Citrus
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Citrus Description of the Industry
Citrus is a major international commercial fruit crop that is widely consumed both as fresh fruit or juice on a global scale. Its worldwide demand is attributed to its high Vitamin C and antioxidant content. The citrus industry within the Cacadu District Municipality is largely focused in the Sundays River Local Municipality, where the small town of Kirkwood is considered to be the citrus capital of the Eastern Cape and is also the centre of one of the largest citrus regions in South Africa, with approximately 12,000 ha of citrus orchards. Approximately 8 million cartons of oranges, lemons, grape fruit and soft citrus are exported. Harvesting normally takes place throughout the winter, May to October.
The table below outlines the citrus producing provinces in South Africa, and their percentage contribution to the total citrus production within the country in 2004.
Table : Total citrus production area in South Africa
Source: Citrus Business Plan, 2006
From the above table it can be seen that the Eastern Cape Province is the most significant contributor to citrus production in South Africa, this trend has remained steady since 2004 and still recognizes the Eastern Cape as the key contributor of citrus today. The Cacadu District Municipality maintains its reputation as the largest citrus producing municipality within the province. The citrus that is grown in the Sundays River Valley equates to about 12 million cartons per year, where growers in the area constantly explore new varieties in order to satisfy the perceived demand in the market place.
Tree age plays a vital role in determining the value of a farm, most cultivars start to bear in year three, although in hotter climates it can be earlier and in colder climates a year later. Lemons also start a year earlier because of its vigorous growth habit. The lifespan of citrus trees varies for different cultivar varieties. The following is averages for different cultivars:
Tree spacing has a direct impact on production (tons/ha), orchards with a 660 per hectare or more can be classified as high-density spacing, while anything less than that is classified as conventional spacing.
Value Chain
Figure : Citrus supply chain
Source: The fruit industry plan (2004)
Global and National Market Trends The South African citrus industry is the 3rd largest exporter of citrus in the world, despite being placed 13th in the world citrus production rankings. According to the Fruit Industry Plan (2004) the estimated value of the annual crop is R2.8 billion of which exports account for R2.5 billion, or approximately 90%. During harvest time South Africa supplies about 85% of the Japanese demand for grapefruit, oranges and lemons.
In 2004 the Eastern Cape Province contributed 26% of the South African production. The export market is the greatest market for citrus, with Northern Europe being the most important destination, followed by the Middle East, Russia, Southern Europe, the Far East and the United Kingdom.
Area Identified and Land Availability
Oranges are mainly produced in the Kirkwood area. Other areas in the Cacadu district are only marginally suited to citrus production under irrigation and include areas to the east of the Sundays River Valley, the northern parts of Camdeboo, south of Klipplaat in Ikwezi, the Aberdeen Plain west of Willowmore and in the Koukamma Municipality around Kareedouw. Other marginally suitable soils also include limited areas of the Blue Crane Route Municipality around Somerset East and Cookhouse and scattered areas of the Makana Municipality.
Figure 1: Potential Citrus Production Areas in CDM
Source: Cacadu District Municipality
Citrus production, i.e. oranges, is mainly produced in the Kirkwood area. This area is highly suitable for the production of oranges under irrigation yielding a potential of 20 to 30 tons per hectare, while other areas in the Cacadu District are only marginally suitable for the production of oranges under irrigation with a potential yield of 15 to 25 tons per hectare.
Industry Associations
§ The Citrus Growers Association of South Africa (CGA)
§ Citrus Research International
§ Department of Agriculture
§ Sundays River Citrus Company
The most influential industry association within Cacadu is that of the Sundays River Citrus Company (SRCC). This company is the leading citrus producer in the province and has grown to become the largest packer and marketer of citrus in Southern Africa.
Land and Climatic Characteristics
Climate, especially temperature, is the most critical factor for citrus production as all growth and physiological processes are dependant on temperature. Therefore the ideal growth temperatures are between 10 – 30°C, the optimum is between 20 – 28°C, with night temperatures of between 10 - 14°C in June. Suitable areas for citrus are grouped together in four climatic zones, for the Eastern Cape, it is “Cold Areas” such as the East Cape Midlands, Gamtoos River Valley, Sundays River Valley and the surrounding areas.
Citrus is divided into cultivar groups based on their origin, characteristics and ripening times. Each cultivar group has a unique climatic requirement that is dependent on temperature, heat units, day length, light and humidity. Therefore in the Eastern Cape, which is considered a “Cold Area”, the most suitable cultivar groups consist of:
§ Mandarins – Satsumas, Clementines and Mandarin Hybrids
§ Lemons
§ Navels
§ Certain Valencias
Soil preparation is essential to optimize citrus production, therefore the ideal chemical soil requirements are:
Infrastructure
A good irrigation system will contribute to optimized citrus production. Citrus uses a vast amount of water, especially when the canopy volume (tree age) increases. The most cost effective irrigation method is drip irrigation, this system makes functions by using just 3-4 litres of water per hour, it consists of a pipe with specially designed nozzles which drip water at a pre-determined rate.
