Orange Juice Prices Skyrocket Amid Concerns Over Florida's Worst Harvest in a Century
Frozen Concentrated Orange Juice Futures Soar
Frozen concentrated orange juice futures on the Intercontinental Exchange in New York are approaching new record highs. The physical markets are expected to tighten significantly following a report on the damage to citrus groves across Florida in the aftermath of Hurricane Milton.
Widespread Damage from Hurricane Milton
Industry consultant Judy Ganes informed Bloomberg that over three million boxes of oranges might have been lost when Milton caused fruits to fall from trees and wreaked havoc on citrus groves in Florida. She cautioned that the upcoming Florida harvest could be the worst since the late 1920s.
Previous Challenges to Citrus Groves
In recent years, Hurricanes Ian and Nicole, freezing weather, and citrus greening disease have wreaked havoc on citrus groves in Florida. Milton has only exacerbated these issues. Recent industry data indicates that US orange production is on track to hit its lowest level in over a century.
Surge in OJ Futures
OJ futures have soared to $5 per pound, a remarkable 433% increase from the Covid lows of approximately $1 per pound. The escalating supply issues could drive prices even higher.
Lowest OJ Cold Storage Levels Since the 1970s
Data from the US Department of Agriculture reveals that OJ cold storage levels are at their lowest since the early 1970s.
Brazil's Drought and Crop Disease
Brazil, the world's leading OJ producer, has increased its OJ shipments to the US to compensate for the declining production in Florida. However, Brazil is now grappling with a severe drought and widespread crop disease, which has significantly impacted yields across its citrus groves.
Brazil's Worst Drought in 50 Years
Rabobank analyst Andrés Padilla warned that Brazil is experiencing its "worst drought in 50 years" and noted the lack of rainfall across the citrus belt in the past four months, a critical period. Padilla described the situation as a "perfect storm" of the smallest crop in 35 years, rising citrus greening disease, and drought.
Record High Prices
Padilla warned of a lack of juice in the market, explaining that this is why prices are reaching record highs. This could lead to a significant increase in OJ supermarket prices. Global inflation experienced its most significant jump in 18 months in September.
Communist-Style Price Controls
VP Harris has suggested a potential policy response of Communist-style price controls. However, this is a bad idea as such policies often lead to shortages.
Global Food Crisis
About a year ago, Sara Menker, founder and CEO of Gro Intelligence, warned in a Bloomberg interview that the current global food crisis is 'much worse than 2008'.
Bottom Line
The orange juice industry is facing unprecedented challenges due to natural disasters and diseases. The situation is causing a significant increase in prices and could potentially lead to a shortage. What are your thoughts on this issue? Do you think there are other viable solutions to address these challenges? Feel free to share this article with your friends. Also, don't forget to sign up for the Daily Briefing, which is delivered every day at 6 pm.
