Page last updated at 22:45 GMT, Thursday, 21 September 2006 23:45 UK

Brazil feels the squeeze in juice war

By Robert Plummer
Business reporter, BBC News, Araraquara, Brazil

Luiz Fernando Catapani gestures proudly at the groves of Pera Rio orange trees that stretch away to the horizon on his family's huge farm, deep in the heart of Sao Paulo state.

Luiz Fernando Catapani, vice-president of the Catapani firm, on his family's estate near Araraquara, Brazil
Catapani is one of numerous firms that grow oranges for juice

"This is the filet mignon of oranges, the Mercedes-Benz of oranges," he says as he drives us down the bumpy red-dirt track that runs through the orchard.

The long harvest is under way on this and more than 35,000 other estates throughout the region, as teams of workers labour to strip the orchards of their ripe fruit and pack them into plastic crates.

Few of those oranges will actually be eaten whole. The vast majority will be taken to nearby factories to be processed into juice and exported to countries including the UK and other European Union countries, as well as Asia and the Arab world.

However, most consumers will be completely unaware of where their orange juice came from. It's not as if the Tetra Pak cartons in UK supermarkets such as Sainsbury's or Tesco ever identify Brazil as the origin of their contents.

If pressed, the average shopper would probably mention the US state of Florida as the likely source. But as it happens, the Brazilian state of Sao Paulo overtook its North American rival back in the 1980s to become the biggest producer of orange juice in the world.

Brazil now has 48% of the world orange juice market, pushing US growers into second place with just 37%. But the rivalry between the top two producers has turned sour, with both sides accusing each other of unfair trade practices.

Raw material

So why is Brazil's achievement in this area of agriculture so ignored? After all, everyone knows that, as the song goes, they've got an awful lot of coffee in Brazil, but the country's other great presence on the world's breakfast tables has passed virtually unnoticed.

"The citrus industry in Brazil is much more recent than that," says the president of the Abecitrus exporters' association, Ademerval Garcia.

Orange tree at the Fazenda Santa Maria, Analandia

"There's been a coffee industry for centuries in Brazil, while the citrus industry only really began in the early 1960s.

"That's part of the reason. The other part is that we mainly export concentrated juice, a raw material that is used, sold and branded by customers abroad without reference to its origin.

"The only place in the world where they place a lot of emphasis in the juice's packaging on its Brazilian origin is the South Korean market. In other countries, it's really not known that Brazil is the biggest producer worldwide."

Tariff troubles

Brazil first got into juice production because severe frosts had dealt a devastating blow to Florida's orange crop. But now companies such as Brazil's Cutrale, which produces one glass in five of all the orange juice drunk in the world, have bought their way into the US market.

In 1996, Cutrale acquired two Minute Maid juice processing plants in Florida from Coca-Cola, which wanted to withdraw from that side of the business.

Glass of orange juice at Cutrale's factory in Araraquara
Cutrale produces one-fifth of the world's orange juice

Yet as Cutrale's financial and administrative director, Jose Cervato, points out, that did not make it any easier for the firm to sell its juice in the US.

"There's a very high tariff barrier there, $450 per tonne, which is excessive and prevents competition," he said.

"That means Brazilian orange juice cannot compete with Florida juice, which will always be cheaper. Brazilian juice is only viable when there's a lack of it over there, as is happening now, because hurricanes caused a big fall in production. So Brazil has begun exporting to the US again."

However, Brazilian exporters have met with stiff resistance from Florida-based processors, who accuse them of selling both frozen concentrate and not-from-concentrate orange juice at unfairly low prices.

The US Commerce Department agrees. Earlier this year, it slapped anti-dumping duties of 19.19% on Cutrale's juice, while other Brazilian firms face penalties of up to 60.29%.

Harvest time

At the Fazenda Santa Maria in Analandia, 60km (37.5 miles) from Araraquara - a farm owned and run by Cutrale - there is a sign on the gate warning that no-one under 18 is allowed to go near the fruit-picking.

Fruit-picker Antonio Leandro at the Fazenda Santa Maria
Antonio Leandro says he enjoys his work

Inside, 39-year-old Antonio Leandro, who has come from Araraquara by bus with a team of workers, is busy plucking oranges from the trees as he has done for the past six years.

"I like this job because I earn more money," he says. "It's better than getting a job in town and being paid the minimum wage (350 reais a month; $163.40; £86.83)."

Antonio reckons that he can fill 180 crates with oranges during his eight-hour working day. For each box, he is paid 38 Brazilian centavos, giving him 68.40 reais a day or 1,368 reais ($635; £338) a month.

That may not be much by developed country standards. But since official figures issued this month indicate that the average Brazilian monthly salary is now 805 reais, he seems to be doing well - although, of course, the harvest normally lasts for just six months of the year.

'Not proven'

US juice producers are frustrated by the fact that picking and transporting oranges in Florida costs nearly four times as much as it does in Sao Paulo state.

They accuse their Brazilian counterparts of everything from exploiting their workers to using child labour - to the annoyance of Abecitrus' Mr Garcia.

Ademerval Garcia, president of Abecitrus
Ademerval Garcia rejects allegations of unfair competition

"It's very difficult to prove your innocence. You can only prove guilt," he says. "And guilt was never proven. Not child labour, not slave labour - none of this was ever proven.

"It's never been proven that we get any kind of subsidy or that we've been dumping our goods.

"We were found guilty of dumping in a judgement with three votes in favour and three votes against. And whenever there's a stalemate like that, it goes in favour of the one bringing the action.

"We've tried to take a positive view and make common cause with the producers in Florida and up to now, we haven't succeeded. But even the governor of Florida has told them - don't look to us, look to China, because the risk to your market is coming from there, not here."

Efficiency

Brazilian citrus producers had hoped that plans to create a Free Trade Area of the Americas would have resolved their dispute with Florida and given them greater access to US markets.

But with that scheme now dead and the Doha global trade talks suspended, there seems little prospect of dealing with what has become a major bone of contention between the economic giants of North and South America.

Luiz Fernando Catapani says Brazilian farmers are being penalised for their efficiency, in a way that is ultimately to the detriment of the US consumer.

"If the US is having to import Brazilian orange juice, it just means Americans are paying more for their juice," he says.

It all highlights the difficulty of getting any of the world's main players to make concessions on agricultural trade barriers - the issue that sank the Doha Round in the first place.

Brazilian orange juice may taste sweet at breakfast time - but for supporters of free trade, the whole saga leaves a bitter aftertaste.



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