Report Highlights: 

The South African 2014/15 MY (Marketing Year) citrus exports are forecasted to decrease based on the uncertainty in the EU market. South African citrus exports to the United States continue to increase and are expected to surpass 50,000 MT in the 2014/15 MY at the back of support from the United States through a pilot program of reducing the cold treatment schedule to 22 days, and in future through the amendment to the regulation proposed by APHIS to permit CBS areas to export to the United States is passed.

Executive Summary 

Post forecasts that the 2014/15 MY grapefruit production in South Africa will increase by six percent to 400,000 MT as a result of the annual cyclical fluctuations of grapefruit production. The production of oranges and lemons is forecasted to decrease to 1,600 million MT (- 1%) and 270,000 MT (-6%), respectively in the 2014/15 MY as weather conditions return to normal following the exceptionally good weather conditions in 2014. Post forecasts that the 2014/15 MY production of tangerines/mandarins in South Africa will remain flat at 190,000 MT based on normal weather conditions. 

South Africa voluntarily suspended citrus exports to the European Union on September, 8, 2014. The voluntary suspension excluded soft citrus and citrus produced in Citrus Black Spot (CBS) free areas. While post contacts have indicated that exports will resume in 2015, Post forecasts that uncertainty in the EU market will result in decreases in the 2014/15 MY exports of lemons/limes (-11%), oranges (-6%) and grapefruit (-4%) while tangerines/mandarins exports will remain flat. South African exports of fresh citrus to the United States is forecasted to continue growing as South Africa seeks to diversify its exports as well as the support being provided by the United States under the cold sterilization program and the proposed regulation that could allow CBS areas in South Africa to export to the United States. 

Post forecasts that the 2014/15 MY imports of fresh citrus will remain flat based on a static domestic consumption and sufficient domestic production to supply the local market. Domestic consumption is forecasted to also remain flat based on the low economic growth forecast of the South African economy and the financial pressure faced by consumers. 

Post forecasts that the 2014/15 MY production of orange juice will increase by seventeen percent to 40,803 MT as more fresh oranges are diverted for processing. The 2014/15 MY exports of orange juice by South Africa is also forecasted to increase by seventeen percent to 36,000 MT, based on the increase in production, and the drive by industry to obtain higher export prices at the back of a weakening rand exchange rate.

Exchange rate 

Rand/US$ Exchange = 11.5 

Background 

In the 2012/13 MY, approximately 63,060 hectares (Ha) was planted to citrus in South Africa. The Limpopo, Western Cape, Mpumalanga, Eastern Cape, KwaZulu-Natal and Northern Cape provinces are the main citrus growing regions in South Africa. Limpopo has the largest area planted, followed by Eastern Cape, Mpumalanga and Western Cape. The Western Cape and Eastern have a cooler climate which is suited for the production of the navel oranges, lemons and easy peelers such as clementines and satsumas. The Mpumalanga, Limpopo and KwaZulu-Natal Provinces have a warmer climate which is better suited to the cultivation of grapefruit and Valencia oranges.

There are approximately 210 commercial varieties being planted in South Africa. Star Ruby is the most planted grapefruit variety due to its high global demand. Producers prefer Valencia oranges over Navels as Valencia’s have a longer shelf life and produce more yields than Navels. Nardocott is one of the most popular soft citrus cultivars in South Africa, however, there is growing interest in the Tango cultivar, which is seedless and is still waiting to be granted its Plant Breeders Rights.

Grapefruit, Fresh 

Production 

Post forecasts that the 2014/15 MY grapefruit production in South Africa will increase by six percent to 400,000 MT as a result of the annual cyclical fluctuations of grapefruit production where a low production season is usually followed by a high production season. The 2013/14 MY production was a low production season. Grapefruit producers usually switch production to lemons or vice versa, depending on the expected prices and production cycle. 

The 2013/14 MY estimate remains at 390,000 MT, and the 2012/13 MY grapefruit production remains at 434,070 MT based on industry data. The 2012/13 MY grapefruit production at 434,070 MT, remains the highest production in the past seven years as a result of good rainfalls in the eastern part of the country and an increase in planted area. A low grapefruit production season is always followed by a higher production season.

Consumption 

Post forecasts that the 2014/15 MY grapefruit domestic consumption will remain flat at 5,000 MT. Domestic consumption of grapefruit is low as most South African consumers especially the younger generation has not acquired the taste for grapefruit. In addition, the consumption of grapefruit slowed down a few years ago following the negative press and perceptions on the medical effects of grapefruits in South Africa. 

