Brazil is becoming a leading food and agribusiness export country. Exports went from US$ 20 billion in 2000 to US$ 75 billion in 2010, bringing a surplus of more than US$ 60 billion to the country trade balance. Several products are being exported. Of the US$ 75 billion, around 22 per cent are soybean complex, 18per cent sugar and ethanol, 18 per cent meats (beef, poultry and pork), 12 per cent is forest products (including paper and pulp), 8per cent is coffee, 4 per cent of tobacco, 4 per cent of other cereals and 3 per cent of fruit juices, almost all being orange juice.

In 2011 the results were even better, since agribusiness exports went to US$ 90 billion, and the surplus was of US$ 75 billion. In 2000, Europe and the USA represented 60 per cent of the Brazilian food and agribusiness export market. Ten years later, represented only 34 per cent of share. In other hands, Asia, Africa, Middle East already bought more than 50 per cent of exports. China is a great client and agribusiness is one of the few sectors of Brazilian economy that have surplus, and the responsible sector for generating cash to finance imports of almost all products.

Within agribusiness, one of the most important chains is the orange juice. Brazil is a long-term very traditional supplier to the USA and Europe. This chain generates 400 thousand jobs in Sao Paulo state, where it is located and almost US$ 2 billion in exports every year, contributing strongly to the development of the country. It is a chain full of challenges, with cost increases, stable production and worldwide stable to declining consumption of its major product.

This article has the objective of analyse the structural changes in the Brazilian orange juice chain in the last 20 years. The major conclusions were:

About the orange juice chain structure, total planted area in Brazil reduced by around 8per cent since the beginning of the 1990s followed by gains in productivity due to the use of technology. The national average of 380 boxes per hectare, in 1990, jumped to almost 500 boxes per hectare.

The rise in operational cost of orange production was around 202 per cent in dollars between the 2002/03 and 2009/10 growing seasons, from US$1.31/box to US$3.96/box. This dynamic is hitting all, but more the 87 per cent of the producers in the citrus belt of smaller size (11,011 producers with less than 20 thousand trees). Concentration of larger properties in the number of trees has increased.

Also the operational cost for processing the oranges and transporting the juice from the factory gates to the overseas port terminals increased over 50 per cent in ten years and to pursue scale, this cost increase also leads to concentration, and now more than 95per cent of Brazilian orange juice is supplied by 3 companies.

The concentration in retail over the last two decades forced downstream consolidation among bottlers, which are direct buyers of orange juice exported from Brazil. In 2009/10, only 30 bottlers bought 71 per cent of global production of orange juice. So there is concentration going on in all levels of this chain.

The conclusions regarding juice demand are also preoccupant. The United States answers for 35 per cent of global consumption. The demand for orange juice has dropped by 19 per cent in the last eight years, equivalent to a drop in the annual demand of around 44 million boxes of oranges (40.8kg). In the top 14 Western European markets, the decline was of 12per cent, lead by Germany, with a 22per cent decrease.

The market grows in Asia and other emergent economies, but is it not 100 per cent juice. From 2007 to 2010, the rate of growth of ready-to-drink beverages in emerging markets intensified reaching an annual rate of 11per cent, 6per cent in the Middle East, and 4per cent in Latin America. Most of the growth was in still drinks and nectars.

It is a chain also where Brazil faced an incredible change is the destiny of the orange juice. In the 80's, around 50-55 per cent of all the juice sold had as buyer the USA and around 40-45 per cent was sold to Europe. In 2010, the USA only represents around 13 per cent of Brazilian exports, and Europe around 70 per cent. Sales to Asia and other continents now represent more than 15 per cent, being even larger that the USA, the most traditional market for the Brazilian juice.

The USA needs to complement the internal orange juice market with imports. And Brazil lost market share in the last 15 years, coming from 80-90 per cent of USA imports in the beginning of the nineties to 50-55 per cent nowadays. With economic advantages coming from the non-imposition of import duties and anti-dumping fees, Costa Rica and Mexico conquered space in the supply of orange juice to the United States. Due to all facts described, it doesn't seem that Brazil will rebuilt it's market share and position within the USA.

Finally, the orange juice chain has serious challenges related to increasing costs and falling consumption. It is time to think in how to revert this process. It is possible, and a strategic plan is needed, probably involving Florida, Sao Paulo and Chinese organizations and institutions.

The author is professor of strategic planning and food chains at the School of Economics and Business, University of Sao Paulo, Brazil and international speaker.