What Happened to the Florida Orange Industry? By Allen Morris

Transcription

1 What Happened to the Florida Orange Industry? By Allen Morris Case Study Presented at the Private and Public, Scientific, Academic and Consumer Food Policy Group Meetings, Harvard University, Cambridge, Massachusetts, November 23-24,

2 The Private and Public, Scientific, Academic and Consumer Food Policy Group (PAPSAC) Founded in 1993, PAPSAC is sponsored by the John F. Kennedy School of Government at Harvard University, and funded from grants provided by the Kellogg Foundation. Its mission is to reach constructive decisions in developing and utilizing technology in the U.S. food system in a socially, environmentally, and economically desirable manner. PAPSAC brings together non-profit organizations and for-profit enterprises, academics, and agribusiness corporate leaders, consumer advocates and nutritionists, public policy analysts and high level representatives of FDA and other government agencies. The purpose is for leaders from all points in the food system to speak freely about critical issues facing each entity, the country, and our global economy and ecosystem. Consequently, media is not allowed entry into the venue because that could prevent the free flow of ideas and information. Attendance is by invitation only and limited to 75. Some of the organizations represented at PAPSAC meetings include Smithfield Foods, Syngenta, Perdue Farms, Cargill, Eli Lilly and Co., King Ranch, Wegmans Food Markets, The Dannon Company (Dannon Yogurt), Monsanto, and Dow Chemical from the private sector; the Harvard Business School, Harvard Medical School, Harvard Law School, the Environmental Protection Agency, the Food and Drug Administration, the U.S. Dept. of Agriculture, the World Bank, Johns Hopkins University, the National Academy of Sciences, the Wharton School of Business, the Norwegian Ministry of Environment, the Mormon Church, and the Royal Agricultural College of England from the public sector. The main focus of the meetings is improving health and nutrition world-wide, sustainable agriculture, food safety, water availability and quality, and genetically engineered crops. The following is a case study. As such, it must be written in past tense because it might be used as a teaching tool at Harvard, and years from now the events described in the case will be in the past. Harvard cases must also have a central character that the case is built around, and be written as a factual story. 2

3 What Happened to the Florida Orange Industry? Allen Morris Introduction Allen Morris, vice-president of sales and marketing for Blue Lake Citrus Products, stared in disbelief as Todd Dicks, a Central Florida grower, showed him through one of his orange groves near Winter Haven. There was almost as much fruit on the ground as on the trees. And it was only December, about two months before this Hamlin grove was scheduled to be harvested. Of greater concern was the fact that this high rate of fruit drop was present throughout Florida s citrus industry, for all varieties of citrus. Harvesting of Valencia orange groves, which would not begin until March, would not be completed until June, so fruit losses could become much worse. Other than after a damaging freeze or hurricane, this was one of the highest rates of fruit drop Allen had ever seen. And Allen had seen a lot of citrus groves in his 35 year career in the citrus industry. A career that in addition to his current position, had included management positions at Duda, one of Florida s largest growers, Tropicana, one of the largest orange juice brands, Cutrale, one of the largest bulk citrus processors, exporters and growers, Prudential Agricultural Investments, the largest lender to citrus growers, and as a member of the University of Florida Citrus Research and Education Center faculty, the world s largest citrus research facility. In addition to Florida, Allen had visited citrus groves in California, Brazil, China, Mexico, and Spain, areas that collectively represented over 90 percent of the world s orange production. There was no doubt in most growers minds that the high fruit drop was because of citrus greening, or Huanglongbing (HLB), a devastating citrus disease that had been found in south Florida nine years earlier. Rather, there was shock and concern that the enhanced foliar nutrient programs that most Florida growers had chosen as a way to control HLB instead of removing infected trees, may no longer be effective as a greening management tool. That concern grew as the Season progressed, and the original Florida orange crop estimate of 154 million boxes by USDA s National Agricultural Statistics Service Florida Field Office (NASS) in October of 2012 was subsequently reduced seven times in monthly forecasts until it reached million boxes at the end of the season. Reflecting the potential for increased fruit drop again, the initial Florida orange crop estimate by NASS for the 2013/14 season was only 125 million boxes. However, that estimate was reduced five times in monthly forecasts until it reached million boxes by the end of the season, as fruit once again dropped off trees at rates seldom seen before the prior season. This was the smallest Florida orange crop in a nonfreeze year since the 1967/68 crop. The 2014/15 season orange crop forecast by NASS on October 10 was 108 million boxes. With better growing conditions than in several seasons, the forecast of a larger crop than that of the previous season was not surprising. But if NASS subsequently reduced this forecast by as much as they did last season s, the orange crop would be 90 million boxes, only one million more than a well-respected private forecast in August. It appeared as if the concerns of many scientists that enhanced foliar nutrient programs may not be effective on a sustainable basis were correct. 3

4 The concern and fear of most of the Florida citrus industry was that if fruit volumes continued to decline in subsequent seasons, there would not be enough fruit to support an economically viable infrastructure of citrus processing, fresh packing, fruit harvesting and hauling, and other sectors that were important to the functioning of the industry. More importantly, that this would result in the loss of a major part of the $8.9 billion Florida citrus industry and the 76,000 jobs it supported. HLB and Funding Research for a Cure HLB had originated in China about 100 years ago. It was thought to be caused by the bacterium, Candidatus Liberibacter asiaticus. HLB had seriously affected citrus production in a number of countries in Asia, Africa, the Indian subcontinent and the Arabian Peninsula. Wherever the disease appeared, citrus production had been compromised with the loss of millions of trees. It was first discovered in the state of Sao Paulo, Brazil in 2004 and Florida in 2005, two regions that accounted for almost 90 percent of world orange juice production. It was spread by a tiny insect called the Asian citrus psyllid when it fed on the leaves of infected trees. Symptoms were leaves with a yellow/green blotchy mottled color and fruit that was lopsided, had aborted seeds, failed to color properly, and was bitter and small. It first reduced fruit yields, then killed the tree. A tree could be infected for up to two years and not show symptoms, yet still spread the disease. By February of 2008, less than three years after the first positive HLB test on a Florida citrus tree, near Homestead, the disease had spread to all 32 of Florida s commercial citrus producing counties. Botchy Mottled Leaves Psyllid Lopsided Small Bitter Fruit with Aborted Seeds 4

