Orange Juice Futures All-Time Highs: A New Commodity Darling?

Why Trust Techopedia
Why Trust Techopedia

Prices for orange juice futures contracts have soared to record highs as climate change has disrupted yield from orange trees in Florida and Brazil, which together account for around 80% of global supply.

The month-ahead concentrated orange juice futures contract on the Intercontinental Exchange (ICE) in New York climbed to an all-time high closing price of $4.92 per pound on May 28, having more than doubled over the past year.

Orange Juice Futures 1 Year Performance

What’s next for orange juice commodity? Are the all-time high prices sustainable? We analyze the major factors behind the recent price increase and explore analysts’ views on the orange juice futures price forecast.

Key Takeaways

  • Orange juice future prices have climbed to all-time highs because of weather-related supply disruptions.
  • Historical analysis shows periodic spikes in orange juice prices are often linked to environmental factors.
  • Volatility in orange juice prices is likely to continue because of the impact of climate change on the global supply chain.
  • Analyst forecasts suggest the market is likely to find continued support from tight supply, but the market remains highly speculative.
  • Trading orange juice futures involves understanding contract specifications, market influences, and strategic investment timing.

Supply Disruptions from the Major Producers

Brazil is the world’s largest producer of the commodity, accounting for around 74% of global exports.

But a series of record-breaking heatwaves in the country last year affected the growth of the fruit, exacerbating a tightness in supply caused by a hurricane and cold spell that hit Florida’s output in 2022, as well as a disease that has been affecting trees in the US for several years.

Brazil is expected to produce 232.38 million 40.8kg boxes of oranges in the 2024-2025 season, a drop of 24.36% from the previous season.

That would be its second smallest crop since the 1988-1989 season, according to a report last month by Fundecitrus, an association of citrus growers and juice manufacturers.

Orange Juice Futures Price Analysis

The orange juice futures price is typically affected by seasonal supply and demand factors, but it has consistently trended higher since late 2022, when the US output dropped, and the country became the third largest producer, falling behind Mexico.

From the late 1970s, prices typically traded in a range between around $0.60-2.00 per pound. But the market began to trend higher from 2010, with the low end of the range moving above $0.90 per pound, the orange juice futures chart shows.

Orange Juice Futures All-Time Performance

Historical production data over 37 crop seasons indicates a gradual downward trend over time, "mainly attributed to increasingly challenging climatic conditions for orange production," according to Fundecitrus. Over the past ten years, smaller crops have become more common than medium-to-large or large crops.

Between the 1994-1995 season and 2003-2004, the average harvest was 351 million boxes. This dropped to 337 million in the following decade and reached 308 million in the 2014-2015 to 2023-2024 period.

The unfavorable climatic conditions are expected to cause a drop in the number of fruits per tree for a second straight year in Brazil, reaching an average of 29% in 2024-2025 compared to a 5% drop in 2023-2024. This represents a break in the biennial cycle, which has seen alternating high and low fruit loads.

Citrus greening—a disease that turns oranges bitter and eventually kills the trees—has spread throughout Florida over the past 15 years, and Hurricane Ian in 2022 further hit production.

In the early 2000s, Florida produced around 240 million boxes of orange juice each year, but the latest forecast from the US Department of Agriculture (USDA) in May for the 2023-24 season revised down its projection to 17.8 million boxes from 18.8 million boxes projected in April.

Futures prices soared above $2 per pound in early 2023 and have continued to rise as poorer harvests have affected orange juice production.

Orange Juice Futures in 2024 & Beyond: Factors to Consider

The orange juice futures market is typically illiquid, which can result in periods of heightened price volatility on small trading volumes.

The market could become more volatile in the future, as climate change is causing extreme weather conditions that are affecting the citrus belt with greater frequency and intensity. There could have been even more damage to production if growers had not significantly invested in groves from the 2000s onwards to improve yield, Fundecitrus stated in its report.

Along with supply from the world's largest producers, factors to consider when determining the direction of the price for the rest of 2024 include consumer demand for orange juice in various parts of the world and activity in commercial markets that use orange juice concentrate for other products, such as vitamin supplements, cosmetics, and cleaning products.

Orange juice suppliers are likely to use up stockpiles of concentrate to maintain production. Some are said to be considering using mandarins, as the trees are less affected by adverse climate conditions. Others could switch to producing different fruit juices instead.

Orange Juice Futures Price Forecast: Analyst Views

Tight supply is expected to keep orange juice prices at elevated levels, and "the market remains well supported longer term based on forecasts for tight supplies and very hot weather in Florida," according to Jack Scoville, analyst at The Price Futures Group.

Low juice yields could keep supply under pressure into 2025, but weakening demand could prevent another large price spike as long as production does not fall further, according to Rabobank Senior Analyst Andrés Padilla.

"Farmers will be incentivized to harvest early, due to growing citrus greening infection rates, which could mean lower juice yields and may limit any potential relief in inventories at the end of the 2024/25 harvest," Padilla said. "However, juice demand is expected to continue to decline at close to 20% [year on year] in volume terms during 2024. This should limit the possibility of another significant rise in prices, as long as the harvest hits the expected level of around 260m boxes with reasonable juice yields."

Trading Economics forecasts that orange juice futures could trade at $4.51 per pound by the end of this quarter but climb to $4.98 per pound in 12 months' time, based on its global macro models and analysts' expectations.

How to Trade Orange Juice Futures

Are you interested in how to trade orange juice futures? As with any commodity, trading orange juice futures involves several steps:

  • Understand the Market: Before you start trading, it is important to study historical price trends and market drivers.
  • Choose a Brokerage: Select a brokerage that offers commodity futures trading, open an account, and transfer the funds you want to trade with.
  • Analyze Contracts: Familiarize yourself with orange futures contract specifications, including expiration dates and delivery terms.
  • Develop a Strategy: Create a trading plan based on your own market analysis and individual risk tolerance.
  • Monitor the Market: Stay updated on orange juice futures news, such as weather conditions, production reports, and supply chain issues.

The Bottom Line: Should You Buy Orange Juice Futures?

Investing in orange juice futures can be lucrative, but it comes with significant risks and requires careful analysis as part of a comprehensive trading strategy.

Understanding the orange juice commodity price, following the latest industry news, and employing appropriate risk management strategies are crucial in this volatile commodity market.

Whether it is the right choice for you will depend on your individual circumstances.

Do your own research and always remember your investment decision depends on your attitude to risk, your expertise in the commodity market, the spread of your portfolio, and how comfortable you feel about losing money.

The information in this article does not constitute investment advice and is meant for informational purposes only.

FAQs

How do you buy orange juice futures?

What is the all-time high for orange juice futures?

Is orange juice a good investment?

Why are orange juice prices going up?

Related Reading

Nicole Willing
Technology Journalist
Nicole Willing
Technology Journalist

Nicole is a professional journalist with 20 years of experience in writing and editing. Her expertise spans both the tech and financial industries. She has developed expertise in covering commodity, equity, and cryptocurrency markets, as well as the latest trends across the technology sector, from semiconductors to electric vehicles. She holds a degree in Journalism from City University, London. Having embraced the digital nomad lifestyle, she can usually be found on the beach brushing sand out of her keyboard in between snorkeling trips.