Squeeze in Orange Juice Futures

Orange juice futures saw a strong move higher during the month of August. Major growing regions experienced supply shortages. Florida and Brazil being two of the areas affected the most. Orange juice prices climbed above $3 dollars - will this rise in futures’ prices carry over to consumer prices? The answer is most likely yes.

The first factor to monitor is weather-related issues for the crops. Hurricanes have caused issues in groves all over Florida. Some analysts anticipate up to 33% of the Florida supply could be negatively affected. Hurricanes appear to have been coming more frequently in the southeast. Brazil is also experiencing production shortages due to erratic weather adding to the surge in prices. Unfortunately there doesn’t seem to be any breaks in this pattern in the short-term.

Disease has also been detrimental to this year’s crops. Citrus green disease has hit growing regions. The insects tend to make the fruit have a bitter taste and not good for consumption. These insects have the potential to wipe out large areas of groves and could even have a long-term affect on areas and their ability to recover from season to season.

Investors who want exposure to this market should cautiously consider going long orange juice futures but any change in production numbers could stabilize futures and have prices flatten-out quickly.

Disclaimer: Past performance is not indicative of future returns. Opinions are my own. Profitable trades are not guaranteed