Bitter Brazilian orange growers turn to sugar cane
By Peter Blackburn BARRETOS, Brazil, Oct 10 (Reuters) - The fields surrounding the factory of the world`s biggest orange juice processor are full of crops -- but there is not an orange grove in sight. Instead, the Sucocitro Cutrale plant in northern Sao Paulo state is encircled by booming sugar cane. Spurred by strong world demand for cane-based fuel ethanol and soaring sugar prices, cane planting has risen dramatically in Sao Paulo over the last five years, and is rapidly swallowing up orange groves, pastures and other farm land. Brazil`s richest state grows two-thirds of the sugar cane and 80 percent of the oranges in the world`s biggest producer of the two commodities. Brazil accounts for 80 percent of world frozen concentrated orange juice exports. "Some 30 years ago there were only orange trees around my farm, now it`s nearly all cane," said farmer Douglas Kowarick, adding he now had 50 percent cane and his neighbor 100 percent. Kowarick also grows bananas and limes, and taps rubber. Orange trees currently cover only 15 percent of his farm near Colina, a 20-minute drive south of the Cutrale factory. Cars entering the farm are sprayed to protect against citrus canker, greening and other devastating orange diseases. Kowarick said that there were around 12 mills within a 60 kilometer (37 miles) radius competing for the rich red rolling farmland to grow cane. Millers offer to rip out old orange trees, plant and harvest cane in return for six-year contracts with prices fixed in relation to target yields and market value. "Farmers lease their land, they are paid in advance and can sit back," Kowarick said, adding that orange groves are prized because they are well-fertilized and provide higher yields. Leading orange growers said that farmers were fed up with the high risk and low return from growing oranges. "We want the cane concept to be used for fixing orange producer prices," said Associtrus President Flavio Viegas, who represents about 1,000 growers. Speaking in Brazil`s orange capital, Bebedouro, he said that Brazil`s four main juice processors -- Sucocitro Cutrale, Fischer Group`s Citrosuco, Citrovita, Louis Dreyfus-Coinbra -- have kept prices artificially low over the past 15 years. From the lofty Sucocitro-owned hotel and large modern shopping center in Bebedouro, orange groves can be seen sweeping up over the rich rolling farmland to the town houses. CANE: GREATER PROFIT, LESS RISK But agronomists said that cane is luring orange farmers. "It`s three times more profitable, depending on yields," said Ronaldo Cabrera, an independent agronomist adviser. He said that most of the groves around Bebedouro are old and yield fewer than 20 tonnes of oranges per hectare when they need to produce double to compete with cane. "Farmers prefer to bet on cane rather than be hostage to a few orange juice buyers," Cabrera said. Growers are awaiting the outcome of a government antitrust probe into their complaints of price fixing by processors. Associtrus estimates that farmers lost billions of dollars over the past 15 years due to artificially low prices. In August, processors offered 100 million reais ($46 million) compensation in return for the probe being dropped. They would this year raise prices to $4.50 per 40.8 kg box, from $3.50, but growers demanded $7 per box to cover costs. The University of Sao Paulo`s Center for Advanced Studies in Applied Economics CEPEA/ESALQ) estimated that the ratio of cane to oranges rose by 63 percent between 2001 and 2005, and the trend accelerated this year. Cane expansion has been greatest in north and northeast Sao Paulo state, mostly replacing old and diseased orange groves. "Cane advanced due to declining returns and increased risks in growing oranges," said CEPEA researcher Margarete Boteon, noting the high cost of fighting disease. Production in Sao Paulo, which grows about 80 percent of Brazil`s oranges, has been stable at around 350 million boxes the past three years. That`s enough to export 1.3 million tonnes of juice a year but insufficient to rebuild stocks. World prices soared after Florida`s orange groves were flattened by hurricanes, but Brazilian growers complained that they didn`t share the profit. "Supplies will be tight over the next two years," Cepea`s Boteon said. But she added that planting could rise in response to higher prices and output rise in four years` time. Associtrus` Viegas said that juice factories this year had to seek supplies from northeast Brazil and would probably close early in December due to lack of stocks. "Exports will probably fall but industry prices and margins are rising," he said. The juice industry is becoming more self-sufficient, investing heavily in planting some 2.5 million trees a year, and it now owns between 30 and 40 percent of the orange area. Brazil`s Association of Citrus Exporters (Abecitrus) said it was confident that orange output will rise in coming years due to higher yields gained from research into crop diseases and more intensive production. Abecitrus President Ademerval Garcia noted that orange production was migrating to the south of Sao Paulo state, due to the expansion of cane in the north, and that groves were increasingly being irrigated to combat drought. $1 = 2.149 reais Tuesday, 10 October 2006 12:13:40 Reuters
