Wednesday 28 July 2021

Diseases, weather and low prices hit the orange sector in Costa Rica

Producers and industry fear collapse of activity; Tico Frut's situation would be an example of the crisis

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HQ – The appearance of pests and diseases, in particular the ‘dragón amarillo’ (yellow dragon), the impact of the weather and a sharp drop in international prices, have the orange sector in a difficult situation. Producers and industry fear a collapse.

The backyard trees, that is, those located in the houses and that are used for self-consumption, become a strong source of transmission of the yellow dragon, which caused havoc in the orange plantations. Photo: Albert Marín.

The combined factors, plus the effect of the pandemic on the international market, brought this productive sector to a critical condition, according to the representatives of large companies.

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The combination of factors had its greatest manifestation when Tico Frut presented a preventive agreement, before the Bankruptcy Court of San José, with the objective of restructuring a debt of US$165.9 million. This was on March 11, 2021.

Since the Huanglongbing (HLB) or citrus greening disease appeared in Costa Rica in February 2011, production has been in trouble, because it is a lethal problem and, therefore, requires an increase in costs to try to control it.

Producers estimate that the cost of maintaining one hectare increased by US$500 per year, due to the need for fumigations against this disease. This represents 20% of the total costs for that area.

Despite the interest of producers to control and sustain the bacteria, today it is present throughout the country and affects, for example, backyard trees or for self-consumption planted in houses.

From those sites with low phytosanitary control, it is believed that the spread of this disease was accentuated, Roberto Aragón, general manager of Tico Frut, and Óscar Arias Moreira, agricultural entrepreneur linked to that sector and former partner of Del Oro, the other great producing and processing company.

The State Phytosanitary Service (SFE) is the entity authorized to eradicate infected backyard trees, but it would have to carry out a yard-by-yard inspection and then justify their removal.
More problems

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The internal crisis due to the arrival of the yellow dragon was joined by a drop in international prices for concentrated juice, which is not due to excess supply but to changes in consumer habits, explained Arias Moreira.

According to Aragon, the pound (official weight of the stock market in the United States) of solids was around US$2 a little over two years ago and dropped to around US$1.

According to the Investing.com portal, in the week of July 15, 2018, the price of this product averaged US$1.70 per pound of solids, while on June 6, 2021, it closed at an average of US$1.21 a pound. The drop in that period is 29%.

The price problem is not due, in this case, to a supply saturation. On the contrary, the attack of the yellow dragon in Florida, the world’s second largest supplier of concentrate after Brazil, lowered production from 280 million a year to 50 million 40.8-kilo boxes.

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What happens then? A change in consumer habits. In the United States, breakfast with orange juice ceased to be an inescapable custom and there were attacks against the amount of natural sugar in that drink.

From that, strong competitors emerged, such as apple juice and others, which continued with the effect on consumption, Arias and Aragón explained separately.

The manager of TicoFrut explained that the impact of the pandemic ended up undermining the consumption of the product. That Costa Rican company, explained his manager, has Coca Cola as a major client, which in turn processes the concentrate and sells it as ready juice to fast food chains.

The closure of the restaurants led Coca Cola to drastically reduce the purchase contracts, Aragón recalled.

Fall in planted area

Before 2010, the number of hectares planted with oranges in Costa Rica fluctuated between 27,000 and 25,000, according to the annual reports of the Executive Secretariat of Agricultural Sector Planning (Sepsa), a technical entity attached to the Ministry of Agriculture and Livestock (MAG).

Precisely a decade ago and in the face of the imminent arrival of the yellow dragon bacteria, the area reached 25,000 hectares.

The planting area fell 11% when comparing 2010 with 2020, while production fell 13% in that period, dropping from 252,000 tons per harvest to 221,975 tons, according to Sepsa reports.

According to Aragón and Moreira, companies and producers are striving to maintain the area, because in the northern part of the country, where the largest plantations are, there is no alternative plan to use the land.

However, they assure that a more dramatic decrease in cultivated hectares is very possible, which would impact the around 6,000 jobs generated by the production and industrialization of oranges in Costa Rica.

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Q Costa Rica
Reports by QCR staff

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