While the headlines scream about Alico's disappointing citrus harvest and the lingering effects of Hurricane Ian, a quieter, more intriguing story is unfolding within their financial statements. Could this 125-year-old agricultural stalwart be subtly shifting its focus from oranges to a less juicy, but potentially more lucrative, commodity – sand?

Reference: Seeking Alpha: ALCO: https://seekingalpha.com/symbol/ALCO

Let's peel back the layers. Alico's recent Q2 2024 earnings call [1] painted a grim picture for the Florida citrus industry. Production was down, fruit quality was inconsistent, and inventory write-downs cast a long shadow over the company's profitability. CEO John Kiernan acknowledged the "disappointment and frustration" felt industry-wide.

However, nestled within the details of the call and the accompanying financial data, a different narrative begins to emerge. Alico is actively, even aggressively, divesting itself of citrus groves, not due to storm damage, but as a strategic decision to pursue "higher and best use" of its substantial land holdings.

Consider the following: In 2023, Alico transitioned its Charlotte County TRB grove from citrus production to third-party leasing for mining and vegetable crops. This wasn't an isolated incident. During the Q2 call [1], Kiernan revealed the company has earmarked another grove for a similar transition, citing the need to move "beyond citrus" to maximize its value.

Further cementing this hypothesis are two significant land sale agreements detailed in the call [1]. The first, a Purchase Option Agreement with E.R. Jahna Industries for 899 acres at their 2x6 grove, specifically mentions sand mining operations as the intended use. The second, a recent agreement to sell an additional 780 acres at the same grove, reinforces the pattern. Notably, Alico retains the right to lease back a portion of this land – but not for citrus.

While the company insists it remains "committed to the Florida citrus industry for the long term," the evidence suggests a nuanced shift in strategy. Alico appears to be capitalizing on the surging demand for sand, driven by Florida's booming construction industry and ongoing infrastructure projects.

This hypothesis is further bolstered by the financial data. While citrus production faltered, Alico's "Land Management and Other Operations" segment, which includes mining royalties, saw increased revenue. Furthermore, the land sale agreements represent a significant injection of capital, providing Alico with additional resources to invest in these alternative revenue streams.

The implications of this potential pivot are substantial. Sand, unlike citrus, is a finite resource, and Florida's reserves are dwindling. This scarcity, coupled with escalating demand, has led to soaring sand prices. Alico, with its vast land holdings, is uniquely positioned to capitalize on this market dynamic.

This isn't just a corporate reshuffle; it's a reflection of broader economic trends. The Florida citrus industry, once a titan of the state's economy, has been battered by citrus greening disease and increasingly volatile weather patterns. Meanwhile, Florida's construction boom, fueled by population growth and post-hurricane rebuilding, has created an insatiable appetite for sand.

Alico's quiet shift towards sand mining might be the canary in the coal mine, signaling a wider transformation in Florida's agricultural landscape. As the state grapples with the challenges of a changing climate and evolving economic priorities, could sand, rather than sunshine, become Florida's new gold?

Alico's Citrus Production Woes: A Visual Representation

The following chart illustrates the decline in Alico's citrus production, based on data from the recent earnings calls [1] [2]. Please note that this chart represents a simplified visualization and does not include all factors affecting production.

"Fun Fact The global sand market is expected to reach a whopping $481 billion by 2028, driven by the relentless demand for concrete in construction and infrastructure projects. Reference: https://www.imarcgroup.com/sand-market"