Orange Juice Prices Sweeten on Supply
Justin Rohrlich September
22, 2010 1:15 PM|
price of orange juice has been surging higher, now up
eight straight sessions.
of orange juice has rocketed higher recently as fears
mount about the potential for hurricane-caused damage
to citrus crops, but commodity pros warn that, should
those worries not bear fruit, the price of OJ will tumble
as demand for the juice remains anemic.
of orange juice has been surging higher, now up eight
straight sessions. The price jumped 3.3% yesterday.
It’s up 17% this month and more than 60% over the past
12 months, according to Bloomberg data.
juice is a reported $20 billion industry with prices
affecting farmers, consumers, and companies like PepsiCo
(PEP), maker of Tropicana.
jumped as concerns climb about the threat posed by hurricanes
to Florida’s citrus crop, says Shawn Hackett of Hackett
Financial Advisors, a Florida-based money manager specializing
in agricultural commodities.
models all say that we'll have a hurricane develop over
the weekend and it could go right into central Florida
and trash the current crop,” Hackett says.
“We had hurricanes hit in 2004 and 2005 and it just
devastated orange juice production. But it is very rare
for a hurricane to actually do that. Most of the time,
the storms don’t have a direct hit or they’re not as
strong as expected.”
if a hurricane did slam Florida’s citrus groves, it
could have a significant impact on orange juice supply.
more oranges than any other region of the world, except
Brazil, according to trade organization Florida Citrus
Mutual. There are more than 11,000 citrus growers cultivating
almost 82 million citrus trees on more than 620,000
acres of land in the state.
2007-08 season, Florida harvested 203.8 million boxes
of citrus, representing about 70% of total US citrus
hurricanes wreaking havoc on supply, commodity experts
say that a spike down in prices seems likely as fundamentals
remain extremely bearish. Consumers, wary of high juice
prices, haven’t been drinking OJ.
orange juice sales are on pace to be the lowest since
the late 1990s, according to Florida Citrus Mutual.
are now drinking alternative beverages,” says Kevin
Kerr of Kerr Trading International. “Juice is one of
the most expensive commodities people buy when they’re
shopping at the grocery store. So they will opt for
things that are cheaper, like powdered beverages. If
consumers see orange juice selling for $5 then they’ll
go for the Hi-C.”
in the orange juice market, says Hackett, is for retailers
to lower prices to stimulate demand. But it will likely
take a futures price plunge to cause such a needed adjustment,
As for trading
ideas, Hackett argues that it’s too early to short this
market given that hurricane threats can persist well
into October, so for now, in his opinion, this market
is to be avoided.