ASME 1993 Citrus Engineering Conference CEC1993 March 25, 1993, Lakeland, Florida, USA CEC1993-3906 Downloaded from http://asmedigitalcollection.asme.org/CES/proceedings-pdf/CEC1993/99809/71/2370690/cec1993-3906.pdf by guest on 01 October 2021 CITRUS JUICE PROCESSING IN BRAZIL by Daniel S. Marques Manager Industrial Research and Development Sucocitrico Cutrale Ltda. Araraquara, S.P. Brazil ABSTRACT The evolution of the Brazilian citrus processing industry is revised and the new trends are discussed. The production of Frozen Concentrated Orange Juice (FCOJ) in Brazil, mainly in the State of SBo Paulo is outlined. Comments on the technology and management strategies that have been used to keep the competitive position of the Brazilian citrus industry will be addressed. Special attention is dedicated to the constraints and the new opportunities that this important sector of the Brazilian industry will face in the near future. EVOLUTION OF BRAZILIAN CITRUS INDUSTRY Orange (citrus sinensis) is the most important citrus fruit cultivated in Brazil. Being of Published with permission. Asiatic origin, oranges were brought to Brazil in the beginning of the sixteenth century by the Portuguese pioneers. Although there are no records on where the first citrus trees were planted, by the middle of the sixteenth century the orange trees were spread all along the Brazilian sea coast, from north to south. (Figure 1) Downloaded from http://asmedigitalcollection.asme.org/CES/proceedings-pdf/CEC1993/99809/71/2370690/cec1993-3906.pdf by guest on 01 October 2021 I 16thCENTURY BRAZILIAN ORANGE GROWING AREAS I It was only in the nineteenth century's records that we could find some indication of the appearance of commercial groves. The predominant varieties according to the records were: "seleta orange", originated from "Valencia", brought from Portugal and Spain, and "bahia", a bud mutation of "seleta" orange. In 1960, the Brazilian production of oranges had nearly reached the level of 1.64 Millino Metric Tons (MMT), 50% of this total was produced in Sio Paulo. By that time, 620 Thousand Metric Tons (TMT) of Sio Paulo production were used to supply the domestic consumption, 160 TMT were exported fresh and approximately 40 TMT were packing house rejects because of size and other aspects. Taking advantage of the very low prices of the rejected fruits, some small orange juice plants were installed in the countryside of the State of S2o Paulo, near the existent packing houses. These processing plants produced primarily preserved concentrated orange juice which was packed in wood barrels, and as a by-product they produced cold pressed orange oil. The scenario of the Brazilian citrus industry was not very promising until the end of 1962, when the Florida groves were devastated by a dramatic freeze. Knowing that the Florida citrus groves would take three to four years to recover their growth rate, marketing and quality experts from Florida began to look elsewhere for citrus Downloaded from http://asmedigitalcollection.asme.org/CES/proceedings-pdf/CEC1993/99809/71/2370690/cec1993-3906.pdf by guest on 01 October 2021 growing regions that could fill the void created by the Florida freeze, with orange juice of comparable characteristics. These requirements were met in the State of SBo Paulo, where a group of entrepre- neurs accepted the challenging opportunity. In the second half of 1963, a few months after the freeze in Florida, the first Brazilian orange juice plant was installed in Araraquara, State of Sao Paulo, using Florida expertise to produce Frozen Concentrated Orange Juice (FCOJ) with the quality standards required by the American market. At the same time, the small plants producing preserved orange juice, equipped them- selves to produce FCOJ, which was packed in steel drums and transported by reefer container ships. The economic results of the enterprise were so promising that in the following three years, six new factories were installed in the State of SBo Paulo. The processing capacity of the Brazilian citrus industry was nearly 490 TMT of orangs in 1968 and since the production was focused on exports, Brazil reached the position of world leader in exports of FCOJ. With international quality standard, the Brazilian orange juice was introduced in the European and Scandinavian market through the dairy products packers, which were responsible for the establishment of the habit of drinking fruit juices and the increase in consumption as well. The favorable market responses experienced by the citrus industry were enough to develop a new concept in citrus planting, because it was clear that the orange varieties more adapted to the European fresh market requirements had to be replaced with varieties more suitable for processing into concentrate. The continuous growth of the Brazilian citrus industry took the Brazilian exports to 11.6 million gallons of 42" Brix concentrate in 1970 and the processing capacity to nearly 612 TMT of oranges. From the total exports, 85% were destined to European countries and 15% to North America. Although there was a