5 The Florida Citrus Production Research Advisory Council (FCPRAC) operated under the Florida Citrus Production Research Funding Order. This research support program was established under the Florida Marketing Act, which initially enabled Florida citrus growers to tax themselves up to one cent per box of citrus for the purpose of providing funding to support needed research. Growers approved this marketing order by referendum in It ended every six years, when growers could elect to renew it and set a new funding ceiling or discontinue it. FCPRAC's board, which consisted of 14 grower representatives serving four-year terms, had the responsibility for assessing citrus production research needs, working with investigators to develop projects to meet those needs, selecting among competing research proposals and awarding grants to selected proposals. The FCPRAC board also determined the tax rate annually within the ceiling. The tax was collected by the Florida Department of Agriculture and Consumer Services (FDACS) and historically raised around $1.5 million annually for research projects. Faced with the urgency of HLB and related research, the Florida Legislature and the Florida Department of Citrus (FDOC) contributed an additional $12 million to FCPRAC for distribution during the citrus production season. In 2011, after it was approved under the Florida Marketing Act and by Florida citrus growers, FCPRAC voted to increase the tax ceiling to three cents a box. The Florida Citrus Commission and the Florida Department of Citrus were formed in The Florida Citrus Commission (Commission) was a 9-member board appointed by the Governor to oversee the Florida Department of Citrus (FDOC). The FDOC provided marketing, research, and regulatory support for Florida citrus products. Although it was a state agency, the FDOC operated under a state marketing order which established a means to raise revenue through a tax. Growers funded the FDOC through an excise tax placed on each box of citrus that moved through processing plants and fresh fruit packinghouses. The Commission set the tax rate each year. Historically, about 80 percent of the FDOC operating budget was allocated to marketing activities such as TV advertising, public relations and merchandising. With the onset of HLB in Florida, the Commission directed 16 percent of the FDOC's budget to disease research. The research money was channeled through FCPRAC for disbursement to researchers in the form of competitive grants. The Citrus Research and Development Foundation, Inc. (CRDF) was a corporation organized in the 2008/09 citrus production season under Florida State laws as a Direct Service Organization of the University of Florida. Its birth was in response to one of the recommendations of a National Academy of Sciences committee. This committee had been employed by the citrus industry to review the threat of HLB and recommend how to organize the efforts to develop management strategies to enable surviving HLB until a cure was found and how to improve efficiencies in order to speed the finding of a cure. The committee recommended that the efforts to battle HLB be consolidated under one organization with strong leadership that would direct the efforts to fight HLB and also patent and commercialize results of the research. The mission of the CRDF was To advance disease and production research, and the patenting and commercial development of new technologies, to ensure the survival, competitiveness, and profitability of the Florida citrus industry. The organization was headed by a 13 member board of directors that included individuals from the citrus industry, academia and government, and represented the interests of all sectors of the Florida citrus industry. After it was established, all 5

6 HLB citrus research funding went through the CRDF which, among other things, solicited research proposals and awarded grants to selected proposals. Florida Citrus Mutual, a cooperative trade association, was formed in Its mission was to help Florida citrus growers produce and market their crops at a profit. With about 8,000 grower members, Mutual was led by a member-elected board of 21 directors. Primary activities included effective lobbying at the federal and state level, providing market information, and serving as a strong, effective voice for members. Mutual was funded through a tax assessment per box of citrus sold through commercial channels. During the past decade, Mutual had secured over $1 billion for hurricane disaster aid, research for citrus pests and diseases, most notably HLB, and other assistance for Florida growers. Since 2007, The Florida citrus industry, federal and Florida state governments had invested approximately $70 million in over 100 research projects to find a cure for HLB. But as of 2014, a cure had not been found. Management Practices to Control HLB From an economic viewpoint, the main consequences of greening were increased tree mortality, reduced fruit yields, and increased costs of production. The recommended horticultural management practices to help control HLB were to scout for trees with infected leaves, remove those trees as soon as they were found, and aggressively spray to control psyllid populations. Most well-trained scouts could be 95% accurate in visually identifying HLB. About 10% of the infected leaves found in scouting were sent for polymerase chain reaction (PCR) testing in a lab as a check on the accuracy of the scouts. U.S. Sugar Corporation in Clewiston and the University of Florida Institute of Food and Agricultural Sciences Research Center in Immokalee operated PCR labs used by Florida growers. Scouting for HLB Uncontrolled HLB spread at a non-linear rate, often doubling, tripling or more each year (Exhibit 1). The goal was, through controlling psylid populations and removing infected trees, to keep HLB infection at 2% or less. Unofficial estimates indicated that had been achieved on less than 100,000 acres of Florida s 524,640 acres of commercial citrus groves. Once the HLB infection rate exceeded 7-8% in a grove or block, the disease was usually uncontrollable. A particularly disturbing aspect of HLB was that psyllids preferred to feed on newly flushing leaves. Since multiple flushes throughout the year were more prevalent on young 1-4 year old trees, it was difficult to reset trees lost to HLB or other causes, or to replant individual blocks in 6

