15th July 2019

FCOJ futures – September Report from Jack Scoville

Orange Juice futures have been on a bit of a ride over the last few weeks as the hurricane season finally started to get active in the Atlantic Ocean.

The season had been quiet and the new crop Oranges have been developing nicely.  The peak of the hurricane season has brought more action to the weather in the oceans and more price volatility to futures.

Early season growth in Florida was characterized by warm and mostly dry weather.  Producers were forces to use irrigation early this year to keep the trees in good condition and to promote good flowering for the coming crop.  This is coming in the state during the dry season, but the season went a little longer than normal this year.  It was also very warm and that made watering the trees even more important and dry and warm weather can rapidly deplete water resources.  This is especially true in Florida which has sandier soils than most areas.  It is after all a peninsula stuck out into the ocean.  Better rains started to appear about six weeks ago and this meant the water pumps could be turned off as Mother Nature kept the trees in good condition.  USDA has responded to the good growing conditions by keeping production ideas strong for the coming year at well over 70 million boxes for Florida alone.

Now the hurricane season is passing its peak days and the ocean is much more active.  Hurricane Dorian devastated northern Bahamas but largely missed Florida.  More tropical waves are coming off the African coast and could form into hurricanes.  In fact, the hurricane center in Miami has now estimated that one of the waves has a 60% chance of forming into some type of tropical system.  These types of forecasts will keep some speculative buying interest alive in the futures market.  The season will start to gradually wind down over the next couple of months as the Sun moves back south, but there is still plenty of time to get a storm going that could damage crops.

Unfortunately for the buyers, a tropical system rarely does lasting damage.  The one exception was several years ago when the crop size was cut in half due to the strong hurricane.  Most bring winds and rains and the quality of the juice in the oranges might get hurt.  Less acid in the orange means using more oranges to make the juice.  The high winds mean that oranges can fall off the tree.  But that just adds to the supply of FCOJ in the end as the producers will quickly gather the fallen oranges and sell them to FCOJ processors as rapidly as possible.  Before that the prices can rally but after the storm the prices can spike higher and then fail.

The season for hurricanes will end by late November and then we will look forward to the freeze season for Florida.  The higher price will give producers better selling chances but the market will also need to look for buyers both here and in the international market.  The lack of buyers anywhere has really hurt the price.  Florida Citrus Mutual showed that inventories are 25% higher than a year ago at this time.  Production is better but the demand is not and the mission of the market will soon be to find buyers for the juice.


By Caroline Calder Features Share: