4 Trends Affecting California Citrus Markets

January 30, 2023
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Taken together, oranges and other citrus crops are one of the largest crops in the world by total production, second only to bananas. AcreTrader has previously offered investors exposure to citrus orchards in two countries: the U.S. and Australia.

This article takes a look at several trends impacting the citrus market and how they are affecting California production in particular. We share AcreTrader’s investment outlook in light of these conditions, emphasizing, as with all California farmland investments, a keen focus on water security.

Key Takeaways:

  • Citrus greening disease is causing declines in citrus acreage in Florida, while California acreage remains unaffected.
  • Growing demand for easy-peel citrus varieties is driving expansions in California mandarin acreage.
  • California citrus acreage is increasingly migrating out of other growing regions to the San Joaquin Valley.
  • Water security continues to be of chief concern in California citrus plantings, and thus, property values.

1. Declining Florida Citrus Acreage

First, a look at the national market context.

California and Florida dominate U.S. citrus production, accounting for 96% of bearing citrus acres in the country. Arizona and Texas make up the remainder.

The key difference between the California and Florida markets is the type of fruit they produce. California fruit is centered around fresh production, while Florida largely produces fruit for processing. As a result of this, orange varietals in California tend to be Navels, which are seedless and easy to peel, while Florida produces Valencias, which have a higher juice content.

We have seen declines in acreage in Florida due to the presence of citrus greening disease. While this bacterial disease has infected trees across the states, causing a marked decline in yields, California has reported no presence of this disease in commercial orchards. The California Department of Food and Agriculture tracks the presence of pest and disease and has put in place strict quarantines to protect the citrus industry in California.

U.S. Citrus Market Overview
Florida Citrus Acreage Decline Leaves Opportunity for California

2. The Easy-Peel Boom

Domestic demand for easy-peel varieties is strong.

Easy-peel citrus is a descriptor and another term for mandarins, which itself is a category that includes clementines, tangerines, tangelos, and other citrus fruits. Their thinner skin, more easily removable than that of your average Navel orange, makes them very popular for fresh consumption.

According to research from Rabobank, mandarins are poised to surpass oranges as the top fresh citrus in the U.S. market. Mandarin acreage across California has grown by 6 times in the past 20 years due to year round demand for fresh produce.

In 2021-2022, mandarins commanded $38 per box, almost double the $21 they traded for in the 2014-2015 season.

expansion of mandarin acres

This trend contrasts with longer-term habits seen in U.S. orange juice consumption. Increased health consciousness among shoppers, competition from alternative health tonics, and a general reduction of Americans who eat breakfast have placed pressures on orange juice sales. The Covid-19 pandemic introduced a resurgence in the beverage due to its vitamin C content, but the continued sustainability of this new demand is yet to be seen.

3. Migration of Citrus Acreage Into the San Joaquin Valley

Most California citrus is grown in three major regions: the Coastal region, the Desert region, and the San Joaquin Valley, which accounts for the southern ⅔ of California’s Central Valley and contains what is sometimes referred to as the “citrus belt.”

As competition from imports challenges production in the Coastal region and the Desert region’s water security comes into question, citrus acreage, particularly lemons, continues to move into the San Joaquin Valley.

Major citrus marketer Limoneira stated that they are exploring an expansion of packing operations into the region in its Q2 2022 earnings call. The valley’s bearing acreage hit a 7.2% annual growth rate over the past 4 years, according to USDA data.

The California Department of Food and Agriculture’s latest citrus acreage report confirmed that overall citrus acreage continues to trend static. Casey Creamer, the President and CEO of California Citrus Mutual, commented on the reshuffle: “You’re probably going to see some acres decline even though in the Central Valley those numbers have climbed a little bit in an upward direction.”

lemon acreage san joaquin valley vs coastal region in California

4. Water Scarcity Issues in California

Across the Central Valley, water security continues to dominate the conversation in land purchasing decisions. This has resulted in a growing disparity between acreage with reliable multi-source water and ground that is supplied solely by well water.

This can be seen in the ASFMRA data shown below. Since the passage of the Sustainable Groundwater Management Act in 2014, land values in reliable irrigation districts with multiple sources of water areas have outperformed land with a single source of water.

water security and land values

As in many other California permanent crops, reliable water access has come under scrutiny in citrus production.

“We are going to see a lot of lemon [acreage] coming out of production as fallowing programs are put in place,” predicted Limoneira CEO Harold Edwards, referring specifically to California’s Desert region, which is reliant on the water-stressed Colorado River.

We believe that water security could be a factor in land values going forward, as properties with access to strong water rights take advantage of supply reductions in less water-secure areas. You can examine California’s water districts in greater depth using Acres’ California water layer.

AcreTrader’s Outlook on the Citrus Market

With California producing over 90% of U.S. fresh citrus, and that production concentrated into select growing regions, there is a natural limit on domestic supply. As U.S. consumers continue to seek healthy, portable snacks at their grocery stores, we expect California growers to fill this demand.

We at AcreTrader continue to focus our property diligence on water security as a key value driver as water availability continues to be a chief concern in California agriculture. We believe the continued popularity of easy-peel citrus varieties will continue to perform as water tightens supply.

Create your free account today to learn more about investing in farmland with AcreTrader, including investing in permanent crops like citrus orchards.

The above content is not intended to be a comparison between products, but is intended for general, educational and informational purposes only. Any performance noted is historical and there is no guarantee any trends will continue. All investing involves risks, including the complete loss of principal. Diversification does not guarantee a profit or protect against loss in a declining market. It is important for each investor to review their investment objectives, risk tolerance, tax liability and liquidity needs before investing. Investment vehicles have differences in fee structure, risk factors and objectives. Investments are considered speculative, involve a high degree of risk and therefore are not suitable for all investors.

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