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Orange Juice Futures Weaken as Global Output Expected to Soar

February 1, 2017 at 17:59 by Andrew Moran

Orange juice futures weakened on Wednesday as a new report suggests that global output is expected to soar. Due to rising supply volumes coming out of Brazil, which are helping fill the gap left by Florida, international output of orange juice is projected to increase in 2017, says a new US government report.

March frozen concentrated orange juice futures tumbled 2.15% to $1.692 per pound at 16:30 GMT on Wednesday on the ICE Futures exchange. This comes as orange juice prices have been trading relatively flat so far this year. In 2016, orange juice prices surged 36%, though it had a lackluster fourth quarter.

Wednesday’s losses were due to a new report from the US Department of Agriculture (USDA), which provided a positive outlook for the global orange market.

US officials noted that a considerable boost in Brazil’s orange production is offsetting an exorbitant decline in the US harvest. Brazil’s harvest is projected to surge 27% to 18.2 million tonnes due to improving weather conditions. The South American country, which is the world’s top producer of oranges, has posted output declines for six consecutive years.

Meanwhile, US orange output is expected to drop by nearly 9% to 4.89 million tonnes. Florida’s massive reduction in output is being blamed on citrus greening, a bacterial disease that causes oranges to fall before they are ripe enough to be picked. Scientists have been making strides over the last couple of years to find a cure to this disease, but a final solution has yet to be generated.

Overall, this is helping world orange output to increase by more than 2.5 million tonnes to 49.6 million tonnes in the 2016–2017 season.

Now that supplies are approaching historical norms, the next challenge the orange market faces is diminishing demand. North American consumers are shunning the classic breakfast staple due to large sugar volumes found inside orange juice, a finding that health experts say is not good for consumers. It was recently reported that orange juice demand has fallen 14 of the past 15 years. The warnings from health organizations and medical experts have prompted many consumers to turn to healthier alternatives, like sparkling water, in the last four years.

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