The role of the processed citrus industry of Brazil, the largest world orange juice producer, is discussed with reference to CVC (citrus variegated chlorosis), a bacterial disease that affects one-third of the Brazilian tree inventory. Scenarios are analyzed via a spatial equilibrium model on the impact of increased/decreased CVC incidence.Brazil, CVC, orange juice, Xylella, International Relations/Trade,

Fernandes, Waldir B.

Spreen, Thomas H.

English

Research Papers in Economics

2002 AAEA-WAEA Annual Meeting in Long Beach 
 
 
The role of Brazil in the world orange juice market: a 
threat posed by CVC 
 
 
By 
Waldir Fernandes, Jr. 
Thomas H. Spreen
a
                                            
a Waldir Fernandes, Jr. (wbfernandes@mail.ifas.ufl.edu) is Graduate Research Assistant, 
Thomas H. Spreen (thspreen@mail.ifas.ufl.edu) is Professor, Food and Resource Economics 
Department, University of Florida, Gainesville, FL 32611. The role of Brazil in the world orange juice market: a threat posed by CVC 
 
 
Abstract 
 
The role of the processed citrus industry of Brazil, the largest world orange juice 
producer, is discussed with reference to CVC (citrus variegated chlorosis), a bacterial 
disease that affects one-third of the Brazilian tree inventory.  Scenarios are analyzed via 
a spatial equilibrium model on the impact of increased/decreased CVC incidence. 
 
Key words: Brazil, CVC, orange juice, Xylella. 1. Introduction 
 
In Brazil, citrus is concentrated in the state of São Paulo, which represents 
nearly 85 percent of Brazilian production and virtually all the Brazilian FCOJ 
(frozen concentrated orange juice) exports. 
The São Paulo citrus industry in Brazil is considered to employ 400,000 
people and to export US$ 1.3 billion in juice, FCOJ mostly, fresh orange, pulp 
pellets and essential oils in 1999.  (Neves et al.) 
While oranges are produced in many countries with tropical or subtropical 
climates, the processed orange industries of Florida and São Paulo dominate the 
world market for orange juice.  These two states produce more than 80 percent 
of the orange juice consumed in the world, 37 per cent and 48 per cent, 
respectively.  (FAO) 
Unlike Florida, São Paulo is the only major orange producing region in the 
world affected by CVC (citrus variegated chlorosis), a bacterial disease present 
in one-third of the orange trees in Brazil (Fundecitrus).  Much research and 
investment has been focused on sequencing and analyzing the causal bacterium 
of CVC, Xylella fastidiosa, in Brazil in an attempt to find a cure for the disease.  
So far, São Paulo has lived with CVC by adopting the following measures of 
control: pruning of affected branches, spraying of vectors and production of 
seedlings in greenhouses, all of which have likely increased the cost of 
production. The economic importance of CVC is uncontestable: in 2000, losses were 
estimated at US$ 250 million (Fundecitrus).  Across all sweet orange varieties 
grown in Brazil, production losses are found in plants with severe symptoms, 
such as reduction in the size and weight of fruits.  It has been estimated that the 
production decrease in highly affected trees is about 75 percent when compared 
to the healthy ones.  (Ayres)  Therefore, on the supply side, CVC represents a 
prominent threat to the leading role that Brazil plays in the world orange juice 
market. 
This paper, thus, analyzes the aforementioned threat in the context of a 
mathematical programming model of the world orange juice market (McClain).  
Scenarios are analyzed via a spatial equilibrium model on the impact of 
increased/decreased CVC incidence, focusing not only on the modeling but also 
on the issue and its results and implications. 2. Recent Events 
 
