Orange-Juice Futures Jump to Nine-Month High

  • Florida needs 20 million trees to recover from citrus greening
  • Dire forecast for long-term output endangers state industry

Orange-juice futures surged to the highest in more than nine months on speculation that Florida’s crop, ravaged by Asian bugs, will continue to shrink.

On ICE Futures U.S. in New York, orange juice for January delivery rose 1.5 percent to close at $1.394 a pound after reaching $1.45, the highest for a most-active contract since Jan 26. Aggregate trading was 88 percent above the 100-day average, according to data compiled by Bloomberg.

ICE Futures U.S., cents per gallon

On Tuesday, the U.S. Department of Agriculture will cut its estimate for Florida’s output of the fruit by 0.4 percent to 79.7 million boxes, extending a plunge to the lowest since 1964, a Bloomberg survey of analysts showed. Citrus greening, spread by the Asian citrus psyllid bug, has caused fruit to shrivel and drop from trees in the state for the past decade.

“The market is scrambling to find a new equilibrium price to reflect what’s happening on the ground,” Joe Nikruto, a senior market strategist at RJO Futures in Chicago, said in a telephone interview. “You may see speculators entering this market in anticipation that prices are going to go much higher.”

Futures have soared 35 percent from a three-year low of $1.0345 a pound on Sept. 29 as investors weighed slowed demand against declining output. Brazil is the world’s top orange-juice producer, followed by Florida.

No Solution

There’s no solution the citrus disease, which has caused billions of dollars in losses across Florida since 2005. By some estimates, “the industry needs to put more than 20 million trees in the ground over the next 10 years to support existing infrastructure and get production back to where it was” before greening, Michael W. Sparks, chief executive officer of Florida Citrus Mutual, the state’s biggest producer group, said in an e-mail on Friday.

The most “pessimistic” scenario in a recent study by the Florida Department of Citrus has the crop falling to 27 million boxes by 2026. A box weighs 90 pounds or 41 kilograms.

The futures rally may boost costs for companies including Coca Cola Co., the maker of Minute Maid and Simply Orange brands, and PepsiCo Inc., which sells Tropicana.

In the 2014-15 season through Oct. 3, U.S. retail prices have climbed 4.1 percent to $6.55 a gallon from a year earlier, while sales have dropped 6.7 percent to 489.77 million gallons.

“The market is holding at higher levels as it factors in the long-range potential for less production,” Jack Scoville, a vice president at Price Futures Group in Chicago, said in a report. “Higher prices can help encourage investment and tree replacement needed to restore production.”

Futures have dropped 0.3 percent this year, almost erasing the 2015 loss. In the Bloomberg Commodity Index of 22 raw materials, which excludes orange juice, only cotton has gained in the period.

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