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Orange Juice Poised for Strong Weekly Gain

October 18, 2019 at 12:41 by Andrew Moran

Orange juice futures are slipping to end the trading week, but prices are on track to record a commendable weekly gain. In addition to investors betting on a bearish crop forecast report from the US government, traders are also seeing a new development forming in the orange juice market: The rise of China.

January orange juice futures tumbled $0.0035, or 0.3%, to $1.021 per pound at 12:34 GMT on Friday on the US ICE Futures exchange. Orange juice prices are poised for a weekly jump of about 2.7%, paring their year-to-date losses to 18%.

In many important agricultural regions of the US, there are interesting weather events unfolding. There is a snowstorm in the Midwest, a temperature freeze in the Northern Plains, and dry air in the south. Because of the conditions surrounding Florida, analysts anticipate that the US Department of Agriculture will publish bearish projections regarding the state’s orange crops.

But the orange growers are stuck between a rock and a hard place. Right now, the air is dry, affecting fruit sizes and limiting output. However, if current weather conditions are any indicator, then Florida might be in for some frigid temperatures in the coming months that would harm crops.

That said, industry observers expect Florida to ramp up output in the short-term. This expectation is leading analysts to hit the “strong buy” button.

Meanwhile, as developed markets continue to decrease their orange juice consumption amid health concerns, there is a new market forming that might serve as a lifeline for the troubled industry: China.

Over the last 12 months, there has been a new Chinese demand for fresh orange juice. According to Bloomberg, Citrosuco, a low-cost Brazilian orange company that produces more than Florida, has been attempting to make gains in China for the last 10 years. Now, Citrosuco has employed a new tactic: Selling orange juice as a product with origin tracked rather than as a standalone commodity.

But what makes the company even more enticing is that it produces oranges for $4 per box. In Florida, the average cost is about $14.

In other agricultural commodities, November corn futures fell $0.02, or 0.51%, to $3.9275 per pound. November wheat futures shed $0.02, or 0.38%, to $5.235 per bushel. November soybean futures tacked on $0.0075, or 0.08%, to $9.3275 a bushel.

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