Thursday, October 12, 2006

U.S. government predicts low Florida orange harvest

According to the federal government Florida will see its worst orange crop since 1990 due to Hurricane Wilma last year and the cold stretch that gripped Florida in February. The U.S. Department of Agriculture is predicting thirteen million fewer boxes of oranges will be picked this year as compared to last year. The U.S. Department of Agriculture predicted 135 million boxes of oranges will be picked in the 2006-07. This estimate is down from the average about 220 million boxes of oranges Florida usually produces during an average harvest. Due to the decrease in the supply of oranges, orange juice prices have already increased about 9 percent over last year and are expected to make further jumps. This decrease in the supply of oranges is bad for consumers, but is great for the growers who could see their best returns in 10 or 15 years due to the smaller crop. Will the decrease in the supply of oranges affect the prices of substitutes and complements of oranges and orange juice? Will the increase in the price for oranges and orange juice dissuade consumers from purchasing these goods? How wide will the effects of this small harvest be? We can only wait and see.

3 comments:

jasonbaumler said...

The raise in the price of orange juice will probably cause a decrease in the amount of orange juice sales. Oranges and orange juice have many substitutes which people will begin to buy more of. Other fruits such as apples, pears, and grapefruits will most likely see an increase in sales.

Paige Burton said...

I’m sure that with the decrease in orange production, the price of complements and substitutes will fluctuate. I’m sure the price of orange juice will increase, maybe making more customers switch to different juice flavors, and not drink orange juice at all. Orange juice is actually an important product in my life. A few years ago my dog was diagnosed with diabetes. When we take her blood pressure, and receive insulin feedbacks, if her sugar level is low, orange juice is one product we feed her to help increase her sugar levels. Sometimes instead of just water with her food, she receives orange juice. I know there are other products that can be substituted to increase sugar levels, but we usually buy orange juice by the bulk because we never know how much we are going to need. Now, with the shortage of oranges, the price of orange juice will rise. Not knowing how much price will rise, the increase may force my dog to find other means of raising her blood sugar levels.

tianzhang said...

I believe that the low Florida orange harvest is going to shift the supply curve of orange to the left, which increases the prices as well as decreases the quantity of orange. As a result, any industry that uses orange as their input will have to increase their cost of production, which will lead to an increase in the price of their final products as well. For example, orange juice and orange-related products will experience a rise in price. However, after a while, when consumers notice the rise in price, they will adjust their composition of consumption. For example, they might purchase other fruits instead of oranges because of the higher prices it charges. Then the demand curve for orange will shift to the left because few people would like to orange at the same price. This shift will have a downward pressure on the price and continuously decrease the quantity of orange. In other word, we will expect a decrease in quantity, but we are not sure about the price changes.