Grapefruit is also processed for juice, the majority of which is exported to Europe. The left over pulp following commercial juice extraction is an important source of grapefruit oil which is used as a flavoring in many soft drinks. The inner peel is a source of pectin and citric acid, which are both used by the food industry to preserve fruits, jams, and marmalades. Naringin is also extracted from grapefruit peel, and gives tonic-water its distinctive bitter flavor. Finally, the grapefruit peel oil is used in scented fragrances. 

Exports 

Post forecasts that the 2014/15 MY grapefruit exports will decrease by four percent to 215,000 MT based on the uncertainty of South African citrus exports to the European Union (EU) due to the citrus black spot. Post revised upwards the 2013/14 MY exports to 225,000 MT based on the higher than anticipated exports up to October 2014. Grapefruit exports from January to October 2014 are already at 217,305 MT. 

Europe and Asia are South Africa’s major export markets. There is also a growing emphasis to grow the Middle East and Africa markets. South Africa grapefruit can enter the United States duty free under the African Growth and Opportunity Act (AGOA). South Africa also has a free trade agreement with Europe providing for duty free access for South African citrus exports. Japan imposes a ten percent Most Favored Nation (MFN) duty on SA grapefruit. Russia which is the third largest market for South Africa’s grapefruit export, imposes a five percent or US$27.96/ton (whichever is greater), while Canada, Hong Kong and the UAE apply a zero percent MFN tariff.

Imports

Post forecasts that the 2014/15 MY grapefruit imports will be 10,000 MT. Post revised upwards the 2013/14 MY to 15,000 MT, based on the updated GTA data which now includes Swaziland imports. South Africa is not a major importer of grapefruit. Imports mainly originate from Swaziland, Spain and Israel to fill the demand gap towards the end of the year.

Prices 

Grapefruit prices tend to follow the production cycles of grapefruit, in years with high production prices are low, vice versa. Domestic price have grown from R1,434 (US$125) in the 2003/04 MY to R2,352 (US$205) in the 2012/13 MY.

Oranges, Fresh 

Production

Post forecasts that the 2014/15 MY production of oranges will decrease by one percent to 1,600 million MT based on normal weather conditions in 2015. The 2013/14 MY production was revised upwards to a peak of 1,620 million MT as a result of exceptionally good weather conditions and an increase in area planted in 2014. 

The 2012/13 MY orange production remains at 1,560 million MT based on industry data. The area planted with oranges in South Africa has grown steadily since the 2006/07 MY. The area planted has grown by at least twelve percent from 36,921 hectares in 2006/07 MY to 41,426 hectares in 2012/13 MY.

Consumption 

Post forecasts that the 2014/15 MY domestic consumption of oranges will remain flat at 130,000 MT based on static consumer demand as a result of the slow economic growth in South Africa and the financial pressure faced by consumers. Fresh oranges are the most popular citrus consumed in South Africa. The 2013/14 MY domestic consumption estimate remains at 130,400 and the 2012/13 MY domestic consumption remains at 127,674 MT based on industry data. 

Exports 

Post forecasts that the 2014/15 MY exports of oranges by South Africa orange will decrease by six percent to 1,100 million MT based on the uncertainty of South African citrus exports to the European Union due to the citrus black spot. The impact of the decrease in citrus exports to South Africa`s export revenue is expected to be offset by the weakening rand exchange rate. 

The 2013/14 MY citrus exports will remain at 1,170 million MT, based on the year to date exports up to October 2014 which are already at 1,130 million MT. Post revised the 2012/13 MY exports to 1,162 million MT based on GTA data.

Europe remains South Africa’s largest market for orange exports, accounting for approximately forty percent of the total export market. However, exports to Asia and the Middle East have grown steadily over the years, and are expected to take up at least 50% of the South African citrus exports in the 2013/14 MY. Post forecasts that South African citrus exports to the United States could surpass 50,000 MT in the 2014/15 MY, especially when the amendment to the regulation proposed by APHIS to permit CBS areas to export to the United States is passed.

Imports 

Post forecasts that the South African 2014/15 MY imports will be 20,000 MT. Post revised upwards the 2013/14 MY imports to15,000 MT based on GTA data which now includes Swaziland imports. Oranges are imported to South Africa in the months of November and December to close supply gaps and satisfy year-long demand.