The citrus infrastructure and support industries are well developed in the Kirkwood, Addo and Lower Sundays River areas; furthermore the area is closely situated to a major port which is important for the exporting of citrus products.
Human Resources
The employment is based on a seasonal requirement, where the greatest labour intensive period during citrus production is the picking stages. This will require a large number of unskilled workers to be temporarily employed for this period of time, which is approximately one two months every year.
Expected Return on Investment
In order to have a productive citrus farm, the ideal size would be 100 hectares or greater. High density spacing is approximately 660 citrus trees per hectare, while conventional spacing makes use of 100 trees per hectare. The Cacadu District Municipality uses the high density spacing method.
In 2005, the expected return per hectare of lemons produced, an average of 60 tons per hectare is produced, where 21 tons would be sold locally and 39 tons exported. The local market would fetch R27 678 per hectare (21 tons) and export would amount to R126, 516 (39 tons). The overall profit earned for the combined market minus the costs is approximately R132, 349.00
In 2005, the expected return per hectare of navals produced, an average of 40 tons per hectare is produced, where local and export market both receive 50% of the fruit produced, however the export price is nearly double that of the local price received. The local market would fetch R21, 800 per hectare (20 tons) and export would amount to R48, 300 (20 tons). The overall profit earned for the combined market minus the costs is approximately R57, 140.00
The total costs incurred are represented below..
Key Constraints
§ The intensive nature of citrus farming is in some instances resulting in the destruction of many natural ecological processes.
§ In order to tap into the international market, there are strict entry level quality standards to meet before the exporting process can begin.
§ Capital costs are significant, however the profit gained is substantial once production is started.
§ The production and maturing of the fruit takes several years, therefore it is not an immediate process.
§ Fruit sizes have been decreasing as a result of climatic changes experienced over the last two years as well as a lack of maintenance and care of trees.
Opportunities:
§ The industry is not highly competitive between provinces, since each province has specific citrus that can be grown in that area due to land and climatic conditions.
§ There are barriers to entry, for other provinces attempting to infiltrate the citrus market, which is exclusively grown in Cacadu.
§ Research activities are underway to improve fruit sizes that comply with all regulations.
§ By increasing the water transferred from the Orange River; the Sunday’s River catchment areas provide further opportunities for citrus production and other high value horticultural production (vegetables, flowers and exotic fruit).
§ The climate within the CDM is advantageous as it permits growers to diversify their range of products and hence increase the length of their picking season.
§ Investors or new citrus producers have the advantage of being able to access the SRCC’s three packhouses which are certified according to a well-recognized global food standard (BRC – Global Food Standard, HACCP, etc.).
§ Access to the SRCC Technical Department, which has been closely involved with various disease prediction modules, enabling them to make scientific decisions about spraying methods and timing schedules.
§ Organic farming methods or niche citrus markets.
Useful Contacts:
References:
Cacadu District Municipality IDP, 2009
Freek Veldman. Value Forming Attributes of a Fruit Farm
University of the Free State, Business Plan for Citrus, 2006
Eastern Cape Department of Agriculture, Personal Interview, Vuyokazi Matshaya, 2010
Sundays River Citrus Company, 2010
Information Indemnity
§ All information contained within this profile was accurate at time of publishing.
§ The information contained within this report is intended only as an industry profile and does not assume to take the place of information contained within a business plan, pre-feasibility study or feasibility study.
§ The Cacadu District and service providers are not liable for any damages caused by the use of the information contained within this report.
§ The purpose of this profile is to both promote the area for investment and inform investors of relevant issues. It is advised that investors, who wish to pursue an investment within Cacadu DM, should use this profile as a basis to conduct further research.
Annexure 1
The following costs incurred and income received is based on a case example; which outlines the potential budget for a typical citrus enterprise. This functions to provide investors with broad categories of costs experienced, however further research in terms of feasibility studies and business plans will need to be carried out in order to determine the relevant costs and income according to the specific enterprise entered into.
Enterprise Budget
The table below outlines the profit received in 2005 after costs have been considered on a farm that obtains 60 tons of lemons per hectare.
Source: State of the Environment for Cacadu District Municipality, 2005
Annexure 2
Enterprise Budget
The table below outlines the profit received in 2005 after costs have been considered on a farm that obtains 40 tons of navals per hectare.
Source: State of the Environment for Cacadu District Municipality, 2005
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