7 a grove with high inoculum levels, and get the newly-planted trees to survive. Of particular concern was the impact of HLB on organic citrus production. Since organic growers couldn t effectively spray to control psyllid populations, organic production was impacted much more by greening than fruit produced in non-organic groves. In the 2003/04 season, the year before HLB was found in Florida, 242 million 90-pound boxes of oranges were produced on 564,844 bearing acres containing 75.4 million bearing trees (Exhibit 2). 1 By the 2007/08 season, 170 million boxes were produced on 464,000 bearing acres containing 61.7 million bearing orange trees. While part of that decline was the result of trees removed to control the spread of HLB, and an unprecedented high-priced Florida real estate market that diverted citrus groves to real estate development, most was due to the federallymandated citrus canker eradication program. The experiences with that program affected the success the Florida citrus industry had in managing HLB. Citrus canker was a bacterial disease that caused lesions on leaves, stems and fruit, making the fruit, which was safe to eat, too unsightly to be sold. It was spread primarily by wind-driven rain and human contact. While it did not kill trees, if uncontrolled, it would eventually render trees unproductive. If controlled by management practices, it reduced fruit yields by 5 15%, and increased production costs, both from reduced yields and increased spraying needed to keep trees producing marketable fruit. The citrus canker eradication program legally required the destruction of all citrus trees in a 1900 foot radius of an infected tree, which was about 260 acres. After hurricanes spread canker throughout Florida in 2004 and 2005, the eradication program was deemed unsuccessful and discontinued in Consequently, the Florida citrus industry was managing canker and dealing with the resulting reduced fruit yields and higher costs. Between 1995 and 2006, 10 percent of Florida s citrus acreage (87,000 acres) was destroyed as part of the canker eradication effort, at a direct cost of $1.3 billion. Citrus Canker 1 In Florida, a box of oranges is a standard unit of measurement and weighs 90 pounds. It contains oranges and produces 6-7 gallons of juice. Citrus fruit is now handled in bulk bins and trailers, thus the term box is a statistical measure only. 7

8 After the failed canker eradication program, many Florida growers felt that eradication of canker should never have been the goal, that managing and living with canker the way Brazilian growers had been doing for decades should have been the goal, and that the eradication program had destroyed tens of thousands of acres of citrus unnecessarily. This hurt the credibility of the scientists and state and federal agencies with growers and as a result, many didn t take the threat of greening seriously. Consequently, a number of growers either did not follow recommended practices to control greening at all, or although they sprayed to reduce psyllid populations, did not remove infected trees that were still economically viable, which exacerbated the spread of the disease. The unpopularity of the canker eradication program was one reason no attempt was put into place to legally require citrus growers to manage HLB. By the time growers realized how serious greening was and began to aggressively follow recommended HLB management practices, it was too widespread to effectively control. The industry desperately needed a way to survive greening until a cure was found. HLB was discovered in Maury Boyd s 400 acre grove near Immokalee in the spring of 2006, only six months after it was first discovered in Florida. At that time, 40 percent of the trees in some of the blocks in his grove were already symptomatic for greening. Maury ignored the advice of scientists that he needed to remove his infected trees because the grove s profitability would have been substantially reduced. With Maury s permission, the Florida Department of Agriculture s Division of Plant Industry (DPI) used his grove to train scouts because the infection was so widespread there. Maury had been a citrus caretaker for many years and had a reputation for experimenting with innovative ways to improve citrus yields and lower production costs. Maury developed a mixture of foliar nutritional compounds and began using it on his grove. HLB infection spread to 100%, but his grove thrived. Maury conducted tours through his grove for hundreds of interested growers and scientists, from both Florida and Brazil. Some groups were so large they came in buses. By the 2008/09 season, production in his grove had increased to 585 boxes per acre, compared to a state average of 354 boxes per acre for that season and a 5- year state average (excluding freeze and hurricane years) of 359 boxes per acre. It appeared to most growers and some scientists that enhanced foliar nutrient programs might keep citrus trees economically productive until a cure for HLB was found. By 2010, informal surveys indicated that about 75% of the growers in Florida had abandoned tree removal and adopted some version of Maury s enhanced foliar nutrient program, which still required aggressive control of psyllids. The cost of Maury s enhanced foliar nutrient program, net of the scouting and tree removal costs it eliminated, and ground fertilizer costs it reduced, were an increase in production costs of $288 per acre, which was 16 percent of direct cultural costs. Scientists believed these programs worked by feeding nutrients to the tree through its leaves, by-passing the compromised root system and blocked phloem of a tree infected with HLB. However, many scientists were concerned that in the absence of removing infected trees, with the resulting increased inoculum levels that would be in groves, if the enhanced foliar nutrient programs were not effective on a long-term basis, infection rates would be too high to enable getting HLB under control and the groves would be lost. Thus, they were against abandoning removal of infected trees as part of an 8

9 Maury Boyd s grove, 100% infected with HLB and using his enhanced foliar nutrient program An example of waiting too late to begin an HLB management program 9

10 HLB management program. Some citrus growers with low HLB infection rates (typically less than 5% infection) agreed with the concerns of these scientists and continued to scout for and remove infected trees, but also used various enhanced foliar nutrient programs to strengthen trees that may be infected but were not yet symptomatic. Since 2004, the year before HLB was discovered in Florida, the costs for managing a Florida citrus grove had more than doubled, increasing from $920 to $2,049 per acre. While some of this increase in costs was due to higher prices for fertilizers and chemicals and costs for managing canker, the vast majority was from greening management practices. Adding harvest and haul costs, depending on fruit yields (which were lower than in previous years due to HLB), and interest on capital investment (or loans) including a return to land, the result was that breakeven costs for producing juice oranges had doubled, going from about $.73 per pound solids prior to the discovery of HLB in Florida to $ Impact of HLB on Citrus Production in Florida Compared To Brazil In the fall of 2008 at industry request, Allen organized and led a collaborative effort by the University of Florida Institute of Food and Agricultural Sciences (UF/IFAS), DPI, and NASS to conduct a survey to determine the extent of HLB infection in Florida citrus groves. In 2009, it was decided to make this an annual survey in order to track changes in infection rates. U.S. Sugar Corporation also joined this survey, providing additional helpful data from their PCR lab. The survey showed that HLB infection rates increased from 1.6% in 2007/08 to 21.9% by 2010/11 (Exhibit 3). After 2011, not enough growers were scouting for infected trees to obtain a representative sample and the survey was discontinued. Exhibit 4 illustrates the way this incidence of infection looks on a map of Florida. It was estimated that by 2011, every commercial citrus grove in Florida was infected with greening, although infection rates varied from less than 3% to over 75%. FUNDECITRUS, a Brazilian citrus research organization, also conducted an annual greening infection survey for Sao Paulo State, where most of Brazil s citrus was produced. In 2008, four years after greening was discovered in Brazil, infection was 0.6%. By 2011, it had increased to 3.8%, substantially lower than in Florida (Exhibit 3). It was estimated that in 2011, 53% of Brazil s citrus groves were infected with greening with infection rates ranging from less than 1% to 7%. As a result of these much lower HLB infection rates, and ability to move new plantings into greening-free regions, citrus production in Brazil had not been affected by HLB nearly as much as in Florida (Exhibits 2 and 5). In fact, the most recent three-year average of orange production in Brazil was greater than the three year average before HLB was discovered there. Brazilian growers, without the stigma of a recently failed disease management policy that Florida growers had experienced, took the threat of HLB much more seriously after it was first discovered than Florida growers. Thus, they were more aggressive in implementing effective 2 Pounds of solids are a measure of the soluble sugar solids in juice. Fruit and bulk juice bought and sold by processors is priced per pound of solids. One gallon of single strength ready-to-serve orange juice, such as consumers buy in a store, contains pounds of solids. Oranges generally produce from 6 to 7 pounds of solids per 90-pound field box. Over 95% of Florida s oranges are processed into juice. 10

