Sunkist Profits for ’85 Climb to Record High : But Price Collapse in Orange Juice Futures May Force Refunds by Growers, Co-Op Warns

In stunning contrast to much of the rest of U.S. agriculture, Sunkist Growers reported record 1985 sales and income to its 6,000 members Wednesday.

However, President and Chief Executive Russell Hanlin warned that the current panic in the orange juice futures market, which has sent prices plummeting, could require some growers to make refunds for payments advanced to them as anticipated profits.

The Sherman Oaks-based co-operative reported revenue of $837 million last year, up nearly 11% over 1984, with payments to its members totaling $619 million, up 14%.

Hanlin attributed this success to aggressive marketing of fresh oranges, grapefruit and lemons from the California and Arizona growers who make up Sunkist’s membership. The fresh-fruit business accounts for most of Sunkist’s revenue.

Outlook Remains Bright

The flip side of that success with fresh-fruit sales was a decline in the amount of citrus available for juice and soft drinks. As a result, there was slightly lower income from orange products.

Processed orange products represents a very small part--about 6%--of Sunkist’s annual revenues.

The outlook for 1986 remains bright, Hanlin told Sunkist’s 92nd annual meeting, which attracted a record 1,500 to the first session ever held in the San Joaquin Valley, heart of California’s citrus belt. The co-operative normally convenes in Beverly Hills but may alternate between there and Visalia in the future, a spokesman said.

The only concern expressed Wednesday was the collapse of the futures market for orange juice contracts, Hanlin said. Prices have plunged from $1.79 per pound of solids to 88 cents--with about half of the collapse occurring in just the last two months. Brazil, now the world’s leading producer of orange juice--some of which is blended with California juice under the Sunkist label--currently has an oversupply, he explained.

Advance Payments Halted

“The price collapse is much more severe than conditions would appear to warrant,” Hanlin said. As a result, the value of Sunkist’s orange juice inventory has dropped by “several million dollars,” he said.

The co-operative advanced to growers payments based on estimates of 70% of anticipated net income from the 1985 juice pool. The present price drop currently far exceeds the normal 30% “safety margin,” he said.

As a result, Hanlin said, Sunkist has suspended advance payments on new deliveries and may later have to seek up to $4 million in refunds from previously paid advances. That decision will not be made until next fall, however, Hanlin told reporters after the meeting. If juice futures were to rise by even 10 cents a pound, the need for refunds could dissolve.

Hanlin welcomed President Reagan’s nomination of Californian Richard Lyng to succeed John R. Block as secretary of agriculture. He described Lyng, who served as California director of agriculture under then-Gov. Reagan as “fair and reasonable.”