Prices 

The export market provides the highest prices, followed by the domestic market and the processed prices last. Local market prices have increased by 91 percent from R1,090 (US$95) in 2003/04 MY to R2,077 (US$181) in 2012/13 MY.

Tangerines/Mandarins, Fresh 

Production 

Post forecasts that the 2014/15 MY production of tangerines/mandarins in South Africa will remain flat at 190,000 MT based on normal weather conditions. Post revised upwards the 2013/14 MY production to 190,700 MT based on good growing conditions and an increase in area planted in the following regions; Senwes, Patensie, Sundays River, Boland, Western Cape, and East Cape Midlands. The 2012/13 MY production of tangerines/mandarins remains at 146,270 MT based on final industry data. 

The growth in area planted with tangerines/mandarins from the 2006/07 MY to the 2010/11 MY was flat. However, there was an increase in area planted from 5,044 hectares in 2010/11 MY to 5,863 hectares in 2011/12 MY and 6,273 hectares in 2012/13 MY as a result of new orchards being planted and growers responding to the increasing global demand for soft citrus.

Consumption 

Post forecasts that the 2014/15 MY domestic consumption of tangerines/mandarins will remain flat at 10,000 MT because of the slow economic growth and increasing financial pressure faced by domestic consumers. The 2013/14 MY and 2012/13 MY domestic consumption remains at 10,400 MT and 9,786 MT, respectively, based on industry data. 

Exports 

Post forecasts that the South African 2014/15 MY exports of tangerines/mandarins will remain flat 170,000 MT based on growing market opportunities in the Middle East and Asia, and the weakening of the rand exchange rate. Post revised upwards the 2013/14 MY exports of tangerines/mandarins to 170,000 MT based on year to date exports up to October 2014 which are already at 153,222 MT. In addition, tangerines/mandarins were not affected by the voluntary suspension of exports to the EU by South Africa. The 2012/13 MY exports remains at 132,917 MT based on GTA data. 

South African naartjies enter the US duty free as a result of AGOA preferences. EU member states impose a 1.6 percent preferential tariff for South Africa for all naartjies originating from South Africa. Russia imposes a five percent or US$41.93/ton (whichever is the greater) general tariff. Most Favored Nation (MFN). Canada, Hong Kong, the UAE, and Saudi Arabia impose a zero percent MFN duty.

Imports

Post forecasts that the 2014/15 MY imports of Tangerines/Mandarins will remain flat at 1,000 MT. South African imports are only marginal in order to satisfy out of season demand.

Lemons/Limes, Fresh 

Production 

Post forecasts that the 2014/15 MY production of lemons/limes will decrease by six percent to 270,000MT based on normal weather conditions. The 2013/14 MY production of lemons/limes was revised upwards to the peak of 286,680 MT based on exceptional good weather conditions and an increase in area planted in 2014. The main regions that resulted in the increase in 2013/14 production are the Sunday River and Senwes due to increased plantings and good growing conditions. The 2012/13 MY production of lemons/limes remains at 229,059 MT based on published industry data. 

The growth in area planted with lemons/limes from the 2006/07 MY to the 2009/10 MY was flat. However, area planted increased gradually from 4,667 hectares in the 2010/11 MY to 5,457 hectares in the 2011/12 MY and 5,828 hectares in the 2012/13 MY.

Consumption 

Post forecasts that the 2014/15 MY domestic consumption of lemons/limes will increase by three percent to 13,000 MT as domestic demand remains flat because of the slow economic growth and increasing financial pressure faced by domestic consumers. The 2013/14 MY and 2012/13 my domestic consumption of lemons/limes will remain at 12,000 MT and 12,033 MT, respectively. 

Lemon juice is used as flavorings for grilled or fried poultry and fish dishes, and a flavor agent in cakes, tarts, biscuits, candies, ice creams and salad dressings. In the drink industry lemons/lime are used to make lemonade, smoothies and liquors. In the cleaning industry, lemon juice is used as a degreaser and disinfectant, due to its high concentration of citric acid which can inhibit the proliferation of some molds and bacteria. 

Exports 

Post forecasts that the 2014/15 MY exports of lemons/limes by South Africa will decrease by eleven percent to 200,000 MT based on the uncertainty of South African citrus exports to the European Union due to the citrus black spot. Post revised upwards the 2013/14 MY exports of lemons/limes to 225,000 MT based on year to date exports up to October 2014 which are already at 218,908 MT. The peak 2013/14 MY exports are a result of increased production, growth in the Asian and Middle East market, and the weakening rand exchange rate. The 2012/13 MY exports remain at 175,061 MT based on final GTA data.

