What Rimes with Citrus?

By Barbara Rudolph

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.

With reporting by Martha Smilgis/New York and Richard Woodbury/Houston