The international market for frozen concentrated orange juice: Prospects for Brazil

To analyze international relationships in Frozen Concentrated Orange Juice (FCOJ) markets, a trade model is used that distinguishes products by place of origin in a world market model divided into 9 countries plus a Rest of the World region. Aggregation of FCOJ coming from different sources in each consuming region is modeled through a CES function and the elasticities of substitution are empirically estimated using the "basic" Morrisset model. Demand elasticities for FCOJ estimated for each region of the model were determined to be inelastic in the United States and Canada and elastic in all other countries or regions. Own and cross price elasticities of demand for FCOJ coming from Brazil and the United States were calculated and indicate an elastic demand for Brazilian and an inelastic demand for U.S. FCOJ.; The world trade model is simulated for shocks in exogenous variables in the short and long run.; Results suggest significant effects on FCOJ trade flows and prices from any changes originating in the European region or the United States. Exogenous reduction of U.S. FCOJ supply would drive prices to high levels and divert Brazilian exports to the United States. Exogenous changes that increase demand in Japanese and European markets benefit both Brazil and the United States, with the stronger advantage going to Brazil. Simultaneous trade liberalization in the United States, the EEC and Japan is predicted to increase total production, consumption and trade volume. In the United States, supply price and production are reduced, but availability of a cheaper Brazilian FCOJ increases consumption and exports. Elimination of the U.S. tariff alone benefits U.S. consumers through lower prices while increasing U.S. imports and reducing U.S. production and exports. Analysis of absolute changes in export flows and prices for any trade liberalization policy indicates that most benefits accrue to Brazil, due to an insensitivity of U.S. FCOJ revenue to exports.; Qualitative results in the European aggregate model are of little difference from those of the more general model. Qualitative results in the blending model suggest benefits for both the U.S. industry and consumers and the effects of exogenous shocks are reduced in every market. (Abstract shortened with permission of author.)...