April 13, 2022

A Quick Glance At Investing In Lemons

by Sara Wensley

Director, Growth and Marketing

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A Quick Glance At Investing In Lemons
FarmTogether's Monarch Citrus Orchard - Crowdfunding Property
How did the lemon trade become the multi-billion dollar global industry it is today? Let's dive into it.

Loved for their acidity and sour taste, lemons are used worldwide to enhance the flavor of many dishes, from garnishes and desserts to savory marinades and more.

High in immunity-boosting Vitamin C and antioxidants, lemons are also a popular option for consumers looking to strengthen their immune systems during cold and flu seasons.

So, how did the lemon trade become the multi-billion dollar global industry it is today?

Let's dive into it.

California: Land of Lemons

Lemons were first cultivated in Iraq and Syria as early as the 8th century A.D., spreading to the Mediterranean in the 11th and 12th centuries. Europe saw its first substantial cultivation of lemons in Italy in the 15th century, around the same time that Spanish conquistadors brought the first lemon seeds to the Americas.

In the United States, lemons were first planted in Florida by Spanish settlers. However, growers soon found that the climates of California and Arizona were more hospitable to the unique needs of lemon trees.

California, where many of FarmTogether's citrus properties are located, is home to prime growing regions and uniquely suited soils for producing a high-quality lemon crop. In 2020, California growers produced 93% of the country's lemons, the highest of any state.

Today, California is home to roughly 47,000 acres of lemon orchards. On average, lemon trees produce fruit year-round, and each tree can produce approximately 500-600 pounds of lemons annually. In fact, an individual lemon tree can produce three times the yield of an orange tree, making it a favorite for citrus producers in the country.

Making Lemonade–and More–Out of Lemons

Lemon sales rapidly increased during the early stages of the COVID-19 pandemic, as consumers sought foods that help build strong immune systems. Recent consumer data suggests this trend is here to stay; 37% of consumers now believe that "food is better medicine than medicine" and will continue to purchase more immune-boosting products, such as vitamin C-rich lemons.  

While fresh lemons comprise approximately 73% of total lemon sales, the processed lemon market is quickly growing. Lemons are commonly used in essential oils, beverages, household cleaning products, and pharmaceuticals. Lemon peels have been used by the food industry as a source of pectin, a food stabilizer, for decades, while the animal feed industry often incorporates lemon byproducts into cattle feed.

Recently, scientists have been researching innovative use-cases for lemon peel waste from processing plants, ranging from bio-aerogels for building insulation to antibacterial fibers.

Growing Prices and Profits for Farmers

The U.S. produces roughly 11% of the world's lemons and is the seventh-largest exporter of lemons and limes. In 2021, American lemon exports reached $144 million, as global demand for lemons hit a record high. On the domestic side, lemons have seen national average price increases at a 5.2% compounded annual growth rate (CAGR) over the last ten years, while lemon production was up 10% in the 2020-2021 season.

For many growers, the organic market is a new area of growth. Organic prices have uniformly outpaced conventional prices in lemon markets in California, as evidenced by data from the USDA Agricultural Marketing Service; in 2021, organic lemons reached prices up to 153% higher than conventional lemons. In California, sales of organic lemons grew 4% over the last three consecutive growing seasons.

Innovations in seedless lemon varieties provide citrus farmers with another area for growth as well. Unlike mandarins, clementines, and other citrus fruits, lemons have historically been difficult to breed for seedlessness. However, in 2015, the Wonderful Company successfully planted 3,500 acres of seedless lemons. The company is betting big on seedless lemon success, with internal projections claiming up to a 50% price premium over other seeded varieties.

Scientific Advances in Lemon Production

As is the case with every crop, lemon production is not without challenges. Emerging pest and disease pressures can affect yield and fruit quality across the country. Over the past decade, an east Asian pathogen, Huanglongbing (HLB), has received considerable attention. Transmitted by small insects known to inhabit citrus groves, this disease has rapidly expanded throughout farms in the U.S. and abroad; today, the disease has been recorded in at least 33 countries. While HLB is not harmful to humans, the pathogen restricts nutrient uptake in citrus trees, harming yield and quality over time.

Thankfully, advances in plant breeding – a standard method used by lemon growers to breed new trees with favorable traits – have allowed growers to begin researching HLB-resistant trees. For example, one team of researchers from California, New York, and Washington discovered that Lisbon lemons were less affected by HLB at the molecular level than another citrus variety, the Washington Navel. Another research team from the University of Florida, one of the most impacted U.S. citrus-producing states, is developing new, resistant varieties that could provide even higher yields than traditionally-grown cultivars.

Lemon Orchards are a Strong Investment

Overall, as consumer shopping habits shift toward healthier options, vitamin-rich lemons are poised to continue their upward growth trajectory.

The lemon market is well-positioned to continue this upward trend, making lemon orchards a valuable asset for investors looking to inject capital into agriculture.

Interested in Learning More About Farmland as an Asset Class?

Click here to see farmland's historical performance, visit our FAQ to learn more about investing with FarmTogether, or get started today by visiting ways to invest.

Disclaimer: FarmTogether is not a registered broker-dealer, investment advisor or investment manager. FarmTogether does not provide tax, legal or investment advice. This material has been prepared for informational and educational purposes only. You should consult your own tax, legal and investment advisors before engaging in any transaction.

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