (ARs). There is an inherent conflict between the requirements of fresh fruit
customers and lemon oil customers. Fresh fruit clients want aesthetically pleasing fruit which requires the use of
agrochemicals. Lemon oil clients have specifications that allow only very low levels of ARs. Some farmers and processors
which are focused on the fresh market have difficulty producing “clean” oil. Argentina has been a leader in the reduction
of ARs. Long ago they began to reduce the use of Agrochemicals in the fields.
23
ƒ Argentina has been leader in AR’
AR’s reduction
ƒ 2008 some growers used substances not globally accepted
ƒ Levels of accepted AR’
AR’s increased
ƒ Be diligent in testing and support AR’
AR’s reduction
Several years ago they began converting their packing houses so that post harvest chemicals were applied after the
sorting process. Typically Argentina is the source for very clean oil. This year, with such a huge focus on fresh there were
some issues. Some used substances that are not globally accepted. Adding to this, some approved substances are
beginning to lose their effectiveness and other compounds need to be applied. The message is to please be diligent in
your testing protocol and support AR reduction with your suppliers.
24
The industry has gone through an important transformation and integration process, where plants are larger and better
equipped not just to process citrus but to resolve environmental and energy issues.
25
Current Citrus Processing
The industry vertical integration level is high, incorporating cooperatives and packaging plants moving forward in the
chain of industrializing their fruit production.
26
There are about 72 registered exporting packing houses in Argentina, 43 of them devoted to lemon. The largest
industries are related to their own packing house and process their own packing house eliminations. Some independent
packinghouse are trying to integrate their business and are installing small process operations in front of historical low
prices that industry was able to afford. Today industry has recognized an important price increase to the purchase of
packing house eliminations as a result of better byproduct market prices, high demand and recognition of internal
production cost affected by high inflation numbers.
27
ƒ For sweet citrus fresh fruit
market is main goal, this sets
fruit characteristics for industry.
ƒ Juice profile out of range for
international specs.
ƒ Specific applications for niche
markets.
The largest volume of sweet citrus crop end up being consumed as fresh fruit, about 25% of this sweet fresh fruit is
exported and the balance or, 75%, gets consumed by the domestic market. This strong volume determines fruit
characteristics for processing as packing houses establish harvest season and elimination fruit end up at the processing
plants. Due to the counter season of the Southern hemisphere, fruit seasonality in Argentina is conditioned by fresh
export time frame. While this fruit does not compete with Northern hemisphere production, the result is fruit with low
ratio characteristics that fall out of most international specs for processing.
28
YEAR
2005
2006
2007
2008
AVERAGE
GENOVA
38.84%
5.77%
6.44
40.39%
5.87%
6.31
35.93%
5.72%
6.20
36.43%
5.72%
6.54
37.90%
5.77%
6.37
JUICE
CONTENT
OILACIDITY
CONTENT
LIMONEIRA
LISBOA
40.13%
41.94%
5.73%
6.78
5.74%
6.80
38.90%
41.29%
5.82%
6.83
5.75%
6.84
35.91%
38.36%
5.88%
6.41
5.68%
6.38
39.01%
38.52%
6.17%
6.88
5.88%
6.76
38.49%
40.03%
5.90%
6.73
5.76%
6.70
EUREKA
39.69%
5.86%
6.57
40.39%
5.60%
6.48
39.95%
5.63%
5.84
39.88%
5.85%
6.41
39.98%
5.74%
6.33
AVERAGE
40.15%
5.78%
6.65
40.24%
5.76%
6.62
37.54%
5.73%
6.21
38.46%
5.91%
6.65
39.10%
5.79%
6.53
The lemon side of the citrus industry has devoted a lot of time and effort understanding fruit characteristics. Technology
has developed systems that benefit from this knowledge and allow process to be adjusted to maintain high consistency
on top extraction performance. During last few years, this analysis has shown that Lisboa and Eureka lemon varieties
have shown the highest juice content, while Limoneira is the highest in acidity and oil content.
29
2005-2008 average
Here we see the quantitative comparison where Limoneira and Lisboa are practically at the same oil level content,
however Limoneira brings more aldehydes to the oil, which generates added value to this variety.
30
2005-2008 average
During 2005 and 2006 Lisboa had more juice content and on 2007 and 2008 Eureka was leading in juice content,
displaying a close difference in the last four years average. Limoneira was the variety that reported more acidity, but this
increase in acidity wasn’t enough to match the juice content difference with leading varieties.
