In The Current Commodity Markets Flux, The Humble Orange Juice Rises Too

In The Current Commodity Markets Flux, The Humble Orange Juice Rises Too  | Oct 09, 2019 13:25

The weather across America is blowing dry to cold, stressing crops and harvests and creating sudden bull opportunities for investors. In the Northern Plains, a crop freeze is developing in corn. In Florida, which sits right on the Atlantic Ocean, it’s arid air now for oranges.

On Tuesday, orange juice futures hit a near one-month high in New York on bets that dry conditions in top growing state Florida will result in a less favorable crop report from the U.S. Department of Agriculture.

The price pop in select agriculture and soft commodities such as corn and OJ comes as sector heavyweights like oil and gold labor in sluggish directionless trading.

Why We Need To Pay More Attention To OJ

Nick Scoville, principal ags and softs analyst at Chicago’s Price Futures Group, makes a case on why investors might want to pay more attention to OJ, America’s favorite citrus and breakfast staple.

“There are no threats out in the ocean right now but the state of Florida has been dry.”
“Many are expecting increased production estimates from Florida on Thursday when USDA releases its next production report, but the drier weather could mean reduced fruit sizes and less than expected production.”

OJ futures’ front-month contract, November, hit $1.0445 on Tuesday, its highest since Sept. 12.

'Strong Buy' Recommendation’s Daily Technical Outlook has a “Strong Buy” call on November OJ, pegging top-end resistance at $1.0866.

The last time OJ traded at such highs was in mid-April, when smaller-than-expected fruiting in Florida crops and worries of dry weather turned even pessimistic investors into buyers.

Andrew Hecht, an independent commodities analyst, noted in a recent post on OJ:

“The price of OJ futures tends to be highly sensitive to weather conditions in Florida over the winter season as freezes can cause significant rallies in the futures market.”

Still The No. 2 Worst Commodity Of 2019

Orange Juice Weekly Chart- Powered by TradingView

But while OJ has rallied in five of the past seven weeks, it’s down almost 19% on the year, making it the worst performing commodity for 2019 after natural gas.

Scoville said short-term trends in OJ were higher, but chart patterns were mixed. He also stressed that there was no alarm yet over supply, with Florida orange inventories still standing at nearly 30% above year-ago levels. In terms of crop progress, he said fruits were developing in dry weather.

In Brazil, the biggest citrus competitor to Florida, Scoville said there were rains instead, amid flowering for the next crop.

Brazil's Real Could Ultimately Decide Longer-Term Price Moves

Hecht said there was potential for OJ to cut its 2019 losses significantly with an extended rally in the real, the currency which determines domestic citrus prices in Brazil and also influences U.S. pricing via Brazilian imports.

The real hit a three-week high of $4.0607 to the dollar recently.

Said Hecht:

“The potential for supply issues is always a danger when it comes to these agricultural commodities markets, and supply issues can cause explosive price moves.”

“The Brazilian real versus US dollar relationship is likely to impact ... FCOJ prices in Q4 as Brazil is the world's leading producer and exporter. Domestic production costs are in local currency terms, so a rise in the Brazilian real would likely put upward pressure on dollar-based prices.”

Related Articles

Latest comments

Add a Comment
Please wait a minute before you try to comment again.
Write a reply...
Please wait a minute before you try to comment again.

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

English (USA) English (UK) English (India) English (Canada) English (Australia) English (South Africa) English (Philippines) Deutsch Español (España) Español (México) Français Italiano Nederlands Português (Portugal) Polski Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 简体中文 繁體中文 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
Sign out
Are you sure you want to sign out?
Saving Changes


Download the App

More markets insights, more alerts, more ways to customize assets watchlists only on the App is better on the App!

More content, faster quotes and charts, and a smoother experience is available only on the App.