Orange juice prices set to rise

The price of your morning glass of orange juice will rise, if recent action in the futures market is any indication.

Frozen concentrated orange juice futures closed at their highest level in four months on Friday after a US government crop report projected a surprisingly low citrus crop for Florida.

The US Agriculture Department's monthly supply/demand report predicted that Florida's 2007/08 citrus crop would hit 168 million (90-lb) boxes. Analysts said that came as something of a shock since practically everyone in the citrus industry had been expecting a harvest of between 180 million and 190 million boxes.

In fact, some players in the market were holding out for a crop that would be close to the 198 million boxes influential crop forecaster Elizabeth Steger was said to have predicted in August. Florida is the top citrus producer in the country.

"The (USDA) report shows a lot less production than anticipated by the trade, and implies that the recovery by the trees in Florida will take longer and that a return to top production will also take longer than the trade had assumed," said Jack Scoville, an analyst for the Price Group in Chicago.

The ICE Futures open-outcry November FCOJ contract soared 7.05 cents or by 5.1 percent to finish at $1.4335 per lb, having traded from $1.345 to $1.495.

Based on the closing performance of the spot contract in the market, it was the highest close for juice since the middle of June 2007.

The January contract climbed 7.05 cents as well to $1.436. The rest of the board gained from 6.85 to 7.90 cents.

The November electronic juice contract climbed 7.00 cents to $1.433 by 1:59 pm EDT (1759 GMT).

The not-for-concentrate market closed 5.00 cents higher, with the November contract at $1.615.

Florida's citrus industry, which an industry group estimates is worth $9.1 billion, was hit hard by a string of storms and disease that began in 2004.

Three of the four hurricanes which struck the state that year pounded the citrus belt and monster Hurricane Wilma roared ashore in late 2005. The winds from the storms helped spread the debilitating citrus canker disease.

Last season, Florida output reached 128.9 million boxes.

"Fruit sizes are considerably smaller on all orange varieties," the USDA said in its report.

Analysts said the question now is whether any further price spikes would harm retail demand for orange juice.

Brazil has also turned into a source of concern for the market given a drought in the world's leading citrus producer.

Market participants who use price levels to plot technical areas of the market believe resistance in the November FCOJ contract is at $1.45 and $1.50 with support at $1.35 and $1.30.

The areas of technical resistance and support are regions where the market may pause and gather itself to go over or under those levels.

Agencies

(China Daily 10/16/2007 page16)