11 greening management practices during the critical early stages after it was first detected when infection rates were low. Also, it was required by law in Brazil to scout for, locate and remove greening-infected trees, but as explained earlier, not in Florida. Brazilian citrus production was also moving further southward and northward ( running from greening ) as growers replanted in areas such as Baru and Istapetininga where there were no psyllids and no disease pressures from greening. These new groves were also planted at double the tree densities, and a larger percent were irrigated, than the groves in the traditional production regions of Matao, Limieria, Araraquara, and Piriciaba. Thus, yields per acre would be much greater in the new regions than they had ever been for groves in the traditional regions. Florida growers had no such places without psyllids or pressure from greening to move their citrus production to. Discussions with Brazilian growers indicated the general expectation was that most of the fruit lost in the areas where greening was most widespread would be offset by new production in the other regions, a process that had already begun to happen. HLB Research HLB research was focused into three broad areas, tree resistance, psyllid control and disease management strategies. Tree resistance research was mainly focused on ways to find or develop rootstocks and/or trees that would be immune or resistant to HLB, either through genetic engineering or trials with rootstocks that would show promise for traits of HLB resistance. Psyllid research was focused on insecticidal control. The two HLB horticultural management strategies that showed the most promise were organizing the state s groves into Citrus Health Management Areas (CHMAS), and replanting economically unviable groves using ultra-high density advanced production systems. No matter how effective tree removal and psyllid control were, if a neighboring grove was not effectively managing HLB, the efforts in both groves were substantially compromised. For large contiguous plantings under one management that was not a problem. But in areas consisting of numerous smaller groves (less than 1,000 acres each), it was. UF/IFAS extension personnel led efforts to organize these smaller groves into larger 10,000 20,000 acre citrus health management areas (CHMAs). All growers in a CHMA operated their psyllid spray program on the same schedule. These larger areas also enabled small growers that were in the CHMA to use aerial spraying, which reduced costs compared to ground spraying. The result was more effective psyllid control since the insects were not being chased into neighboring groves on a different spray schedule. In 2014 there were 48 CHMAS in Florida covering over 500,000 acres. Higher density plantings enabled greater fruit production from 4-10 year old trees because of the greater number of trees per acre, which increased the present value of earnings over the life of the grove. 3 But higher density groves were more costly to plant than groves of traditional densities of 116 to 145 trees per acre. Before HLB, most growers were unwilling to invest the additional funds to plant ultra-high density groves, so most Florida groves were planted at 3 Citrus trees are four years old before they produce a commercially harvestable crop, and their production increases until they are about 12 years old, when production levels out. A citrus tree will produce fruit for over 30 years if it does not succumb to diseases or a freeze. 11

12 traditional densities. In fact, after higher density groves are 10 years old, anecdotal evidence indicated that the higher density crowded the trees and actually led to reduced grove yields. With endemic HLB, in order to offset increased tree attrition and increase the productive life of future groves potentially infected with HLB, some Florida citrus growers were considering replanting groves lost due to HLB or some other cause to densities ranging from 198 to 350 trees per acre. Some smaller groves producing fruit for the fresh market were being planted at densities as high as 570 trees per acre. In addition to providing more trees per acre to offset higher tree mortality from HLB, a key advantage of higher density groves was that when trees were lost, the neighboring trees grew to fill the empty spaces, thus helping further mitigate lost yields per acre. An advanced production system (APS) was being used where the higher planting density was combined with nutrients and water, precisely managed through a drip irrigation system. To reduce the impact of crowding as the trees matured, dwarfing rootstocks were used in APS groves. The smaller trees received sunlight in their interior more uniformly than traditional trees, which improved fruit yields. Fruit harvesting costs were also reduced because the trees did not grow tall enough to require ladders. Economic analysis conducted by Morris and Muraro at the University of Florida showed that the economic life of a mature citrus grove planted at traditional densities was less than 8 years after it became infected with HLB if the infection was not controlled to less than 3%. That same mature grove planted at 270 trees per acre had an economic life of 15 years or more. However, young (less than 5 year old) trees were at greater risk of greening infection than mature trees because of the increased attraction of psyllids to the multiple leaf flushes of young trees. Thus, the challenge for replanting an unprofitable citrus grove at higher densities in order to increase its economic life was to prevent or minimize greening infection in young trees so they lived long enough to become profitable. That was the main impediment to replanting economically unproductive citrus groves in Florida after the discovery of HLB. Prior to the discovery of HLB in Florida, when annual tree losses were 2-4% and lost trees could be easily replaced by resetting, groves had an economic life of over 25 years if not destroyed by a freeze. Some groves were still in production after 80 years. Addition horticultural management practices that were being explored to mitigate the impacts of HLB included heat treatments that entailed placing tents around individual citrus trees and subjecting them to temperatures of degrees F., and treating trees with antibiotics and antimicrobial compounds. Saving the Florida Citrus Industry Between 2000/01and 2013/14 the Nielsen-measured U.S. orange juice market declined by 45%, Florida orange production declined by 53% and retail orange juice prices increased by 44% (Exhibits 1 and 6). The decline in the orange juice market appeared to be the result of the decline in orange production and resulting higher prices. However, an examination of historical data during the supply-reducing freezes of the 1980s will help explain why the U.S. orange juice market problem is not caused by inadequate supplies. Between 1979/80 and 1989/90, Florida s orange crop went from 207 million boxes to 110 million boxes, a 47% decline (Exhibit 7). Yet the Nielsen-measured orange juice market only declined from 808 million gallons to 702 million gallons, a decline of 13.1% during this time, even though retail orange juice prices increased by 12

