Orange industry battling out of red ink sea

California's orange industry is awash in red ink admits, Joel Nelsen, president of California Citrus Mutual, Exeter, Calif. However, he believes the industry will do more than just tread water, but will drive its way to profitability in the near future.

Nelsen told the 19th annual Agribusiness Management Conference in Fresno, Calif. that the seasons encompassing 2000 "will go down in history as the industry's worst revenue years," not withstanding the devastating 1990 freeze.

The reasons for the red ink are many. Some can be laid off to outside factors, but several Nelsen tossed at the feet of the industry under the heading of "complacency"

While Nelson railed the shortcomings of the industry he represents, he also praised growers and others for their efforts now underway to right the citrus ship.

"I'm bullish on the tomorrows," he said. "There are many steps being taken in a variety of areas within the industry that are designed to produce a better bottom line.

"Complacency is not the adjective driving our industry any longer. Problem solving, initiatives, technology advancements, adaptability and aggressiveness are more suitable terms for the orange producer.

"The turn around won't be complete this next season, but the turn will commence," he predicted.

One of the reasons for the downslide is overproduction or under consumption, and it is being addressed, he said.

"Growers and marketers have different agendas with this discussion," he said, adding, however, that with growers "openly discussing" the need for an industry wide advertising and for greater cooperation "regarding raw industry data clearly shows that the status quo is not sufficient.

"A program has been identified and an industry task force established to bring the industry together and form an information exchange entity," he said.

It is not clear if the effort will be successful. However, "it is past the discussion stage and there is meat on paper. Grower meetings are being coordinated and a campaign being formulated. Growers know that the economics recently and the trends are not positive."

Orange quality also must improve, said Nelsen. "Our quality has been inconsistent" and consumers are switching from oranges to "a more consistent supply of table grapes, a longer and earlier starting apple crop; improved peach, plum and nectarine quality; offshore products that look better and value added traditional commodities such as strawberries and melons."

The industry is responding with a stricter regulations to ensure only quality fruit reaches the consumer.

These standards impact primarily the navel orange grower, but it also "raises the bar" for Valencia producers. "A more satisfied navel orange buyer eagerly looks forward to the next orange variety."

The industry is also transitioning from older trees that produce poor or inconsistent quality to younger, more vibrant trees producing better fruit.

Also, certain varieties of navel oranges are no longer acceptable in the market. Growers are pulling out those varieties, even if they are still vibrant trees, he said.

Industry consolidation is underway in the wake of the red ink. Growers are getting out, but two "significant marketers" have also left. These changes will reduce industry pricing and marketing conflicts.

As with other fresh fruit and vegetable producers, citrus growers are being impacted by retail grocery consolidation. However, growers are fighting back in drawing the spotlight to what they believe are unfair trading passes resulting from this consolidation. Several federal agencies and Congress are looking into the issue, and Nelsen predicted the issue "will burn brighter in 2001." Already two proposed mergers have been halted as result of grower concerns.

As in all agricultural segments, Nelsen said government "intrusion" is impacting the bottom line. "Taxes, fees and mandates are having an effect. Minimum wage increases will force the industry to absorb higher labor costs."

Mandates for microbial concerns and food safety issues also will add to costs.

The flip side of this is the industry is making better use of new handling technology. The "science of handling" has increased dramatically, according to Nelsen, and this has reduced costs and fruit losses. "The end result is more fruit into the carton, more efficiency and therefore more revenue per acre."

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