31
OIL CONTENT
JUICE CONTENT
In summary, the most profitable variety in today’s market environment is Lisboa, almost as good as Limoneira in oil
content, but with the largest juice content contribution of the four varieties under this analysis.
32
Metric Tons
Source: Fedecitrus
Juice production is following the trend of increased process volume with the plus of reaching higher juice yields due to
improved technology. In 2009 due to higher juice content on the fruit, it broke all-time yield record with 72 kg of
concentrated 400 GPL low pulp juice per metric ton throughout this season, having less than 20% of the crop to go.
Performance data for sweet citrus is very scarce.
33
Source: Fedecitrus
Oil production has the same trend as juice, and it is interesting to see that also in 2009 new oil recovery throughout 80%
of the season is reported to be over 6.0 Kgs per metric ton on the drum. This is a great year for process yields and
performances that are going to offset some of the reduced crop forecast due to the last freeze in July.
34
ƒ 5555-66 kg Lemon juice concentrate 400 GPL
ƒ 3.5 – 5.5 Kg Lemon oil
ƒ 5252-54 kg Lemon peel
On historic average, each ton of fruit yields 55-66 kg of lemon juice, 3.5-5.5 kg of lemon oil and 52-54 kg of lemon peel
for pectin recovery. There are different types of concentrated lemon juice: turbid, clarified, of different acidity degrees.
Special products are also elaborated according to the customers’ preference. This juice yield translates into close of 17
MT of fruit to produce 1 MT of lemon juice concentrate at 400 GPLs. This year fruit has higher acidity and juice content
was able to use only 14 MT of fruit to produce 1 MT of lemon juice concentrate. Argentine juice is of exceptional quality
due to its color, flavor, pulp proportion and the soluble/acidity solids relationship, which are of great advantage in the
international market.
35
ƒ 5050-69 kg FCOJ
ƒ 3.0 – 6.0 Kg Orange oil
Orange juice production in Argentina shows low juice yields in general, possibly due to the harvest seasonality and low
ratio fruit that gets processed. Also, no peel gets processed for pectin recovery on oranges.
36
ƒ 7272-94 kg FGJC
ƒ 1.0 – 2.4 Kg Grapefruit oil
Grapefruit concentrated juice shows better yields. However, grapefruit juice ratio is extremely low, most of the time it is
under 8. Grapefruit oil recovery is the lowest of all citrus due to lower oil availability on the fruit and unfortunately oil
prices on recent years are not supporting profitability on grapefruit oil recovery systems. Average processed grapefruit
volume is about half of orange processed volume.
37
ƒ 5555-56 kg FCTJ
ƒ 2.0 – 4.5 Kg Tangerine oil
The lowest process volume of all citrus varieties is Tangerines. Juice yield suffers due to the soft skin that makes it very
difficult to process. Oil recovery is average but the value of the oil is low due to mixing of different varieties during
processing making it complicated to keep high value varieties separated. This is a consequence of processing low
volume of fruit.
38
As the diseases map of the citrus world keeps progressing with new affected areas, Argentina has managed to stay free
of Greening for the time being. Tristeza killed all of the sour orange rootstock trees in the thirties and since then only
resistant rootstocks are being used. Because Argentina is such a fresh fruit exporter it has been their priority to stay free
of any major diseases that could create a commercial impact or potential spread risk. Canker the only current disease is
tightly controlled and monitored to prevent it from spreading, and to keep their fresh fruit exporter status.
39
New standards in process
ƒ New technology benefiting
performance
ƒ Agricultural residues awareness
ƒ ISO 9000 and ISO 14000
ƒ Carbon reduction certification
New technology is available for lemon processing is setting a new level of performance and unseen oil and juice
extraction yields, contributing to the competitiveness of this region of the world. New agricultural practices are in place
to reduce and control agricultural residues that affect the marketing of byproduct. Today, all the emphasis of this control
is over citrus oils, tomorrow it could be over citrus juices as well. Documentation and certification at plant levels
increase the confidence in negotiating with Argentinean companies as they progress in many standardization practices
such as ISO 9000 and ISO 14000 and, different certification processes. Carbon reduction certification will certify that
some of the greenhouse gas emissions produced from running their business is offset through the funding of energy
efficiency and renewable energy installations.
40
There is good news regarding future trends.