13 62% (Exhibit 7). How did the Florida citrus industry suffer a 47% decline in orange production, experience a 62% increase in orange juice prices, yet only lose 13% of the market? Orange juice imports, primarily from Brazil, supplemented reduced Florida orange juice supplies, and as a result of strong orange juice demand, did not denigrate prices (Exhibit 8). In 1989/90 the Florida Citrus Processors Association average price for early-mid and Valencia oranges was $1.55 per pound solids, which in 2014 dollars would be $2.82. Why had the US orange juice market declined so much by 2014 that it was smaller than it had been in over 30 years? Because since 2001 the Florida Department of Citrus generic advertising programs had not been effective, 4 and because some nutritionists and physicians had been downplaying orange juice consumption because of its high sugar content, which they claimed contributed to obesity. Effective marketing of any product required telling consumers what was different about the product and why that difference had value. By 1992 the US orange juice market was down in spite of increased consumer purchasing power and lower retail prices, because marketing efforts had been reduced during the supplyconstraining freezes of the 1980s. The Florida Citrus Commission decided to recapture the declining orange juice market by developing a marketing program that would emphasize the health and nutritional advantages of orange juice. This led to the launching of the Triple Crown marketing campaign, which told consumers that orange juice consumption reduced chances of cancer, heart disease, and birth defects. Endorsements about the health benefits of orange juice were received from the American Heart Association, the American Cancer Society and the March of Dimes. Messages were also published about the health benefits of consuming orange juice from credible scientists and research institutions. Between 1995/96 and 2000/01, the last five years of this marketing strategy, the total orange juice market grew by 10 percent and retail prices increased by 20 percent real demand growth. US per capita orange juice consumption rose to its highest level in history, 5.8 gallons. Telling consumers that orange juice helps them take on the day, such as the FDOC s generic advertisements had done since 2001, did not effectively convey these messages. Coffee, tea, soft drinks and a number of other products could also help consumers take on their day. The consumer needed to be told what was different about orange juice, and why that difference had value. If changes in laws governing health claims now prevented that, then a credible scientist or physician could say orange juice is an important part of a healthy diet as part of the advertisement, which was an opinion. Orange juice did contain natural fruit sugars, the same as any 100 percent fruit juice. But nondiet soft drinks contained more sugar per ounce than orange juice, and it was added sugar from other sources, and had no substantial nutritional benefits. Per capita consumption of non-diet soda was ten times as high as orange juice consumption, but health care professionals were not attacking soft drinks as much as orange juice. Also, orange juice had more nutrients per calorie 4 Studies have repeatedly shown that brand advertising does not grow the orange juice market, it only grows the advertised brand s share of that market. Effective generic advertising is required to grow the total orange juice market. 13

14 than most other 100 percent fruit juices such as apple, grape, pineapple, and prune juice. 5 Other nutritional attributes of orange juice that leading beverages such as soft drinks, other 100 percent fruit juices, coffee, tea, and milk did not have is that orange juice was unusually high in vitamin C and contained potassium citrate, vitamins or other compounds that may act as anti-oxidants in the body, flavonoids, folate, and thiamine. These attributes may contribute to improving blood vessel functioning, reduce the risk of some birth defects, reduce LDL (the bad cholesterol), help prevent kidney stone formation, and may have beneficial effects on blood pressure, which can help reduce the risk of cardiovascular disease. These attributes may also help support the immune system, and protect cells against free radicals, which could damage cells and tissue that could contribute to the development or progression of chronic disease. Importantly, some of these benefits, particularly those related to cardiovascular disease markers, had been demonstrated in clinical trials with orange juice Moreover, epidemiological research had shown that consuming orange juice compared to not consuming was not associated with an increase in bodyweight in children or adults Unfortunately these messages had not been effectively conveyed to consumers. The citrus industry already had the technology to live with HLB, the same as China had been doing. In Ganzhou, the world s largest naval orange production region, larger than California, Spain and South Africa combined, they tried enhanced foliar nutrient programs. But ultimately all of their citrus trees were wiped out. So they replanted using disease-free bud wood, at higher tree densities, 260 or more trees per acre; they regularly identified and removed symptomatic trees as soon as they were found; reset lost trees; and sprayed aggressively to control psyllids, coordinating their psyllid spray schedules so they were spraying on the same days. The result was an average HLB infection rate in Ganzhou of only 0.2%. 5 Rampersaud, Gail C. A Comparison of Nutrient Density Scores for 100% Fruit Juices. Journal of Food Science, Vol. 72, No. 4, Basile, LG, Lima, CG, Cesar TB. Daily Intake of Pasteurized Orange Juice Decreases Serum Cholesterol, Fasting Glucose, and Diastolic Blood Pressure in Adults. Proc Fla State Hort Soc. 2010; 123: Cesar, TB, Aptekmann NP, Araujo MP, Vinagre CC, Maranhao RC. Orange Juice Decreases Low- Density Lipoprotein Cholesterol in Hypercholesterolemic Subjects and Improves Lipid Transfer to High-Density Lipoprotein in Normal and Hypercholesterolemic Subjects. Nutrition Research. 2010; 30 (10): Morand C, Dubray C, Milenkovic D, Lioger D, Martin JF, Scalbert A, Mazur A. Hesperidin Contributes to the Vascular Protective Effects of Orange Juice: A Randomized Crossover Study in Healthy Volunteers. Am J Clin Nutr. 2011; 93 (1): O Neil CE, Nicklas TA, Rampersaud GC, Fulgoni VL 3 rd. One Hundred Percent Orange Juice Consumption is Associated With Better Diet Quality, Improved Nutrient Adequacy, and no Increased Risk for Overweight/Obesity in Children. Nutrition Research; 2011; 21(9): O Neil CE, Nicklas TA, Rampersaud GC, Fulgoni III VL. 100% Orange Juice Consumption is Associated With Better Diet Quality, Improved Nutrient Adequacy, Decreased Risk for Obesity, and Improved Biomarkers of Health in Adults. National Health and Nutrition Examination Survey, Nutrition Journal; 2012; 11:107 (December 2012). 14

