Why many consumers will switch from orange juice to mandarin juice, and be paying more for it

The Financial Times reported last week (probably paywalled, in which case try this article from The Conversation on the same topic):

Orange juice prices have soared to record highs, driven by bad weather and disease in Brazil, the world’s largest exporter, prompting manufacturers to explore whether they can use mandarins instead to make the drink...

The long-term solution to a dearth of oranges, according to [president of the International Fruit and Vegetable Juice Association, Kees] Cools, might be to make orange juice from mandarins, whose trees are more resilient to climate change in growing regions...

The industry is already experimenting. In Japan, which normally imports 90 per cent of its orange juice, mostly from fruit grown in Brazil, the supply crunch has been exacerbated by a weak yen, pushing up import costs further. Seven & i Holdings, the owner of supermarket chain 7-Eleven, has turned to the country’s domestic supply of mandarins, launching a mandarin and orange juice product.

The effects of poor weather and citrus greening disease in Brazil on the markets for oranges and mandarins can be easily analysed using the supply and demand model (from my ECONS101 or ECONS102 classes). The effect on the market for oranges is shown in the diagram below. The market was initially in equilibrium, where demand D0 meets supply S0, with a price of P0 and a quantity of oranges traded of Q0. Bad weather and disease reduce the orange harvest, decreasing supply to S1. This increases the equilibrium price of oranges to P1, and reduces the quantity of oranges traded to Q1.

Now consider the market for mandarins. Mandarins are a substitute for oranges in the production of citrus juice. Since mandarins are now relatively cheaper than oranges, some juice producers will switch from making juice from oranges only, to a blend of oranges and mandarins. The effect is shown in the diagram below, where the mandarin market is initially in equilibrium with a price of PA, and a quantity of mandarins traded of QA. Producers switching to a blend of oranges and mandarins increases the demand for mandarins from DA to DB, increasing the equilibrium price of mandarins from PA to PB, and increasing the quantity of mandarins traded from QA to QB.

All of this might be bad news for orange and mandarin lovers, since the price of their favourite citrus fruits are likely to rise. Luckily, some of us have our own mandarin trees (and in fact, my family's tiny mandarin trees have been so laden with fruit this year, we've been giving them away!).