Orange Juice in Bull Market as Florida Crop Set for 52-Year Low

  • Futures surge 21% in eight sessions, reach five-week high
  • Citrus greening spread by pest may lose 100,000 acres of crop

Orange-juice futures entered a bull market after the U.S. Department of Agriculture said that Florida’s crop will shrink to a 52-year low as a bug from Asia continues to spreads citrus disease.

On ICE Futures U.S. in New York, orange juice for November delivery rose 5.2 percent to close at $1.2745 a pound on Wednesday. In eight sessions, the price jumped 21 percent from $1.0535, the recent low settlement on Oct. 1. The common definition for a bull market cites a gain of 20 percent. The commodity topped the 200-day moving average.

Florida’s orange crop in the season that ends Sept. 30 next year will slump 17 percent to 80 million boxes from a year earlier, the USDA said last week. That would be the lowest since 1964. Before the latest USDA data, the average of eight analysts’ predictions in a Bloomberg survey was 93.46 million boxes. Citrus greening, spread by the Asian citrus psyllids bug and first discovered in the state in 2005, has triggered the loss of an estimated 100,000 acres (40,000 hectares), the University of Florida has said. The disease causes fruit to shrivel and drop from trees.

“Part of the rally is related to the report last week,” Jack Scoville, a vice president at Price Futures Group in Chicago, said in a telephone interview. “The technical chart also looks good, and people are also taking positions ahead of the frost season,” which can threaten Florida’s crop during the winter months, he said.

Minute Maid

The eighth straight increase in futures marks the longest rally in 10 months. The price reached $1.279, the highest intraday for a most-active contract since Sept. 8. Aggregate trading more than doubled compared with the 100-day average, according to data compiled by Bloomberg.

Shrinking supplies may boost costs to make Coca-Cola Co.’s Minute Maid and Pepsico Inc.’s Tropicana.

In the four weeks that ended Aug. 29, U.S. retail sales dropped 3.8 percent to 34.65 million gallons from a year earlier, according to the Florida Department of Citrus, citing Nielsen Co. data. The average price rose to $6.55 a gallon from $6.46.

In the season that started Oct. 1, sales declined 7.1 percent to 454.3 million gallons, the data showed.

Urban Sprawl

This year, futures have dropped 8.8 percent because of sluggish beverage demand. A box weighs 90 pounds or 41 kilograms. Brazil is the world’s top orange-juice supplier, followed by the U.S. Florida is the biggest state producer.

Florida’s crop declined by more than half since 2008 as efforts to eradicate the bug floundered, while maintenance costs for farmers increased.

Planted acreage in Florida has dropped to the lowest since at least 1966, partly because of urban sprawl and hurricane damage, according to the state’s citrus agency.

“The number of of commercial citrus groves in Florida continues to shrink as does the number of bearing trees,” Judy Ganes-Chase, the president of J. Ganes Consulting in Panama City, Panama, said in a report. “This certainly feeds into ideas that the crop will be lowered, but by how much depends not on how much fruit is on the tree, but how much will drop off prematurely and if the fruit can size properly.”

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