2.1. An Overview of Citrus Production in São Paulo 
 
The processed orange industry of São Paulo (including the south of Minas 
Gerais state), Brazil, together with Florida, United States dominates the world 
market for orange juice. 
The processed orange juice industry in São Paulo, Brazil had its origins in 
the early 1960's as a result of a freeze that damaged Florida orange groves in 
1962.  Due to the need to find another production area for oranges in order to 
meet the growing market in North America, São Paulo arose as an investment 
opportunity for orange juice processors and exporters.  Lykes-Pasco, a large 
integrated grower-processor in Florida, entered São Paulo and formed Citrosuco 
in a joint venture with the German-Brazilian group Fischer.  Orange juice exports 
from Brazil grew from 5,313 MT of FCOJ in 1963-64 to almost 1.3 million MT in 
1999-00 as shown in Figure 1.  FCOJ produced in São Paulo is responsible for 
98 percent of the total FCOJ produced in Brazil.  (Abecitrus) 
Helped again by a series of freezes in Florida in the 1980's, the São Paulo 
citrus industry received another thrust and grew even more.  The citrus 
commercial area expanded further north in São Paulo and established in the 
southern extreme of Minas Gerais state.  Northern São Paulo state and Minas 
Gerais have a drier and warmer winter, more tropical.  Besides the weather 
effect, growing in a rapid and disorganized fashion, without much control on new planting materials, in 1987 the first occurrence of the disease in a commercial 
grove in northern São Paulo was observed.  Over the decade of 1990’s, the 
disease spread throughout the citrus industry in São Paulo and now is present in 
one-third of the tree inventory.  Every year, six million bearing trees become 
unproductive due to the severe symptoms caused by the bacterium. 
Currently, there is no cure for CVC, caused by Xylella fastidiosa (Chang et 
al.).  This way, São Paulo has lived with CVC through pruning affected branches, 
spraying against vectors (sharpshooters), and producing seedlings in 
greenhouses, which have increased the cost of production by 10 percent or so 
according to industry sources. 
The Brazilian citrus industry is in the middle of a transitory moment, in 
which research on ways of controlling the bacterium and creating plants resistant 
to it is conducted while the tree inventory is being renovated by seedlings grown 
in greenhouses and a new technological paradigm is established, as a 
consequence of institutional changes. 
Production losses in plants showing severe symptoms, such as reduction 
in the size and weight of fruits, are about 75 percent when compared to the 
healthy trees.  (Ayres)  Therefore, on the supply side, CVC can represent a major 
threat to the prominent role that Brazil plays in the world orange juice market, 
limiting its viability. 
São Paulo has become the largest citrus production region in the world.  
The combination of abundant land, good soils, adequate rainfall that is well-
distributed, and no threat of freezes has allowed the citrus industry in São Paulo to exert leadership in world citrus production.  Brazil also has a low wage scale 
that provides low cost unskilled labor for citrus harvesting.  The citrus industry 
has also made major investments in citrus processing as well as investment in 
transportation to facilitate the export of orange juice to Europe, North America, 
and the Pacific Rim. 
The most important citrus crop produced in São Paulo is round oranges.  
São Paulo orange production over the period 1979-80 through 2001-02 is shown 
in Figure 2.  Production increased significantly over this period from just over 150 
million boxes in 1979-80 and peaking at 420 million boxes in 1997-98.  This rapid 
increase in production was spurred by two primary factors.  First, a series of 
freezes visited Florida and killed millions of trees in the decade of the 1980’s.  
Orange production in Florida decreased from 220 million boxes in 1979-80 to 103 
million boxes in the 1989-90 season.  World orange prices rose dramatically and 
significant capital was attracted to orange production.  Second, improvements in 
transportation of FCOJ sharply reduced the cost of delivering orange juice to the 
developed economies of North America and Europe.  Per capita consumption in 
both markets grew with per capita consumption in the United States approaching 
six SSE gallons. 
By the end of the 1990’s, however, production in Florida recovered from 
the low levels realized after the freezes of the 1980s.  Florida orange production 
was 244 million boxes in 1997-98 and has exceeded 200 million boxes each 
season since 1999-00.  Large crops in both São Paulo and Florida brought sharply lower prices in the 1999-00 and 2000-01 seasons.  Lower prices have 
curtailed the rate of new plantings as shown in Figure 3. 
Orange production in São Paulo is concentrated in the northern half of the 
state.  An outbreak of citrus canker in the 1970’s in a production area south of 
the Tietê River confined citrus production to production north of that river.  Nearly 
all citrus production is in a rainfed system because of lack of surface water and a 
deep water table.  The distribution of rainfall in Brazil is such that a rainfed 
system is successful in most seasons.  Because of its dependence on rainfall for 
moisture, however, most citrus trees in São Paulo (estimated at 80 percent by 
private sources) is planted on Rangpur Lime rootstock which is highly tolerant of 
drought.  Rangpur Lime, however, is susceptible to blight, a disease that usually 
attacks trees in after they reach 10 years of age.  By 15 years of age, a large 
proportion of trees are usually lost to blight, and the grove is replanted. 
With the rapid expansion of orange production in the 1980’s and early 
1990’s, orange growers were forced to move into new production areas in 
extreme northern São Paulo state.  New plantings were also found in southern 
Minas Gerais which lies on the northeast boundary of São Paulo.  These 
production areas are in a more tropical climate with less rainfall. 
 