15 Replanting groves to much higher tree densities, controlling psyllid populations, and regularly identifying and removing trees symptomatic for HLB was how the Florida citrus industry could survive and live with endemic greening. Following the freeze damages to the Florida fruit supply of the 1980s, the national orange juice brands provided selected well-capitalized growers with long-term (15-20 year) fruit contracts containing guaranteed minimum fruit prices that enabled making a profit and obtaining financial loans. As a result, over 100,000 acres of citrus groves were planted, restoring the citrus industry s production lost to freezes. So what was preventing this same strategy from restoring the citrus industry s production lost to HLB? THE DYING ORANGE JUICE MARKET! If a national citrus juice brand or brands provided 15 year fruit contracts with a floor price equal to that $2.82 per pound solids that fruit prices were in 1989/90 (in today s dollars) after the supply damaging freezes, and gave all of the rise to each season s market price in a growing orange juice market, there would be a strong supply response. Even if the national brands offered long-term fruit contracts with floor prices equal to $2.00 per pound solids, 37% above breakeven costs, the same premium to break-even costs as the floor prices the brands provided in the long-term contracts they offered following the freezes of the 1980s, then adjusted it annually for inflation, and gave all of the rise to each season s market price in a market with growing demand, there would be a strong supply response. This would lead to an industry successfully living with endemic HLB the way China was doing. Why would a brand do that? In order to secure a stable base of Florida fruit for a growing high-priced orange juice market that is, if there still was one. Under the strain of a continuously declining citrus crop and falling tax revenues with no relief in sight, on March 19, 2014, the Florida Citrus Commission voted unanimously to terminate its contract with BBDO Atlanta, its advertising firm. This firm had been primarily responsible for creating and implementing a national TV orange juice campaign since But the continuing decline in Florida's orange crop under the effects of citrus greening had reduced tax revenues received by the Florida Department of Citrus too much to support an effective TV marketing campaign. Finally again recognizing that to effectively market orange juice its health benefits needed to be pointed out, in September of 2014 the FDOC, working with comic book giant Marvel Entertainment, redesigned their Captain Citrus character. Unlike the rotund, jovial character they introduced in 2011, the new Captain Citrus was a muscular, fitness-focused, healthy Marvel-style superhero that joined Marvel Comics popular Avengers to digitally promote the nutritional benefits of orange juice. How could the Florida Department of Citrus (FDOC) get the funds to support an effective national TV advertising program for orange juice? By issuing the Healthy Taste Challenge. The Healthy Taste Challenge would be a national contest where two winners were chosen every three months for a year. The winners would the people or families that had spent the most and the second most money on OJ during that three month time period. First prize would be a new car. Second prize would be an all-expense paid 7-day trip for four to Florida to visit one of the theme parks near Orlando. 15

16 One of the auto manufacturers and one of the theme parks would be chosen to partner with the FDOC on this contest, and provide the car and the all-expense paid trip for to Florida for four, respectively. They would also promote that they were one of the sponsors of the Healthy Taste Challenge, their incentive being that Florida citrus, which was healthy, wholesome and produced by Florida growers, was a good image for them. The unique nature of this contest, boosted by the promotional results of the auto manufacturer and theme park chosen, would gain national media attention. Some of the headlines might be The Florida Department of Citrus, Ford Motor Company and Disney World have teamed up to award big prizes to families that buy the most orange juice. ; Want to win a new car or spend a week in Florida? Enter the Healthy Taste Challenge and buy lots of orange juice. Following these types of headlines, the article would point out the health benefits of orange juice, and the fact that this contest could help save an industry. The TV talk shows would likely pick up on this and officials from the FDOC, the auto manufacturer, and theme park could be interviewed on the TV talk shows and give the same message as the newspaper articles. This would give lots of free opportunities to correct the growing negative image of OJ and to re-educate the public about its health benefits. It would also get on the internet, face book, twitter, etc. and go viral. It could become a national mania with hundreds of thousands of families taking the healthy taste challenge. And the FDOC would not have to spend a penny on TV advertising to get tens of millions of dollars of it. The Future Lakeland Ledger, January 27, In the darkest hours of Florida's eight-year battle against citrus greening, Congress has come through with its most substantial commitment yet a guaranteed $125 million over five years to finance research against the ruinous bacterial disease. The money is part of a bipartisan new Farm Bill congressional leaders announced late Monday. The research money caps a four-year effort by U.S. Sen. Bill Nelson D-Florida to create a longterm funding solution to attack greening, arguably the biggest threat to Florida's $9 billion citrus industry in generations. It comes on top of $20 million for greening-related research in the recently approved federal budget that was obtained by Nelson; U.S. Rep. Tom Rooney, R-Okeechobee, whose district includes Polk County; and other Florida representatives. As Allen drove to the University of Florida Citrus Research and Education Center in Lake Alfred, he thought about the presentation that he was going to make at the request of a group of Brazilian citrus growers who had come to Florida to tour the citrus industry. His presentation would be about the impact of HLB on world orange juice supplies and markets, now a topic of much concern to the global citrus industry. As he turned into the familiar parking lot, Allen wondered if the $145 million now available to fund HLB research would enable scientists to be successful in discovering a cure, and if so, would this cure come in time to save the industry. He also wondered when or if they did discover a cure, could the declining U.S. orange juice market be turned around into a growing market that would support high enough prices for Florida growers to take the risks and commit the capital to replant the Florida citrus industry s 400,000+ acres of infected groves. 16

