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Foodnews - 11/15/2011

Tuesday November 15 2011

CONTRACTING global demand for orange juice in recent years could help speed up the forging of a new historic deal between Brazil's orange juice industry and producers. With both sides under pressure, the decades-long rivalry could become a historic partnership as producers and industry become aware they need to jointly fight for their product and to focus on common interests.

"We went to World Juice 2011, a global meeting place for bottlers and the press and we gave the following message - 'Look, here is our study that demonstrates an increase of production costs in Brazil'. The world has changed and the production costs are now different," said Christian Lohbauer, CitrusBR president in an interview for Brazil's TV Canal Rural earlier this month.

Significantly, Brazilian citrus producers also listened to what bottlers and juice distributors at the ANUGA fair in Germany also had to say about the current market conditions. "Coca-Cola, Pepsi and other large bottlers and groups that buy Brazilian orange juice, were there. They told us: 'OK, we understand where you are coming from, production costs are rising in Brazil but when costs go over a certain limit we will not be able to pass it on to the consumer. This is the great dilemma with the sector of citrus producers - we have to find an equilibrium point," Lohbauer explained.

An important challenge for the Brazilian citrus sector is to ensure that all sides involved inside Brazil start working in unison, which will advance the interests of the whole. "Consecitrus will clear up this situation. We will have to agree on what to accept as a reference price for contracts. The system will be voluntary, but it will serve as a reference," explained the CitrusBR official.

A consultant in charge of mediating in the Consecitrus process, recently received reference citrus production costs from producer organizations FAESP, SRB and Associtrus and average costs for the industry-controlled groves. "He will invite us all to a meeting to review these estimated costs so that we can reach a consensus about what is competitive and what is not," said Lohbauer.

The key point will be to establish at what price it is not profitable to produce oranges. "We will say that we are in consensus, for example, there cannot be orange production below a certain number of boxes per hectare because it would entail losses. It is this decision that will be very sensitive," said Lohbauer.


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