41
ƒ Europe is enjoying a resurgence
ƒ New factories in Spain
ƒ Floor prices for U.S. juice imports
ƒ Fresh demand continues to grow
ƒ Heavy investment in Argentina
ƒ Conversion to more efficient processing and packing equipment
ƒ Installation of effluent systems
ƒ Several new small factories
Europe is enjoying resurgence, and I understand that there are a couple of new factories in Spain. Due to a recent antidumping issue, floor prices have been established for juice in the US which should really help everyone. Fresh demand
continues to grow. The investment is very strong there. Old equipment is being replaced with new more efficient
models. There is a focus on effluent treatment systems which we as an industry need to support. Several new factories
have popped up in Argentina as well. All of the origins are working towards reducing ARs.
42
Region
Asia Pacific
Australasia
Eastern Europe
Latin America
Middle East / Africa
North America
Werstern Europe
Total
Cola
Non-Cola
Millions of Liters
2002
2007
21,427
25,477
2,306
2,368
9,863
12,627
39,977
49,170
16,718
20,305
58,907
58,535
28,863
32,339
178,061
2012 - Forecast
30,067
2,342
15,090
55,943
25,634
53,862
35,504
200,820
218,441
102,768
114,110
75,113
86,719
Source : Euromonitor Internantional
123,850
94,591
(+9%)
More good news is that soft drink volumes are predicted to grow by 9% from 2007 through 2012.
.
43
Argentina has had an explosive citrus industry growth period on their production and process driven mostly by lemon oil
demand, followed by an adjustment period. This has brought Argentina globally, from a 37% processed lemons 15 years
ago, to a current standing of about 53% or more depending on weather conditions affecting different growing regions
around the world. Climate conditions have played an unusual alignment in 2008 affecting most producing lemon areas
around the globe, and creating an unprecedented rise in lemon byproduct marketing. This is causing great instability to
the supply and is affecting final consumption. Lemon byproduct reached prices never seen before in this industry. This
year, with weather returning to more normal conditions, we will see a struggle to define a fair market price. There are
many supply and demand factors that are affecting a final settlement that can satisfy both sides of the equation. The
second half of this year in Tucuman, Argentina, a freeze affected the main lemon producing area bringing new price
negotiations conditions and revised forecasted process volume.
The 2009 lemon crop in Argentina is progressing fairly well, although the crop is now not expected to be as good as first
thought. There are two reasons for this; the first one is a drought situation followed by a freeze during last days of July.
44
ƒ Supplements natural
deficiencies of fruit juices.
ƒ High acid apple juice is in
particular high demand.
ƒ Balances sweetness to
desired BrixBrix-Acid ratio in
some soft drinks.
To correct natural deficiencies of fruit juices, lemon juice has proven to be a good natural acidulant. After sweetness the
second most important feature of a soft drink or juice drink beverage is acidity which balances sweetness to the desired
Brix to Acid ratio. High acid apple juice is in particularly high demand in Japan and European markets.
45
Country
Argentina
Brazil
Italy
Mexico
Spain
South Africa
USA
Processed Lemons
2008
2009
889,600
1,180,000
100,000
100,000
90,000
275,000
117,000
100,000
60,000
200,000
80,000
80,000
185,000
292,000
Total Processed
1,521,600
2,227,000
46%
5,659
8,282
46%
Oil Production
% Change
33%
0%
206%
-15%
233%
0%
58%
2008 short production due to weather conditions is back to full level in 2009 and maintain it’s growth trend, becoming
the largest world lemon crop ever recorded. In consequence there is going to be a record by-products production and
we will see prices settling down to a more reasonable level. Future proof that the market has reached a maturity level.
Variances will continue to occur due to the fact that supply has a low response time depending on the growth time for
new groves; however demand seems to be in a market niche of beverage business that it is not easily impacted by world
economic conditions.
46
140
Tons of Processed Lemons
Thousands Metric Tons
120
100
80
Brazil
Mexico
60
South Africa
40
20
280, 000 MT processed
0
96 97 98 99 00 01 02 03 04 05 06 07 08 09
Let’s take a look at where the growth occurred. Here are the three “new origins” (Brazil, Mexico and South Africa). You
can see from this graph that growth has taken place in each country during the growth phase but has since leveled off. It
is also important to note that the total volume processed between all three countries on a good year is around
240,000mt. To put that in perspective, several factories in Argentina can individually process that volume and more in
one season. So, although these countries have been added to the picture, their impact is not that great.
