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Weak Demand, Higher Supplies Send Orange Juice Futures Lower

April 27, 2017 at 16:52 by Andrew Moran

Orange juice futures lowered on Thursday as investors continue to see weak demand for the beverage and higher supplies coming out of Brazil. Orange juice prices are being supported by traders’ bets over potential hurricanes that could impact crops – the size of the damage is what could drive prices.

May orange juice futures tumbled $0.0315, or 1.96%, to $1.576 per pound at 16:34 GMT on Thursday on the ICE Futures exchange. Orange juice prices have been plummeting since peaking at $2.15 at the end of November. Year-to-date, orange juice futures are down more than 17% amid rising supplies and lower demand.

Following a sublime year for the commodity, this trend has devastated orange juice prices in 2017.

Any support that orange juice has stems from seasonal long bets ahead of the hurricane season. Speculators are starting to buy in anticipation of any potential weather events that could hurt orange supplies in Florida, the second-largest producer of oranges. Previous hurricanes that have made landfall have severely damaged coastal citrus areas, and investors seem to have placed bets on higher prices ahead of the hurricane season.

The Sunshine State has seen its orange crop decimated over the last decade. Because of citrus greening, a bacterial disease that causes oranges to fall before they are ripe enough to be picked, and weather events, farmers have produced the smallest amount of oranges since 1963 with just 67 million boxes.

Brazil has been filling in the gap in the last year by boosting supplies. Overall, global orange output rose by nearly three million tonnes to 49.6 million tonnes in the 2016–2017 season.

Meanwhile, consumer demand for orange juice continues to be weak amid concerns over the amount of sugar. Since orange juice products contain high volumes of sugar, consumers have been transitioning into healthier alternatives, like sparkling water. The once classic breakfast staple is disappearing from households across North America.

If you have any questions and comments on the commodities today, use the form below to reply.

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