Orange juice futures are one of the most volatile commodity markets. “OJ” contracts are also quite illiquid. The chart below shows a 23% price increase since the end of March. This up move is in the face of reduced global demand for OJ, thanks to diet fads and alternative beverages (think coconut water), that have been in vogue in recent years. With demand fading, it takes a reduction in Brazilian orange production to get any semblance of a bull market underway. Citrus greening in Florida has practically destroyed the Sunshine State’s orange industry. While this has occasionally resulted in a sharp rally, I believe the current spike stems from last October’s dry weather. Despite Brazil’s record 2017 crop, production could fall sharply as new estimates flow in from the harvest’s progress.
For a recent report that likely influenced the run up in OJ futures, please click here
The map below shows last October’s heat and drought stress in Brazil. Certainly, coffee trees and buds have various growth cycles, thus affording them more opportunity to recover. This is not the case with oranges in years having a hot (and dry) October. Combine this with the above-mentioned citrus greening, now also affecting Brazil, and it is possible that OJ prices could rise even further. The price strength will be even more acute if Florida experiences an active hurricane season this year.