17 Discussions with Citrus Industry Representatives Gilberto Tozatti, President of GCONCI, a Brazilian company that provided horticultural consulting services to approximately fifty percent of Brazil s citrus growers, and also the owner of a large citrus nursery, located in Cordeirôpolis. The most important thing that citrus growers can do to mitigate the impact of HLB is regularly scout for and eradicate symptomatic trees, and spray to control psyllid populations. In some cases it may take as many as 24 sprays per year for effective control. Growers also need to rotate insecticides to prevent psyllids from building resistance. Much like in Florida, Brazilian growers were organizing into large contiguous areas that sprayed on the same schedules to improve the effectiveness of psyllid control. Growers also needed to replant unproductive groves at higher tree densities, to provide a larger base of trees that could be lost to greening and still enable profitable production. But only the larger growers were following all of these practices to manage HLB. The smaller ones could not afford to. Consequently, over the past three years 370,650 acres of citrus owned by 5,100 small Brazilian growers had been switched to other crops, mainly sugarcane and coffee. The result was a concentration of production into fewer but larger, well-capitalized growers who had multi-year fruit contracts with processors. By 2013, one fourth of the growers produced three fourths of the citrus, which was not the case ten years earlier. By then, processors owned percent of the citrus groves in Brazil, with the largest processor owning over 250,000 acres. As important to the future as effectively managing greening, was restoring growth to the orange juice markets in the USA and Europe (which accounted for 90 percent of world orange juice consumption). Consumption in both of these markets was declining. Without growing markets and demand, improving citrus production with effective management of HLB would not matter because there would not be high enough prices to make a profit, or even cover the cost of managing HLB. Gilberto reminded Allen that in the talk Allen had made at a GCONCI grower banquet in 2010, Allen had proposed that Florida and Brazil cooperate to grow the world s orange juice markets. An orange juice marketing strategy for growing the orange juice markets in Europe and the US would be developed and implemented. It would be funded with taxes collected from both Florida and Brazilian growers, and the funds placed in a pool. Because Brazil produced three times as many oranges as Florida, the funds in this pool would be four times as much as was currently available to fund marketing programs. The funds available from the pool for each market would be determined annually by each market s relative share of the total. Europe was currently 53 percent and the US was 47 percent of that total. A world marketing board would be created comprised of representatives from both Florida and Brazil to oversee this marketing program. This idea, which had gained press coverage after Allen s presentation, had been widely discussed among Brazilian growers and processors, and was particularly popular with Brazilian growers. But nothing had happened about it. With growing markets in the greening-endemic citrus industries in Brazil and Florida so vital to the future of the world orange juice industry, Gilberto believed that this idea should be resurrected and pursued. 17

18 Quentin and Morgan Roe, president of WG Roe and president of Blue Lake Citrus Products, respectively. WG Roe was a fresh citrus packer whose focus was tangerines. Blue Lake Citrus Products, the citrus processing subsidiary of WG Roe, produced and marketed the Noble brand of tangerine and other high end specialty citrus juices as well as bulk citrus juices sold to other brands and labels. Quentin, a former Florida citrus commissioner, served on the boards of directors of the Florida Fruit and Vegetable Association (FFVA), the Florida Citrus Packers Association, and the New Varieties Development and Management Corporation. Morgan had served as a member of the boards of directors of the FFVA and the Florida Citrus Processors Association, and as chairman of the FFVA Mutual Insurance Company. Their brother, Bill, who was also an owner of WG Roe, was unable to attend the meeting. The Roes became concerned with the popularity of seedless, easy-to-peel clementines from Spain that entered to US market in the early 1980s. The fact that clementines would not grow in Florida s climate, and that none of the University of Florida or USDA citrus breeding programs were trying to develop a seedless, easy-to-peel tangerine that would grow in Florida s climate also concerned them. Thus, in the 1980s the Roes began their own breeding program. By 2012, they had developed two seedless, easy-to-peel tangerines that thrived in Florida s climate, patented them, and begun planting groves with the new patented varieties. Sweeter and juicer than California citrus because of Florida s climate, the Roe s new tangerines would be positioned to compete with California Cuties. The Roe s were planting their patented new varieties at 570 trees per acre. In order to facilitate such a high density, they were grafting the trees onto a dwarfing rootstock recently released by the USDA #897. This ultra- high planting density combined with the dwarfing rootstock would provide a number of advantages. The additional trees in a grove containing four times as many trees as a grove planted at traditional densities would offset higher tree mortality from HLB. It would also enable greater fruit production from 4-10 year old trees, which would increase the present value and internal rate of return on earnings over the life of the grove. For example, four years after planting these groves would be producing 600 boxes per acre compared to less than 100 boxes per acre for groves planted at traditional densities. The smaller tree would also receive sunlight in its interior more uniformly than traditional trees. This would improve the quality and flavor of interior fruit compared to that produced in traditional groves, and these groves would not need to be hedged or topped until they were 9-10 years old, if ever, which would reduce costs. The Roes were also adapting irrigation and harvesting technology they had learned from the apple industry. The fertigation 11 required to achieve the aggressive growth in citrus trees and fruit yields the Roes were expecting required the use of drip irrigation. However, these systems wasted water and nutrients because once the system was turned off, the nutrient-laden water continued to seep out until the system was drained. The system the Roes were using was a pulse drip system with a pressurized emitter that prevented the seepage of water and nutrients out of the system when it was turned off. The result would be a 50% savings in water and nutrients. A dual micro-jet irrigation system that shared the wells with the drip system would also enable 11 Fertigation is the application of fertilizers, soil amendments, or other water soluble products through an irrigation system. 18

