Report Highlights:

Total citrus production for MY 2013/14 is forecast at 645,000 tons, 3.3 percent lower than the 667,000 MT of MY 2012/13. However, a higher quality crop is expected due to increased sugar content of the crop. Winter Unshu orange and late varieties production is forecast at 90,000 tons in MY 13/14, 7.2 percent of total citrus production. Unshu exports are forecast at 5,000 tons in MY13/14, 1,300 tons higher than MY12/13 due to more farms joining the export support program and the result of an EPA-established tolerance level for Mancozeb, a fungicide. Meanwhile, fresh orange imports are expected to remain at 150,000 tons in MT 13/14 due to stagnant consumer demand.

Production In marketing year (MY) 2013/14, total citrus production on the Korean island of Jeju is forecast at 645,000 tons, 3.3 percent lower than the 667,000 MT of MY 2012/13. The reduction is mainly due to the cyclical “bumper-bust” pattern as a result of the bumper crop year in MY 12/13. However, industry forecasts the quality of 13/14 crops will be higher than the prior marketing year due to little or no significant damage from typhoons during the summer season, and about 50 days of drought during the fruit growing period (September-October) increased the sugar content of the crop. Although the cultivated area for Jeju citrus is expected to decrease continuously, production is expected to increase slightly in the coming years with improved farming techniques such as an increased ratio of organic versus chemical fertilizers and timely disease and pest control.

The production of winter unshu orange and late varieties is forecast to increase in MY 13/14 due to an increase in cultivated area of these varieties. In MY13/14, the production of winter Unshu orange and late varieties are forecast at 90,000 tons, which amounts to 7.2 percent of total Jeju citrus production. The production has increased 82 percent since MY 07/08 from 49,500 tons. The increase of winter Unshu orange and late varieties production is due to the shift from open field production to rain shelter greenhouse in order to cope with the market opening for imported fruits. Particularly, about 20 billion won (US$ 18.8 million) of annual FTA support funds helped the farming shift in the Jeju citrus industry.

In MY 12/13, Jeju citrus production reached 667,000 tons, which is much higher than the forecast in 2012. Because no typhoon damage during the summer season and ample sunlight during the fruit growing season in autumn, a bountiful harvest resulted in a bumper crop year. Additionally, the increased production of late varieties and winter Unshu coupled with the good harvest in MY 12/13.

About 50 days of drought during the crop growing period after the monsoon season in MY13/14 created a high quality crop, while conversely this led to smaller fruit generally not acceptable for retail sale. In MY 13/14, the utilization of Unshu oranges for tangerine concentrate production is forecast at 65,000 tons, which amounts to only 10 percent of total citrus production and this represents a lower than average level volume (90,000 tons – 110,000 tons) in past years. The reduction in Unshu orange utilization for concentrate for MY 12/13 and MY 13/14 is a result of due to a reduced production of big size fruit for the past two years, and more farmers want to sell their quality fresh citrus in the retail market.

In MY 12/13, the utilization of Unshu oranges for concentrate production was approximately 56,000 tons, which is about 46 percent lower than the 103,000 tons in MY 11/12 due to increased sales in the market for quality crops and reduced production of big size fruit.

As an increase of direct sales between producer and consumer including internet sales, sales volume in “other” distribution channels (includes exports and military consumption) increased to 180,738 tons in MY 12/13, which is 59 percent higher than the 113,329 tons in the previous season. In MY 13/14, the “other” consumption volume is expected to be similar to MY 12/13 at 180,000 tons.

Consumption

As a result of reduced supply in imported fruits including bananas and kiwis with increased prices, the sales of domestic fruits (apple, pears and tangerines) are expected to increase in MY 13/14. Although total Jeju citrus production is expected to decrease slightly to 645,000 tons in MY 13/14, Unshu orange price is expected to increase due its improved quality (sugar content), as well as increased prices for imported fruit in the market.

FTA transition Fund

The FTA fund has allocated 22.1 billion won (US$ 20.8 million) for 2014, which is 2.8 billion lower than the previous year. The FTA fund will be used for crop quality improvement and to build infrastructure, such as packing houses and installation of rain shelter greenhouses.

Greenhouse Citrus Production

In MY 13/14 season, Unshu orange greenhouse production is forecast at 20,000 tons, which is a similar production level of the previous season at 19,963 tons. The Jeju citrus industry estimates the 20,000 tons of greenhouse citrus is an appropriate level during the summer season following the completion of the open field Unshu orange harvest.

Trade

Unshu orange exports are expected to increase slightly to 5,000 tons in MY 13/14 season, which is about 1,300 tons higher than MY12/13 due to an increasing number of farms joining the export support program provided by the Jeju provincial government. As of result of an established tolerance level for Mancozeb by the Environmental Protection Agency (EPA) in July 2013, the export volume to the US market is also expected to grow gradually in the coming years.

Fresh orange imports are expected to remain at 150,000 tons in MY 13/14 due to stagnant demand by consumers who are looking for new imported fruits rather than the typical imported fruits like oranges, bananas, pineapples, etc. In addition, as of result of two consecutive years of good harvests of local fruits with improved quality (higher sugar content) than past years, demand for domestic fruits is expected to increase accordingly in MY 13/14. In MY 11/12, fresh orange imports from the U.S. increased to 173,455 tons due to poor domestic fruit production and tariff reduction under the KORUS FTA. However, many importers suffered losses because market prices were lower than import prices. Therefore, in MY 12/13, the import volume decreased to 152,415 tons which is 12 percent lower than the previous year.

For fresh lemon imports in MY 12/13, Korea imported 12,408 tons, 20 percent higher than the 10,352 tons in MY 11/12 season. U.S. fresh lemon imports amounts to 91 percent of total import volume. Industry estimates the increase is due to lemonade sales increase during the summer season and a steady increase in demand in the HRI sector for supplementing materials usage. For grapefruit imports, Korea imported 11,363 tons of fresh grapefruits in MY 12/13 and the U.S. ranked first with a 77 percent share, followed by Israel with 17 percent and South Africa with 7 percent.

Frozen Concentrated Orange Juice (FCOJ) Market Situation

Korea’s frozen concentrated orange juice (FCOJ) imports are expected to remain at 23,000 tons in MY 13/14 season, which is a similar level to MY 12/13 at 22,817 tons. However, Korea’s demand for FCOJ has been decreasing in the past years due to consumer demands for various drinks including coffee, mineral water, and sports drinks. As a result of tariff elimination for U.S. FCOJ under the KORUS FTA, the import of FCOJ from Brazil shifted to U.S. origin in MY 12/13 with an 83 percent share of 19,418 tons, while FCOJ imports from Brazil dropped significantly by 98 percent to 271 tons from 13,944 tons in MY 11/12. In MY 12/13 the total imports of FCOJ dropped slightly to 22,817 tons, 5.3 percent lower than the previous year, however U.S. FCOJ amounted to 83 percent of market share compared to 26 percent in MY 11/12. The FCOJ market is expected to reduce gradually or stagnate in the coming years because of consumer demands for various drink products, while demand for premium juice products, such as freshly squeezed orange juice is still expected to increase gradually