What's Up: Orange juice is costing the average consumer more. But investors should squeeze out a profit as demand exceeds supply.
As juice futures rise, investors lick their lips
Looking for juicy returns? Commodities traders are cleaning up on orange juice, which this week hit its highest price in more than four years.
And consumers who like a glass in the morning may continue to get squeezed: anticipation of adverse conditions including crop diseases and unseasonably dry weather in Florida's orange-growing region is prompting investors to position themselves for further price increases this year.
Orange juice futures climbed 0.9 per cent to $1.905 a pound on Wednesday, the highest since April 2007. The price has risen about 24 per cent in the past three months.
According to the commodities researcher Mintec, the price of frozen orange juice concentrate has risen by 143 per cent in the past two years, from $1,500 to $3,647 a tonne.
Fruit juices are just the latest household staple to be hit by the rise in global commodity prices.
Abah Ofon, an agricultural commodities analyst at Standard Chartered, said he expected further market volatility in the months to come.
"Agricultural commodities markets have bounced higher after the sell-off at the start of May. Market uncertainty and risk aversion underpin this reversal in market sentiment and largely reflect growing concerns about crop weather," he wrote in a recent note to investors.
Forecasts for orange juice production, a multibillion-dollar industry, are below expectations for the upcoming 2010-2011 season, signalling tightness in supply.
And although the US department of agriculture said this month that Florida would produce 140 million boxes of oranges this season, up from 133.7 million in 2009-2010, that is still well below the production of 170.2 million in the 2007-2008 season and 162.5 million in the 2008-2009 season.