2.2. Recent Events in the São Paulo Citrus Industry  
 
Two of the most destructive diseases that affect citrus trees, canker and 
tristeza, have both been found in São Paulo in the past 50 years.  As trees planted on sour orange rootstock are susceptible to the tristeza virus, orange 
growers reacted by switching to Rangpur Lime and other tristeza rootstocks.   
After the citrus canker outbreak of the 1970’s, orange growers realized that citrus 
canker is endemic south of the Tietê River and moved their citrus plantings. 
In 1986, a new disease surfaced in the northern production areas of São 
Paulo and southern Minas Gerias.  This disease resulted in lesions on the leaves 
and smaller fruit with greatly reduced juice content.  An intensive research effort 
was initiated funded by Fundecitrus, a research organization funded by citrus 
growers and processors.  In 1989, the disease was identified as citrus variegated 
chlorosis (CVC).  Its vector of spread was a common insect known as a 
“sharpshooter.”  There is no treatment to cure CVC, and given the widespread 
incidence of the sharpshooter, insecticides have only limited success in reducing 
the spread of CVC. 
By 2000, it was clear that CVC has spread beyond the northern production 
areas and had moved into older production zones near Matão and Araraquara.  It 
is now believed that poor control of new planting material hastened the spread of 
CVC.  With the high rate of replanting in São Paulo, use of diseased trees 
became another vector of spread. 
CVC can only be controlled through severe pruning of affected limbs or 
tree removal. 
Additional spraying may also reduce sharpshooter populations.  Therefore 
São Paulo citrus growers face the prospect of “living with” CVC and must deal 
with the increased production costs and lower yields associated with CVC.   Fundecitrus estimated that 2001, over 36 percent of all citrus groves in São 
Paulo show some evidence of CVC, with 24 percent of groves exhibiting “level 2” 
or a more advanced level of infection.  
CVC is also more lethal to young trees, which explains the sharp decrease 
in the nonbearing tree inventory that occurred over the 1996 through 2000 
period.  As CVC first appeared in the mid-1980’s, but still not diagnosed, young 
trees infected with the disease were unknowingly planted close to healthy groves 
widening the CVC spread. 
 
2.3. Citrus Production with CVC in São Paulo 
 
The citrus industry in São Paulo now accepts the verdict that it will not be 
able to eradicate CVC and must learn how to manage the disease.  A three-
pronged approach is being adopted: 
1. Beginning January 1, 2003 all new plantings must be done with trees 
propagated in shaded greenhouses.  Production of seedling citrus trees in 
an open system for commercial sale will be prohibited; 
2.  Growers will increase scouting to detect CVC infection and aggressively 
prune diseased branches; and 
3.  Increased spraying to control sharpshooter populations. 3. Research Question 
 
What is the economic impact of CVC on Brazilian citrus? 
1.  Reduced production (yields); 
2.  Increased death loss/tree removals; 
3.  Increased cultural care costs; and 
4.  Increased cost of new trees, screen house and regulation. 4. Methodology 
 
It is being written. 
This paper, thus, analyzes the aforementioned threat in the context of a 
mathematical programming model of the world orange juice market (McClain).  It 
is also an opportunity to improve the Brazilian side of the model, as far as 
equations predicting new plantings in Brazil, ramifications of CVC and 
interactions with citrus canker and blight, the role of Pêra Rio as a midseason 
and multiple blooming variety. 
1.  Partial budgeting to estimate cultural care, replacement tree 
cost and yield effect on cost per hectare and cost per box; 
and 
2.  Adapt a spatial equilibrium model of the world OJ market to 
estimate market impacts of smaller crops and reduced tree 
numbers. 5. Analysis 
 
It is being written. 
Scenarios are analyzed via a spatial equilibrium model on the impact of 
increased/decreased CVC incidence, focusing not only on the modeling but also 
on the issue and its results and implications. 
Sensitivity analysis are conducted to identify the conditions that would 
allow Brazil to continue to be the world’s largest exporter of orange juice.   
Different growth rates scenarios are considered for the spread of CVC as well as 
for the market for orange juice. 
1. The  budget;  and 
2.  Go back and project the tree inventory without CVC. 6. Conclusion 
 
It is being written. 
The expected result of the analysis is likely reduced trade in orange juice 
between Brazil and its consumer markets as CVC grows. Figure 1.  Brazil FCOJ Export 
 
0
200,000
400,000
600,000
800,000
1,000,000
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1,400,000
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1965-66
1967-68
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1991-92
1993-94
1995-96
1997-98
1999-00
2001-02
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Source: FAS (Foreign Agricultural Service); FDOC (Florida Department of Citrus) Figure 2.  São Paulo Orange Production 
 
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1960-61
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Source: FAS (Foreign Agricultural Service); FDOC (Florida Department of Citrus) Figure 3.  São Paulo Non-Bearing Tree Inventory 
 
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1969-70
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Source: FAS (Foreign Agricultural Service); FDOC (Florida Department of Citrus) Figure 4.  São Paulo Bearing Tree Inventory 
 
0
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1960-61
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1990-91
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Source: FAS (Foreign Agricultural Service); FDOC (Florida Department of Citrus) References 
 
Abecitrus (The Brazilian Association of Citrus Exporters).   
http://www.abecitrus.com.br 
 
Ayres, Antonio J.  [06/2000]  Intensidade da Clorose Variegada dos Citros em 
Pomares Comerciais de Laranja do Estado de São Paulo e Sul do Triângulo 
Mineiro.  Dissertação de Mestrado.  Jaboticabal: FCAV-UNESP.  59p. 
 
FAO.  http://www.fao.org 
 
Fundecitrus.  http://www.fundecitrus.com.br 
 
McClain, Emily A.  [1989]  A Monte Carlo Simulation Model of the World Orange 
Juice Market.  Ph.D. dissertation.  Gainesville: University of Florida.  159p. 
 
Neves et alii.  [12/2001]  http://www.fruit-processing.com 

THE ROLE OF BRAZIL IN THE WORLD ORANGE JUICE MARKET: A THREAT POSED BY CVC

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