15th July 2019

FCOJ futures – July Report from Jack Scoville

Continuing problems for Florida as US domestic demand slides, and Brazil muscles in on the export trade.  Tariff wars with EU continue.

Orange Juice futures in New York have had a tough time trying to rally over the last few months.  In fact, prices are down after trading as high as USD1.32 per gallon.  Now prices are below USD1.00 per gallon and could easily go lower.    The problem is the weather right now.  Hurricane season is underway in the Atlantic, but there are no signs of hurricanes or even tropical storms anywhere.  It is still very early in the season, but the conditions right now are not good for hurricane development.  Hurricanes need calm winds and warm ocean temperatures to form and thrive.  The temperatures in the ocean are just about warm enough, but not quite at the warmest levels to really allow hurricanes to form.  But, the big problem is the wind.  There is a strong wind blowing from Africa into the ocean and across to the west near the islands in the Caribbean and into Florida.  One can see dust from the Sahara making all the way to the US on the satellite images used to help predict the weather.  There are no signs that these winds are ready to calm down, and there can’t be much in the way of storm formation until they do.  Hurricanes can be very destructive to oranges production in Florida since the state is so flat and the growing areas stick out into the sea on the peninsula.  Instead, just regular storms and showers are being reported and this is great for production.

The biggest production losses often come from hurricanes.  One incredibly powerful hurricane once traversed below the equator to brush South America.  It picked up the greening disease there then turned north and devastated parts of Florida.  The losses were hug that year from the storm and the greening disease was deposited on the crops that did survive.  It took a few years but eventually the greening disease manifested itself and grew to create the big crop problems of a couple of years ago.  The disease seems to be under control now as USDA and others are looking for a very significant rebound in production to near or above 70 million boxes.

Demand is the other issue that is hurting prices.  US domestic demand remains weaker as Orange Juice is considered by many consumers to be a bad way to get Vitamin C in the morning.  That is not true, but it is what people think and the growers and the state of Florida have had a hard time fighting the perception.  Domestic consumption will increase if Orange Juice prices get cheap enough, but consumers will stick with alternatives until the price gets a lot cheaper.  That could take a lot more time.  Export demand has also taken a hit.  The US is having a little trade war with the EU, and agricultural products are involved.  Much of the attention has been placed on autos and other industrial goods, but just now the US government has announced new tariff on dairy products.  The EU continues to make it very hard to by our GMO Corn and Soybeans, but the tariff war now is bout industrial products.  FCOJ has been caught in the crosshairs of the war.  The EU is the largest importer of FCOJ in the world, but Florida has been knocked out of the race due to the Trump tariffs.  All that demand is going to Brazil now and Florida producers are left out in the cold.  This problem will take a long time to fix even in the trade war ends tomorrow.

By Caroline Calder Features Share: