Orange Juice Prices Could Sparkle Further In Lockdown 2.0

 | Nov 13, 2020 09:35

As daily record highs in US coronavirus cases bring us closer to the grim prospects of Lockdown 2.0, products, services and markets best equipped for the ordeal will thrive. Aside from home gym, video conferencing and delivery services, a winner in commodities may be orange juice.

Frozen concentrated orange juice futures had their best rally in four months in October, gaining 3.7%, as adverse weather hit citrus groves in Florida. Since this month began, juice prices have picked up another 1.4% on production concerns.

The orange juice market looks set for more sparkle as people continue to obsess about healthier foods. In fact, juice market watchers say demand for the commodity has been steady since the pandemic broke out in March, although consumption and prices have consolidated over the months.

On the coronavirus front, on Wednesday there were 140,543 cases reported, making it the ninth straight day where the infection count stood at over 100,000. According to Johns Hopkins University , some 10.4 million Americans have contracted COVID-19 so far and nearly 242,000 have died from complications caused by the virus.

On Thursday, Dr. Michael Osterholm, a top advisor on President-elect Joseph Biden’s coronavirus task force, floated the idea of shutting down businesses over four to six weeks to control the spread of the pandemic.

Jack Scoville, analyst at the Price Futures Group in Chicago, said orange juice will be a market to watch if another lockdown was imposed:

“The coronavirus is still promoting consumption of FCOJ at home. Restaurant and food service demand has been much less as no one is really dining out.”

Mike Seery, who tracks various commodities out of his Plainfield, Illinois office, concurs that juice is a market to stay on top of:

“I have been talking about orange juice over the last several weeks as I will be recommending a bullish position if prices close above the October 13th high of $1.1875 (per lb).”

Phenomenal Run That Began In February/h2

Juice prices had a phenomenal run that began in February, even before the first US COVID-19 lockdown, and ran through June, when they hit an 18-month high at $1.3175. May was a blockbuster month for FOCJ, with the 18% gain for that month being the highest in four years,

In Thursday’s trade, FCOJ’s front-month January contract settled at $1.18—just around the trigger Seery recommended for a long position.

Should you take his call, he suggests you do this as well: Place a stop loss under the spike bottom of $1,0735 set on Oct. 21. He added:

“The risk is around $1,700 per contract plus slippage and commission. I do believe a bottoming out pattern is developing.”

Seery notes that juice prices were trading above their 20-Day Moving Average but still below the critical 100-DMA which stands at the $1.20 level.

He adds:

“The volatility certainly is going to expand as we enter the highly volatile winter season where prices can experience tremendous price swings to the upside, due to a possible frost in the State of Florida decimating the orange juice crop which has happened multiple times historically speaking.”