TIME: Almanac 1993/TIME Almanac 1993.iso/time/010890/0108205.000

Text File | 1992-08-28 | 5.3 KB | 121 lines

                                                                                BUSINESS, Page 59

What Rimes with Citrus?


Bitter cold bites growers, refiners and consumers


    The Arctic freeze that blasted across the U.S. last week
pushed its chilly talons deep into the national economy. How
far, farmers and commodities investors from Florida to Chicago
are still trying to figure out. Some of the effects were as
obvious as the icicles hanging from Sunbelt citrus fruit;
others, like increased demand for energy supplies and
bottlenecks in heating-fuel distribution, were harder to gauge.
U.S. consumers, however, were fairly certain they could count
on higher costs for food and fuel this winter.

    In Florida, where the freeze was most brutal, growers who
normally produce about 75% of the U.S. citrus crop (worth some
$3.5 billion  in 1989) had tried to prepare for the worst. They
banked orange, lemon and grapefruit trees with extra dirt and
fired up smudge pots to raise the temperature in their groves.
But the cold snap -- with wind-chill temperatures of -5 degrees
F as far south as Orlando -- lasted too long for such stopgap
measures. Many strawberry, orange and grapefruit crops were
completely ruined. Said Ben Abbitt, general manager of the
Haines City Citrus Growers Association, Florida's biggest
orange producer: "Mother Nature took us to the woodshed and
kept us there three long nights."

    At week's end, with growers scrambling to ship
freeze-damaged fruit to juice processors before it spoiled
entirely, industry losses had yet to be calculated. One stroke
of fortune was that in Texas some 40% of the crop had already
been harvested, though this year's calamity, which followed
freezes in December 1983 and January 1985, might still force
many small producers to the wall. Among the remainder, layoffs
seemed inevitable: Abbitt, for one, has furloughed 175 of his
450 workers.

    The weather was especially hard on growers in Texas'
depressed Rio Grande valley, where fruit and vegetable
production is the leading industry; citrus losses in that area
alone could reach $55 million. Winter vegetables, including
celery, cauliflower, radishes and broccoli, were heavily
damaged in the South. In Florida, virtually the entire $200
million vegetable harvest might be gone, and in Texas only about
20% of the crop might be salvaged.

    Consumers felt the pinch almost at once as some wholesale
vegetable prices tripled. Orange-juice prices were unlikely to
rise anywhere near as much, thanks to a large crop in Brazil
and normal production in California and Mexico, which escaped
the freeze. Nonetheless, traders on the New York Cotton
Exchange last week drove the price of a futures contract for
January delivery of frozen orange-juice concentrate to $1.61
per lb., up more than 25% in two weeks.

    Petroleum and heating-oil traders were equally bullish. The
price of home heating oil for January delivery rose to a 3-year
high of more than $1 per gal. in the futures market. Retail
prices are soaring. In parts of the Northeast, consumers are
paying as much as $1.40 for a gallon of home heating oil, up
more than 40 cents in three weeks.

    While the great cold stimulated heating demand, there were
significant crimps in supply. U.S. production was severely
impaired when a Dec. 24 explosion damaged the second largest
refinery in the country, an Exxon plant in Baton Rouge, La.,
that normally processes 455,000 bbl. of crude a day. The
accident, probably caused by a spark that ignited hydrocarbons
released from a pipe, killed two workers and injured seven
others. Company officials announced that the facility will
partly reopen this week. Other installations also suffered
shutdowns: Shell Oil closed two gasoline refineries in Texas
and Louisiana and curtailed operations at an Illinois plant
because of frozen equipment. Some facilities were operating at
about half capacity.

    Even if the weather improves, shortages of natural gas, a
popular alternative to heating oil, should keep overall energy
prices higher this winter than last. U.S. gas reserves remain
abundant. The problem is inadequate delivery: pipeline capacity
is seriously limited in some regions. Moreover, the cold caused
some gas wellheads to freeze up, trapping supplies in the
ground.

    Even where crops were not affected, the cold struck a blow
at agriculture by snarling transportation. On the Mississippi
River, barges were frozen north of Cairo, Ill. The sub-zero
temperatures hit midway through the biggest single delivery of
corn -- 11 million tons -- to the Soviet Union. Some 6 million
tons had already been shipped from Gulf ports, but the rest was
still in storage in elevators along the Mississippi.

    Finally, there was considerable property damage -- about
$300 million  in Texas alone, where insulating home water pipes
is seldom the uppermost thought on a homeowner's mind.
Plumbers, not surprisingly, finished the year working overtime.
Coming on the heels of two hurricanes as well as several floods
and hailstorms, the frigid interlude signaled that
home-insurance rates in the Lone Star State are likely to go
up.


By Barbara Rudolph. Reported by Martha Smilgis/New York and
Richard Woodbury/Houston.