The Florida citrus industry has faced multiple challenges during the past 20 years. On the supply side, such challenges have included the expansion of urban development, resulting in a decrease in agricultural land (Hernandez et al., 2012; Kautz et al., 2007); the reduction of domestic labor supply availability with its consequent increase in cost (Emerson, 2007; Wu and Guan, 2016); as well as the introduction of exotic diseases (Gottwald et al., 2002). The industry has also seen challenges on the demand side. In Florida, ≈90% of the citrus crop is processed for juice (U.S. Department of Agriculture, National Agricultural Statistics Service, 2018), and the introduction of new and alternative beverages available to consumers has increased the competition among beverage products during the past few years (Terazono and Hume, 2016). In addition, consumer concerns and media reports about sugar content in orange juice (Barclay, 2014; Saner, 2014; Time Magazine, 2014) have likely affected demand negatively, which triggered a response from the industry to address them (Florida Department of Citrus, 2016). Changes in consumer lifestyles and diets have also conspired against orange juice consumption (Heng et al., 2018; Terazono and Hume, 2016). But, chief among all challenges, the industry has been dealing with HLB since 2005.
The finding of HLB in Florida in 2005 was at about the same time that the citrus canker eradication program ended. Despite government and growers’ efforts to eradicate canker-affected trees in Florida, such disease became endemic across the state (Gottwald et al., 2002; Weaver, 2016). Thus, when plant pathologists recommended the eradication of HLB-affected trees as part of the disease management plan (Bové, 2006), many Florida growers were reluctant to adopt such a strategy and opted instead for keeping the trees. This was not only because of the futile efforts to try to eradicate canker, but also because fruit prices were high at the time. Therefore, the opportunity cost of removing trees that were producing fruit was too high for many growers. Without inoculum removal, HLB spread rapidly across Florida. In 2015, it was estimated that 90% of the area of a citrus operation in the state was affected by HLB (Singerman and Useche, 2017). To date, there is no cure or successful management strategy to deal with HLB. As trees become increasingly affected by the disease, they suffer premature fruit drop, the fruit harvested is smaller and misshapen, and the juice quality is compromised, all resulting in lower yield. In addition, tree mortality and cost of production also increase.
Production costs have increased significantly compared with pre-HLB levels. Figure 1 shows real cultural production costs for processed oranges in Southwest Florida. On a per-hectare basis and using 2017 as the base year, costs increased from $2869 in 2003–04 to $4804 in 2016–17, up 67% during that period. Such an increase in cost was mainly a result of growers using more foliar sprays and fertilizer (Singerman and Burani-Arouca, 2017). Figure 1 also shows that, on a per-box basis, real cultural production costs have increased from $2.71 in 2003–04 to $10.40 in 2016–17, which represents a 283% increase. The reason for the greater percentage increase on a per-box basis is a result of the simultaneous increase in cost per hectare and decrease in yield per hectare. During the same period, as a result of the decrease in supply (and as economic theory predicts), on-tree prices per box increased. Such an increase in real prices was by 122% (U.S. Department of Agriculture, National Agricultural Statistics Service, 2018). Thus, the greater increase in cost per box relative to price has resulted in a lack of profitability for the average grower, particularly during the past few seasons (Fig. 2).
As a consequence of the challenges the industry has been facing, but in particular as a result of the lack of profitability, it is not surprising that the rate of area lost has been larger than that of area planted (Fig. 3). And, as shown in Fig. 3, the difference between the two rates has also been increasing during the past few years. Consequently, the bearing area for oranges in Florida has decreased from 229,000 ha in 2003–04 to 149,000 ha in 2016–17 (Fig. 4). Such a decrease in area also denotes the reduction in the number of citrus growers across the state. Figure 5 shows the number of operations by farm size through time. The number of citrus growers in all four categories decreased from 7167 in 2002 to 3122 in 2012. However, the two categories with a smaller area—0.4 to 19.9 ha and 20 to 100.9 ha—decreased by 59% and 52%, respectively, whereas the decrease in the two categories of growers with a larger area were 34% and 40%, respectively. Thus, the reduction in the number of growers has been greater in absolute and percentage terms for smaller operations. Operations with areas between 0.4 to 19.9 ha still represented 69% of the total number of citrus operations in Florida in 2012. However, they accounted for ≈6% of the citrus-bearing area. The representativeness of operations with am area greater than 303 ha increased by 4% from 2002 to 2012. The 2017 census data will be released by U.S. Department of Agriculture, National Agricultural Statistics Service in 2019, but given the impact of HLB, it is very reasonable to assume that such a trend has continued because, under current circumstances, it can be sensibly argued that smaller growers have had a harder time staying in business relative to larger growers.
The downsizing of the industry in recent years has not only occurred at the grower level, but also at the industry level. Figure 6 shows that the number of juice processing facilities decreased from 41 in 2003–04 to 14 in 2016–17, whereas the number of packinghouses decreased from 79 to 26 during the same period. The reduction in infrastructure is particularly troublesome. After a juice processing plant or packinghouse shuts down, the facility is put up for sale and is, therefore, unlikely to reopen. To prevent more growers and the infrastructure from going away, and to keep the Florida citrus industry afloat until a cure or management strategy for HLB is found, several public and private incentive programs for replanting have been made available to growers (Singerman, 2017; Spreen and Zansler, 2016). Such programs can incentivize growers to invest in a new citrus grove. However, and perhaps more important, a key question is whether current practices—in particular, the typical grove planting density—are still valid (i.e., profitable) in the current environment. Thus, the purpose of this study is 2-fold: first, to estimate the establishment and production costs for a new grove under endemic HLB conditions for three different tree planting densities; and second, to examine the profitability of those three different densities under different production and market conditions.
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