constellation of positive facts, the optimism wave was not a consensus because to some investors, the Brazilian citrus industry was a temporary operation that was destined to face difficulties when the Florida groves recovered from the 1962 freeze. In fact, to their surprise the Brazilian conditions for growing citrus were different from Florida, and the differences in the cost of labor and raw material were important factors to support the industrial growth during the upcoming years. The Brazilian citrus industry was not intimidated when Florida started to show the first signs of recovery because the European market was expanding in West Germany, Holland, Scandinavia and in the United Kingdom. Meanwhile, factors other than the low cost of labor and fruit contributed to the growth of Downloaded from http://asmedigitalcollection.asme.org/CES/proceedings-pdf/CEC1993/99809/71/2370690/cec1993-3906.pdf by guest on 01 October 2021 the agricultural activities in the 70s in Brazil, for example: 1) Short term loans (up to 180 days) for the manufacture of exported goods at subsidized interest rates; 2) Credits to exchange operations; 3) Average or long term loans (3 months to 5 years) for industrial construction or expansion for the manufacture of exported goods at subsidized interest rates; 4) 28% return on taxes and duties charged on exported products; 5) Financing of agricultural projects at subsidized interest rate; 6) Federal taxes reduction for companies with ongoing reforesting projects. It is important to mention that these incentives were not specific for the citrus industry. They were derived from governmental programs intended to support the growth of the Brazilian economy, but without them the brazilian citrus industry would not have reached the actual development state. Thus, it is possible to assume that the development of the Brazilian citrus industry was not only caused by the increase in orange juice consumption, but by a number of other advantageous conditions, like: 1) Plentiful and increasing supply of good quality raw material at low cost to give competitiveness in the international market; 2) A good supporting structure of transportation, energy supply, technical assistance, labor, research and other related factors necessary for the production, storage and distribution processes; 3) The governmental economic programs mentioned before. These attractive conditions soon brought new investors to the citrus business and the Brazilian orange crop increased at an average rate of 9.0% a year from 1968 to 1973. The elapsed time between 1974 and 1976 was marked by a serious economic crisis in the agro-industrial sector in Brazil. This was the result of the policies of rates and tariffs on imports imposed by the importing countries, the increase in transportation cost between the exporting countries and importing markets caused by the oil crisis and the recovery of production in the United States. These factors together brought the Brazilian orange juice prices to the lowest levels since 1962, which led some companies to relinquish the citrus segment and other companies to go bankrupt The production of FCOJ became concentrated in four big processors, which had to find alternatives to keep competitive in the new reality. This was a good survival exercise for the 1979180 season when the prices of the Downloaded from http://asmedigitalcollection.asme.org/CES/proceedings-pdf/CEC1993/99809/71/2370690/cec1993-3906.pdf by guest on 01 October 2021 Brazilian FCOJ went back to the same levels practiced in 1974. With the experience acquired in the two crises and a scenario indicating that the future of the Brazilian citrus industry would depend on the price and quality competitiveness, the biggest processors began to sponsor internal programs for technological development and one of the most important achievements was the introduction f the concentrate bulk handling system which was responsible for considerable savings on transportation costs. This movement towards process improvements was accelerated when the government announced that after 1979 the incentives and financing projects at subsidized interest rates were to be gradually eliminated due to the constant pressures imposed by the GATT over the Brazilian exporting policies. It was considered that the credit over exchange operations given to the Brazilian producers was causing dumping in the international market. The reduction of incentives and credits to the Brazilian exporters did not cause the desired effect on Brazil's international relations and the lack of competitive prices of the Brazilian exports in the 1980181 orange crop together with the turbulent national economi- cal environment brought difficulties to the Brazilian exporters who in some instances had to work under the break even point to keep in business. These difficulties forced the Brazilian citrus industry to look into alternative solutions like the development of other potential markets, the improvement of the current technol- ogy of planting and processing of citrus and the search for alternative sources of energy.