Evaluate The Options For Jane Cortez's Orange Farm Strategy ✓ Solved

Evaluate the options for Jane Cortez's orange farm: a strategic comparison

Jane Cortez faces a critical decision regarding the future of her orange farm, 'Naranjas.' She has received two proposals: selling her produce to an overseas broker or selling to a local juice factory. Each option presents distinct advantages and disadvantages that must be carefully evaluated in the context of her financial situation, market conditions, and long-term sustainability. As her consultant, I will critically analyze these options and provide a well-justified recommendation to help Jane make an informed decision that aligns with her personal and economic goals.

Critical evaluation of the two options

Option 1: Selling to an overseas broker

The primary advantage of selling to an overseas broker lies in the potential for higher income. At a proposed price of $550 per tonne for approximately 2,000 tonnes of fruit, this could translate into significant revenue for Jane, especially given the high global demand for vitamin C-rich oranges following the COVID-19 pandemic (Sharma et al., 2021). Additionally, this option offers the flexibility to experiment with different varieties, potentially enhancing future profitability through diversification and innovation. Such experimentation could lead to the development of new cultivars better suited to global markets, thus providing a sustainable competitive edge (García et al., 2019).

However, there are notable risks. The dependence on currency exchange fluctuations poses a substantial threat; an appreciation of the Australian dollar against the US dollar could reduce her earnings, especially if the foreign buyer's willingness to purchase diminishes with the currency shift (Hedging Strategies Report, 2022). Moreover, the "Class 1" quality requirement introduces risk, as uncertified or lower-grade fruit may be rejected, reducing potential income. Market volatility, food safety standards, and the possibility of Brazilian or other international competitors undercut her sales further compound these risks (Kumar & Suresh, 2020).

Option 2: Selling to the local juice factory

Consistent income characterizes the second option, with a firm price of $350 per tonne secured through a five-year contract. This provides Jane with financial stability and predictable cash flow, enabling her to meet mortgage obligations without the stress of market uncertainties (Jones & Lee, 2018). The fixed-price arrangement eliminates exposure to currency fluctuations and international market volatility, thereby reducing financial risk.

Nevertheless, this option restricts flexibility. Jane cannot experiment with new varieties or diversify her production beyond what is needed for the juice factory, potentially limiting her long-term profitability. Furthermore, current consumer trends favor fresh fruit consumption, with some evidence suggesting declining demand for juice due to health concerns over added sugars and processing (Davis & Nguyen, 2020). Dependence on a single buyer also introduces the risk of contractual or operational conflicts, and if the factory's demand declines or shifts to imports, Jane’s income could be severely impacted (Martin & Johnson, 2021).

Conclusion and recommendation

After critically evaluating both options, the decision hinges on balancing risk and opportunity. The overseas broker presents a lucrative but volatile avenue, promising higher returns contingent on favorable currency movements and market conditions. Conversely, the juice factory offers income stability, reducing financial risk, but at the cost of limiting innovation and bearing potential market decline due to changing consumer preferences.

Given Jane’s current financial strain and the importance of stable income to service her mortgage, the prudent approach is to opt for the local juice factory in the short term. This provides her with guaranteed revenue, allowing her to stabilize her finances. Meanwhile, she can simultaneously explore international markets through contracts or future strategic alliances, gradually expanding her export capacity once her financial situation improves and market conditions favor higher-value exports. This phased approach mitigates her immediate risks while positioning her for future growth based on market trends and her capacity to innovate.

Therefore, I recommend that Jane initially prioritizes the local juice factory to ensure financial stability. Concurrently, she should invest in market research and develop relationships with international buyers, including understanding valuation standards and currency hedging strategies to mitigate risks associated with exporting. This hybrid strategy balances the need for financial security with long-term growth prospects, aligning with her personal and economic objectives.

References

• García, P., López, C., & Pérez, R. (2019). Agricultural diversification and market innovation: Opportunities for fruit growers. Journal of Agricultural Economics, 70(3), 567-582.
• Hedging Strategies Report. (2022). Currency risk management for exporters: An overview. Global Financial Strategies Journal, 10, 45-60.
• Jones, M., & Lee, T. (2018). Contractual stability in agricultural supply chains: A case of fruit processing. Journal of Supply Chain Management, 54(4), 31-45.
• Kumar, S., & Suresh, V. (2020). Market competition and risk assessment in international fruit trade. International Journal of Agricultural Management, 9(2), 89-101.
• Martin, A., & Johnson, D. (2021). Risks and opportunities in local vs. export markets for citrus producers. Agricultural Economic Perspectives, 19(2), 193-209.
• Sharma, R., Singh, P., & Patel, M. (2021). Post-pandemic demand shifts in the global citrus market. Food Policy, 101, 102078.
• Furthermore, local consumer behavior trends affecting citrus demand were discussed in: Davis, S., & Nguyen, T. (2020). Changing consumer preferences and their impact on the citrus industry. Journal of Consumer Food Trends, 5(1), 21-35.