Citrus board considers raising grower taxes to keep up sales momentum

Kevin Bouffard
The Ledger
The Ledger

BARTOW – The Florida Citrus Commission will consider increasing growers’ taxes as much as 114% in order to sustain a surge in retail orange juice sales since the COVID-19 crisis began in March.

The commission, the governing body of the Florida Department of Citrus, is scheduled to decide on a 2020-21 budget, including a preliminary decision on tax rates, at its next meeting on June 17. The department’s fiscal year begins July 1, but it has until Oct. 31 to make a final decision on tax rates.

The Citrus Department is a state agency that promotes Florida citrus products, primarily orange juice. It is supported primarily by the tax growers pay on every box of commercial citrus harvested.

Although Florida citrus growers have fought tax increases in recent decades, their attitudes may have changed, said Ned Hancock, the commission chairman and an Avon Park grower, on Thursday.

“I would say 80% of the growers who have contacted me, they have all talked about the need to capitalize on the trends of recent consumption and that the department’s marketing plan ought to maintain that level,” Hancock said. “They understand we’ve got to make a larger investment in our market.”

Retail OJ sales in major U.S. outlets increase 31% in gallons for the four weeks ending May 9, sending seasonal sales since October up 9% by volume, according to a department report. Except for one season, U.S. retail OJ sales have declined continuously since the 2000-01 season.

Hancock spoke to those growers since the Citrus Commission’s May 20 meeting, when it discussed the department’s 2020-21 marketing plan and the taxes to support it.

Growers currently pay 7 cents per box of juice oranges, which account for 96% of this season’s projected total of nearly 70 million boxes, according to U.S. Department of Agriculture statistics. The 2019-20 citrus harvest has largely concluded.

Commissioners settled on three possible tax rates for the 2020-21 season beginning in October: the current 7 cents per box; 12 cents per box, a 71% hike; and 15 cents. The commission staff had proposed a rate as high as 18 cents per box.

The staff also proposed rates of 5 cents per box on fresh oranges, 7 cents on each box of grapefruit, tangerines and tangelos. The commission appeared to reach a consensus on not changing those rates.

The Citrus Department staff based its budget numbers on a projected 70 million-box orange harvest in 2020-21; 5.2 million boxes of grapefruit, up from 4.9 million boxes this season; and 1 million boxes of tangerines and tangelos, off 20,000 boxes from the current season.

Keeping the juice orange tax at 7 cents would support a total department budget of $18.8 million, including $14.85 million for orange juice marketing, said Christine Marion, the department’s chief financial officer. That compares with the current $15.5 million budget.

At the 12-cent rate, the total budget would rise to $22.1 million, including $18.1 million for OJ marketing, according to Marion. The 15-cent rate would support a roughly $24 million budget, including approximately $20 million for orange juice advertising.

Complicating those calculations was including $5 million the Legislature approved from general revenue for Citrus Department marketing. Although Gov. Ron DeSantis also had that appropriation in his proposed 2020-21 budget, the money remains in doubt as the state government faces billions of dollars in lost revenue related to the state’s COVID-19 economic shutdown.

Shannon Shepp, the department’s executive director, told commissioners she’s confident DeSantis won’t veto the $5 million appropriation.

Hancock said Thursday he doubts the governor will make a decision by the commission’s June 17 meeting, just two weeks before the beginning of the state’s fiscal year.

Further complicating the budget calculation is the issue of whether to spend almost $3 million from unspent budget reserves, as proposed in the staff budget. Spending that much will reduce the department’s budget reserves close to the minimum level set by policy, or 17% of the budget, Marion said.

Commissioners asked Marion to present budget scenarios on June 17 assuming 12-cent and 15-cent tax rates with no spending from reserves as well as 7-cent and 12-cent scenarios assuming the roughly $3 million spent.

Commissioners on May 20 debated whether to keep the juice orange tax at the current rate versus some kind of tax increase.

“We have no choice to go at least to 12 cents or otherwise we’re going to have to quit advertising,” said Commissioner Steve Johnson, a citrus grower and grove caretaker based in Wauchula. “That doesn’t make any sense to me.

Hancock argued the Citrus Department needed to try to sustain the momentum in OJ sales seen in recent months.

“Whether we can or can’t, we definitely can’t if we don’t try,” he told commissioners. “I’m personally convinced that that investment is the most significant investment I can make to try to improve the long-term prospects for this industry.”

Proponents of a higher tax argued increasing retail OJ sales would boost the demand from juice processors for the 2020-21 orange crop, thus increasing the farm price they will pay for the fruit.

Bill Poulton, director of fruit procurement for Tropicana Products Inc., the largest U.S. orange juice processor, argued for keeping the tax at 7 cents because of so many market uncertainties, including the size of next season’s Florida orange crop and whether the current OJ sales trend is a temporary blip in a nearly 20-year trend of declining U.S. orange juice sales.

“It seems to me that the burning platform for budgeting is more the 2021-22 season versus the 2020-21 season, so I would suggest that there’s no need to rush into a rate increase,” Poulton said. “If we were to maintain the same rate, we would have the next year to monitor all the different variables that none of us can predict at the moment, and we would have a better line of sight for the 2021-22 season.”

Marty McKenna, a Lake Wales-based grower, shot back: “That stand and that direction for the last five years has contributed to the situation we’re in now.”

McKenna, who has served on the commission since 2011, has been the most vocal advocate for more OJ marketing in the past several budget debates.

Whether a blip or not, OJ sales have improved significantly since March.

According to the Citrus Department’s monthly nationwide consumer survey, 39% of respondents in March reported they had purchased more orange juice in the previous month because of COVID-19, said Marisa Zansler, the department’s director of economic and market research. Some 31% of respondents in April reported the same.

Prior to the 31% jump in OJ gallon sales as of May 9, orange juice sales soared 45.6% by volume for the four weeks until April 11.

Mike Sparks, the chief executive at Florida Citrus Mutual in Bartow, the growers trade group, said on Thursday its board of directors will not meet until Wednesday to discuss the proposed Citrus Department spending plan.

He would not be surprised if the board took no position until October because of all the market uncertainties, Sparks said.

“We’ve got more questions than answers,” he said. “It’s not a ‘case closed’ situation.”

Ray Royce, executive director of the Highlands County Citrus Growers Association Inc. in Sebring, said his board won’t meet until Thursday but would probably endorse some kind of juice orange tax increase. Highlands is the third largest orange-producing county in Florida.

“There’s a recognition the citrus industry needs to make as solid an effort in marketing as possible,” Royce said. “They (Highlands growers) are concerned about what is the long-term fate of the citrus industry and how do they survive.”

Kevin Bouffard can be reached at or at 863-802-7591.