19 these groves to be protected from freezes, something a traditional drip irrigation system could not do. The Roe s HLB management strategy was zero tolerance for the disease. Thus, they aggressively controlled psyllids, and regularly scouted for and removed diseased trees. As a result, the infection rate in their newly planted tangerine groves was less than 2 percent. Harvesting represented almost half the cost to produce citrus fruit in Florida. Citrus fruit for the fresh market was typically harvested by pickers on ladders putting fruit in sacks slung over the picker s shoulder. This fruit was subsequently dumped into large plastic bins holding about 900 pounds of fruit. From there the bins were loaded onto a truck by a machine and hauled to a packinghouse. The Roe s smaller trees on the dwarfing rootstock would not grow tall enough to require the use of ladders. Thus, the harvesting system the Roes were going to use entailed the use of a large vacuum hose. The hose would be placed under the picker s arm, the picked fruit would be placed in the mouth of the hose, and a vacuum would pull the fruit into a bin on a machine driving slowly down the middle between rows. Four pickers, one on each side in the front and back of the machine, respectively, would supply fruit to the bins on this machine. When a bin was full, it would be hydraulically removed from the machine and left to be retrieved by another machine, and would ultimately be loaded onto a truck for its journey to the Roes packinghouse. The result was estimated to be 1.5 times the productivity of traditional citrus harvesting, yielding a significant reduction in harvesting costs. The main source of tangerines for Blue Lake Citrus Products was packinghouse eliminations, the percent of fruit being packed for the fresh market that was sent to processors because of its small size or unattractive appearance. Once their groves planted in the new varieties were in full production, they would own over 80 percent of Florida s tangerine supply. Not dependent on oranges or grapefruit for their Noble brand, and effectively controlling HLB in their groves, the Roe s felt that they had protected themselves from the loss of citrus due to HLB. Vic Story, President of Story Companies, which consisted of about 2,000 acres of Florida citrus groves owned, and another 3,000 acres of groves managed by the Story family. Vic was a former Florida citrus commissioner and former president of Florida Citrus Mutual. Florida growers were trying everything they could think of to mitigate the effects of HLB and survive until a cure was discovered. They were also comparing notes, and sharing ideas and the results of their experiments with new grove management practices. It was believed that the recent three years of atypically dry weather, and the resulting increased use of irrigation water had increased the ph of irrigation water going onto groves because of increased dissolved limestone in the water. The ideal soil ph for citrus groves was 6-6.5, whereas the soil in many Florida groves was now 7-8. Noting that a grove near Immokalee in South Florida with a soil ph of 6 had almost no fruit drop during the past few seasons of record high fruit drop, it was thought that one reason for the unusually high fruit drop over the past few seasons might be the high ph. In response, growers were treating their irrigation water with sulfuric acid that included nitrogen that made it safe to use, and that brought the ph down into the ideal range. 19

20 Headline was a fungicide used on citrus trees for blossom blight and black spot. It interrupted the life cycle of fungus, killing it. Consolidated Citrus, Florida s largest citrus grower with over 55,000 acres prior to the discovery of HLB, and a division of King Ranch, conducted a test with Headline. They had noticed that groves sprayed with Headline did not have as much fruit drop as their other groves. So they sprayed one grove with Headline next to a grove that was not sprayed. The grove they sprayed with the fungicide had 47 percent less fruit drop than the one not sprayed with headline. BASF, who made Headline, conducted a grower meeting where one of their scientists explained that Headline enhanced chlorophyll production in the leaves, which reduced fruit drop. As the meeting concluded, Vic made the point that no matter how effective HLB management practices were, or even if a cure for HLB was soon discovered, none of it would restore the Florida citrus industry unless the declining orange market could be turned around and made to grow again. Mike Sparks, executive vice-president of Florida Citrus Mutual, had over 30 years of experience in the citrus industry, serving as the chief financial officer of the FDOC before going to Florida Citrus Mutual in Mutual had recently been instrumental in getting greening recognized as an eligible cause of tree loss under the USDA s Tree Assistance Program (TAP). TAP provided up to 50 percent of the cost of tree removal and site preparation, and 65 percent of the cost of trees and replanting. However, since it was subject to a $125,000 cap, it was only applicable to small growers. The resulting funds would cover 28 percent of the total cost of replanting and then caretaking a grove for the four years required for it to produce a commercially harvestable crop. Still, if the estimated 5,000 eligible growers all planted the 71 acres that TAP would support, that would total 355,000 acres. The problem was that without long-term fruit contracts that provided guaranteed minimum floor prices, growers may be unwilling to commit the capital and take the risk to replant groves, and because of this risk, they may not be able to secure loans to fund it. In 2013, the Coca-Cola Company announced that it would offer 20 year contracts for the planting and production of 25,000 acres of orange groves. These contracts would be offered to Cutale Citrus Juices USA, and Peace River Citrus Products, Coca-Cola s two largest citrus juice suppliers. Cutrale Citrus juices USA was the U.S. Subsidiary of Suco Citrico Cutrale, one of the world s largest citrus growers, processors and exporters, based in Araraquara, Brazil. Peace River Citrus Products was a bulk processor with plants in Arcadia and Bartow, Florida. These contracts were said to contain guaranteed minimum floor prices. In 2014, Citrus World, a Florida grower-owned cooperative whose brand was Florida s Natural, announced that it would provide $10 million as an incentive for its members to plant citrus trees. At an estimated cost of $8,349 per acre to plant a citrus grove and get it into commercial production, $10 million would cover 100 percent of the costs of planting about 1,200 acres. PepsiCo, that owned Tropicana, had not announced any long term fruit contracts. The 26,200 acres of orange groves that Coca-Cola and Citrus World were incenting growers to plant, at full production would total 11 to 13 million boxes. That was only about 15 percent of the oranges processed by the three national orange juice brands. However, following the freezes 20

21 of the 1980s, the national brands covered 40 to 60 percent of their fruit needs with long-term contracts. Mike s concluding remark was that other than finding a cure for HLB, the most important thing to the Florida citrus industry was incentives for growers to replant groves infected with HLB. Exhibit 1. Spread of HLB Infection in Groves Where It Is Unmanaged Note: The above line graphs are for both uncontrolled and controlled HLB. They are based on actual data. The large differences, such as the projection for 45 years to spread to 100% in Brazil on one graph and only about 3 years on another, are due to differences in the mix of controlled and uncontrolled HLB, different tree ages, different levels of inoculum in surrounding groves, and different fruit varieties. Exhibit 1 was reproduced with permission from Tim Gottwald, USDA, ARS. 21

22 Exhibit 2. Florida Orange Production, Acres and Trees Season Thousand Million Million Boxes Bearing Acres Bearing Trees 2000/ / / / /05 (a) /06 (a) /07 (a) / / / / / / / (a) Effects of hurricanes, the canker eradication program and the start of HLB Note: Production year is November - June Source: USDA, National Agricultural Statistics Service, Florida Field Office 22

23 Exhibit 3 23

24 Exhibit 4 24