The Learn About Futures Insider for Dec 12, 2010: Orange Juice


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Relatively modern when compared to other agricultural products, orange juice futures are a versatile and often volatile market with unique fundamental and technical considerations. Fresh squeezed or mixed from concentrate, orange juice is a popular beverage across the world. The first juice production occurred early in the 20th century, and trading began later on the New York Board of Trade, where the market appeared in a particular feature film with Eddie Murphy and Dan Aykroyd. The frozen concentrated orange juice market has developed into a favorite focus for many traders and currently finds its home on the Intercontinental Exchange list of products.

Contract Size: 5,000 pounds of orange juice solids (3% or less)

Price Quote & Tick Size: Cents and hundredths of a cent to two decimal places; minimum tick is 5/100 of a cent per pound = $7.50 per contract therefore .10 represents $15.00 per contract

Contract Months: January, March, May, July, September, November

Trading Specs: Futures trade electronically only on the Intercontinental Exchange 0800 to 1400 ET.
Options floor trading hours are 1000 to 1330 ET.

Daily Price Limit: Ten cents per pound above/below the prior day settlement price. Limit is subject to expansion under certain conditions.

Trading Symbols: OJ, IOJ

Past performance is not indicative of future results.
***chart courtesy of Gecko Software

Orange Juice Facts​

Orange juice is often sought out as a source of vitamin C and potassium. Folic acid and flavonoids are also purported to be healthful and inspire the juice drinking faithful. In North America, the image of oranges usually conjures up ideas of Florida, the principal growing area for citrus in the United States. Early Spanish explorers brought and planted the first citrus trees in the peninsula state, likely in the 16th century. Over the next few centuries, cultivation and groves spread across Florida and the state remains as the source for the majority of orange juice consumed in the United States. Oranges for retail are also grown in Texas, California, and Arizona and include different varieties such as Valencia, Navel, and Ambersweet. Navel oranges are actually the result of a mutation from an orange grove in a Brazilian monastery. The season for fresh oranges usually runs from October through to June.

On a global level, Brazil usually far surpasses the United States in production and exports. This orange producing giant provides orange juice for most world markets while US production is normally consumed domestically. In the following chart on production, only one year in the last two decades has seen US production rival Brazilian. In exports, the margin is far wider. Most citrus in Brazil is grown in the state of Sao Paulo.

Past performance is not indicative of future results.
*Data Courtesy of USDA/FAS

Past performance is not indicative of future results.
*Data Courtesy of USDA/FAS

As a point of reference for the US and Brazilian data on orange juice, consider the following charts showing the overall global production, import, export, and consumption:

Past performance is not indicative of future results.
*Data Courtesy of USDA/FAS

Past performance is not indicative of future results.
*Data Courtesy of USDA/FAS

Key terms for the orange juice market include:

Grade A juice - a grading for frozen concentrated orange juice based on United States orange juice standards. Grade A juice has specific color, flavor, and appearance qualities that are scored. It will have a total minimum score of 90, and it must also reconstitute properly.

Brix value - A Degree Brix is a representation of the percentage of sugar content in a liquid, like juice.

Key Uses​

While orange juice has an obvious end use, the by-products of orange groves and the production of orange juice are worth noting. Orange oil from pressed orange peels is used in household chemicals, food flavorings, and other fragrance products. Orange blossoms can be used for food and tea flavorings. Orange peels are employed by some gardeners as a slug repellent. The remains from squeezing out the juice can also be used as dehydrated livestock feed.

Key Concerns​

Disease and weather are of the upmost importance to orange juice producers and the following are the key areas of focus:

Hurricanes: Since Florida is the source of around 90% of orange juice in the United States, hurricanes heading towards the peninsula can cause significant interest. In the 1960s Hurricane Donna cut across Florida causing a loss of anywhere between 35 to 50% of the orange crop. In 2004, three hurricanes whipped across the state causing an estimated 30% destruction of the orange crop. Winds from hurricanes can cause direct tree damage as well as spreading disease.

Frost: Oranges are sensitive to cold temperatures and frost or freezing can devastate a crop overnight. Freezing temperatures have threatened groves and caused major crop losses since well before the 20th century. Due to the winter freeze of 1989, most growers have moved further south in Florida. The chill inspired exodus means most of Florida's growers are in the southern region of the state. Usually, when a freeze is forecast, growers will spray fruit with a protective coat of ice to insulate against extensive damage.

Citrus Canker: This bacterial disease causes lesions on leaves, stem, and fruit and can cause oranges to drop early. Most countries in which infection has been detected are unable to export fruit to other countries and eradication programs have been implemented including destroying and quarantining infected trees. Despite a few times when the US has declared citrus canker eradicated, it has persisted and its spread is likely exacerbated by the winds associated with hurricanes. Canker has also caused significant losses of crop and revenue in Brazil.

Citrus Greening: Unlike canker, this bacterial disease can kill trees and greatly reduce production. Greening was confirmed in US groves in 2005 and has rapidly spread across southern Florida. The disease is primarily spread by two psyllid insects which feed on trees and carry the disease from infected to healthy trees. Symptoms include poor flowering, small blotchy leaves, and small and misshapen fruit with a bitter or sour taste. Citrus greening is also established in Brazil.

Besides these fundamental concerns, other factors can impact the price of orange juice. Consumer demand can be important to watch and, since juice is frozen and stored, the Cold Storage report from the USDA is also worth watching.
Disclaimer: There is a substantial risk of loss in futures trading and it is not suitable for all investors. Losses can exceed your account size and/or margin requirements. Commodities trading can be extremely risky and is not for everyone. Some trading strategies have unlimited risk. Educate yourself on the risks and rewards of such investing prior to trading. Futures Press Inc., the publisher, and/or its affiliates, staff or anyone associated with Futures Press, Inc. or, do not guarantee profits or pre-determined loss points, and are not held monetarily responsible for the trading losses of others (subscribers or otherwise). Past results are by no means indicative of potential future returns. Fundamental factors, seasonal and weather trends, and current events may have already been factored into the markets. Options DO NOT necessarily move lock step with the underlying futures contract. Information provided is compiled by sources believed to be reliable. Futures Press, Inc., and/or its principals, assume no responsibility for any errors or omissions as the information may not be complete or events may have been cancelled or rescheduled. Any copy, reprint, broadcast or distribution of this report of any kind is prohibited without the expressed written consent of Futures Press, Inc
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