Imports

Post forecasts that the 2014/15 MY imports of limes/lemons will remain flat at 320 MT as a result of sufficient domestic production to meet local demand.

Orange Juice 

Production 

Post forecasts that the 2014/15 MY production of orange juice will increase by seventeen percent to 40,803 MT based on the forecasted increase in fresh oranges that will be delivered for processing to 390,000 MT in the 2014/15 MY. 

Post revised upwards the 2013/14 MY production of orange juice to 35,007 MT, and the 2012/13 MY production of orange juice was revised downwards to 28,379 MT based on the updated quantity of fresh oranges delivered for processing. 

Industry statistics for orange juice (200911, 200912 and 200919) are largely unavailable in South Africa. The production, consumption and stock data are comprised of information extracted from various sources, and represent Post`s best effort of the South African orange juice supply and distribution statistics. 

Consumption 

Post forecasts that the 2014/15 MY domestic consumption of orange juice will remain flat at 7,200 MT based on static domestic demand as a result of the increases in food price inflation, low economic growth and increasing financial pressure faced by domestic consumers. This has resulted in restricted growth in the domestic consumption of fruit juices especially the 100% fruit juice, and the shift in demand to orange juice concentrates. 

Export

Post forecasts that the 2014/15 MY exports of orange juice will increase by seventeen percent to 36,000 MT based on the increase in production and the weakening rand exchange rate. The 2013/14 MY and 2012/13 MY exports of orange juice will remain at 30,884 MT and 21,989 MT, based on GTA data. 

Producers in South Africa prefer to export fresh oranges than to process the oranges to juice as fresh orange export prices are much higher than the domestic fresh oranges as well as the domestic prices for orange juice. Netherlands is the biggest market for South African orange juice exports, followed by Mozambique, Zambia and Zimbabwe.

Imports 

Post forecasts that the 2014/15 MY imports of orange juice will be 1,000 MT. South Africa only imports a small quantity of orange juice, as there is sufficient domestic production to supply the local market.

Policy Issues: 

United States cold-sterilization protocol 

The Western Cape Province is the major region which exports to the United States under the cold treatment schedule of 24 days to reduce False Codling Moth. Following discussions by the United States Animal Plant Health Inspection Service (APHIS), and the South African Department of Agriculture, Forestry and Fisheries (DAFF), APHIS granted a pilot program to reduce the cold treatment schedule to 22 days which will be hugely beneficial to South Africa in preventing losses estimated to be between six and fifteen percent due to cold damage. Exports under the pilot program will be destined to the ports of Newark and Philadelphia, and if the program is successful South Africa will also have access to Houston and New Orleans in 2015 and beyond. In September 2014, South Africa successfully exported citrus under this program to the port of Houston. 

South African citrus exports from CBS areas to the United States 

Currently, South Africa can only export citrus to the United States from official CBS free areas. The CBS free areas are found in the Western Cape and Northern Cape regions, including the magisterial districts of Hartswater and Warrenton, as well as relevant districts of the Free State and North West. On August, 28, 2014, the United States Animal and Plant Health Inspection Service (APHIS), issued a notice proposing to amend the fruits and vegetables regulations to allow the importation of several varieties of fresh citrus fruit, as well as Citrus hybrids, into the United States from areas in the Republic of South Africa where citrus black spot has been known to occur. 

Tightening of the European Market 

South African citrus exports enter the EU duty free under the bilateral Trade Development Cooperation Agreement (TDCA). On September, 8, 2014, South Africa voluntarily suspended citrus exports to the European Union (EU) as a precaution not to reach the five CBS detections that could have resulted in the EU further strengthening the citrus import measures or imposing additional restrictions to South African citrus exports. South Africa has indicated that these measures are unscientific and directed at prohibiting South African citrus exports to the EU. The voluntary suspension by South Africa excluded soft citrus and citrus produced in CBS free areas. The South African Minister of Trade and Industry has been quoted by media stating that South Africa will be lodging a formal dispute to the World Trade Organization (WTO) against the EU. Post contacts indicated that while they are in the process of preparing for this appeal, industry has been continuously engaging the EU to address the CBS issue. South Africa is expected to continue to aggressively diversify its citrus exports to other markets.