47
Tons of Processed Lemons
450
Thousands Metric Tons
400
350
300
250
Italy
200
Spain
150
USA
100
50
0
96 97 98 99 00 01 02 03 04 05 06 07 08 09
Three of the primary sources for lemons are Italy, Spain and USA; none of which experienced any growth during this
period, and in some cases, a decline trend can be seen.
48
Thousand Metric Tons
1,200
1,100
1,000
900
800
700
600
500
400
300
200
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Bad weather conditions during 2007/08 season created a large reduction of processing volume. Similar weather related
issues in other lemon producing areas of the world contributed to put some pressure on Argentina for fresh fruit supply
resulting in very low processing volume. Several new processors entered to compete for reduced crop. 2009 is indicating
a full recovery, leaving the rest of the world with extra margin from reduced fresh exports. Prices will return to regular
levels but internal inflation and economic factors will present a challenge for non integrated industries.
49
13%
Argentina
4%
28%
Brazil
37%
Argentina
Italy
9%
Italy
Spain
53%
4%
USA
Mexico
Spain
South Africa
10%
12%
USA
25%
4%
Argentina maintains a dominating position with opportunities to grow. New prices will determine the interest to
maintain expansion plans, or level off current processing volumes. Small new processors will have more difficulty
adjusting to new market prices, and are integrating their plants with all by-products. Economic factors will play an
important role as Argentinean currency maintains a strong position in front of their internal inflation. Demand needs to
maintain their consumption trend; otherwise prices will crash affecting industry in general.
50
40
USD/Kg
30
20
??
10
0
95 96 97 98 99 00 00 01 01 01 02 02 03 03 04 04 05 05 06 06 07 07 08 08 09
Lemon oil prices were around $25 to $30 USD at the beginning of the season and there are expectations of seeing these
prices on the low $20’s or high $10’s if this good crop gets processed and world process volume hits the new mark of 2
million metric tons. Recent freeze and adverse weather conditions will create a new struggle to find a fair middle point,
which is believed to land in the low to mid $20’s.
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ƒ Weather patterns may continue
ƒ EU/US under continued pressure
ƒ Industry must support all growing regions
ƒ Support AR’
AR’s reduction
ƒ Keep an eye towards emerging markets
ƒ Green movement = demand for natural
Weather is always going to be a factor but perhaps more so now. We know that there is citrus in China and India and we
need to follow how those industries will develop and impact the markets. The Western world will be under continued
pressure from land development, environmental restrictions and struggle with competitiveness. For these reasons and
others, as an industry we must support all of the growing regions and multiple suppliers. It is clear that 2008 was a
disaster. I have explained some other factors affecting the market. However, looking at the volume of lemon oil that
could be produced in a normal year, I believe that supply and demand balance could be near. Mother Nature has the last
word on that though. Undoubtedly some new planting is going to take place. Hopefully that will be well planned and
controlled. Finally, there is a global awareness of the need to be green. With the green movement comes the demand
for natural products. What could be more natural than a lemon?
Argentina will be consolidated as the main lemon producer and processor of the world. Lemon oil is benefiting from a
resurgence on soft drink market. Lemon juice from being a byproduct of Argentina’s industry has become to be the main
revenue generator for this activity; where new applications on lemon juice to correct natural deficiencies of fruit juices
have proven to be a good natural acidulant. Processing equipment is being replaced with new and modern technology,
an improved processing culture is paying attention to process efficiencies and environmental protection and agricultural
residues are being closely watched, making this region the leader of safe practices globally. Sweet citrus juices from
Argentina have developed a niche market due to unique specs resulting from processing fruit based on fresh fruit
market needs and demands.
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Special thanks to Suzy Nolan for her
contribution, she is the General Manager of
Lionel Hitchen USA, Ltd., based in Sarasota
Florida, also to Vivian Glueck,
Glueck, from Citroil
Enterprises, and Juan Carlos Gonzalez and
Julieta Migliavacca,
Migliavacca, from Citrusvil,
Citrusvil, for their
collaboration.
Special thanks to Suzy Nolan for her contribution, she is the General Manager of Lionel Hitchen USA, Ltd., based in
Sarasota Florida, also to Vivian Glueck, from Citroil Enterprises, and Juan Carlos Gonzalez and Julieta Migliavacca from
Citrusvil for their collaboration.
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Victor Onchi Navarro
Sr. Vice President Latin America
Brown International Corporation, LLC
[email protected]
Thank you,
International Citrus & Beverage Conference
September 16-18, 2009.
Victor Onchi Navarro
Sr. Vice President Latin America
Brown International Corporation, LLC
[email protected]
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