Orange-Juice Futures Enter Bull Market on Florida Crop Concerns

Orange-juice futures entered a bull market as dry weather threatens output in Florida, the world’s second-largest citrus grower.

The price jumped 20 percent to close at $1.412 a pound today from the settlement of $1.175 on Oct. 22. Florida will be drier than normal next week after some groves got as little as 1.5 inches (3.8 centimeters) of rain in the past two months, compared with 30-year averages of as much as 5 inches, Kyle Tapley, a meteorologist at MDA Weather Services in Gaithersburg, Maryland, said in a telephone interview.

In the 12 months that began Oct. 1, Florid may harvest the smallest crop since since 1990, the U.S. government estimates. The price rally to a four-month high may boost costs for companies including Pepsico Inc., the maker of Tropicana juices, and Coca Cola Co., which sells Minute Maid and Simply Orange brands.

“With the crop size so small, the market is going to be a little nervous,” Sterling Smith, a futures specialist at Citigroup Inc. in Chicago, said in a telephone interview. “If the dry weather continues into January, that’s going to be a problem.”

Orange juice for January delivery rose 2.3 percent today on ICE Futures U.S. in New York. Earlier, the price reached $1.45, the highest for a most-active contract since Aug. 2. Trading more than doubled compared with the 100-day average, according to data compiled by Bloomberg.

Citrus Greening

Last season, the U.S. Department of Agriculture cut its initial projection for the Florida orange crop by 13 percent after drought exacerbated damage from citrus greening, a crop disease that starves trees of nutrients, causing fruit to shrink and drop prematurely.

This year, orange juice has climbed 20 percent, the third-biggest gain among the 19 raw materials in the Thomson Reuters/Jefferies CRB Index.

Citrus greening has been found in all of Florida’s 32 counties that produce oranges commercially. An icy storm fueled by the coldest air of the season blanketed the U.S.

“With the cold blast very well publicized,” prices probably will add a weather premium, Smith said.

In the week ended Dec. 3, money managers and other large speculators boosted bets on a price rally by 9.9 percent to the most bullish since September, Commodity Futures Trading Commission data showed on Dec. 6.

This season, Florida may harvest 125 million boxes of oranges, the USDA has estimated. The agency is scheduled to update its forecast tomorrow. Brazil is the top citrus grower.

“We are seeing some buying today ahead of the USDA report tomorrow,” Fain Shaffer, the president of Infinity Trading Corp. in Indianapolis, said in an e-mail.

A box weighs 90 pounds, or 41 kilograms. Natural gas has posted the biggest gain among CRB index components this year, followed by cocoa.

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