Inclement weather and the presence of a fungicide pushed orange-juice futures to their sharpest climb since 2007, according to published reports.
Citrus groves in Florida endured large amounts of damage from sub-zero temperatures, Bloomberg reports. Roughly 5 percent of the groves in the Sunshine State's central groves, considered the main growing region for oranges, endured harm, which is more than initially believed. The state is the globe's second-largest producer of the citric fruit, trailing only Brazil.
Senior agricultural meteorologist Kyle Tarpley with MDA EarthSat Weather told the news source that cooler weather is likely to return next week to Florida.
"Orange juice jumped due to the frigid weather that permanently damaged some of the crops here," principal Jim Garasz with Transworld Futures in Tampa told Bloomberg on Tuesday. "And there's more cold weather coming in here late tomorrow. That spooks the market."
Since late September, orange juice futures have skyrocketed nearly 39 percent as a consequence of diminishing inventories of the commodity in the U.S. That advance represents the largest increase among 19 commodities followed by Thomson Reuters.
March-delivery orange juice is poised to close on Tuesday at roughly $2.0775 per pound, which would represent the commodity's top price since March 2007. The daily spike exceeded the maximum allowed on the exchange of 20 cents, which would be the sharpest gain since October 2006.
Its gains thus far this month, less than one-third through, are 23 percent.
"The market is starting to factor in that maybe there was more to the damage than initially thought," president Michael Smith with T&K Futures and Options in Port St. Lucie told Bloomberg.
The first week of the year saw roughly one-quarter of Florida's regions for citrus endure a hard freeze while temperatures elsewhere were frigid enough for a frost to occur, according to MDA EarthSat Weather, which is based in Maryland.
Oranges typically are harmed should temperatures fall lower than 28 degrees Fahrenheit for as few as three hours.
Also harming crops while pushing up the price of oranges is the possibility of the presence of fungicide, according to The Wall Street Journal. The U.S. Food and Drug Administration is probing orange juice for the foreign object and the agency intends to have orange juice removed from store shelves if it presents a threat to public health.
"The market is rallying on this," independent commodities analyst Judy Ganes Chase told the news source.
The federal agency stated a juice company reported traces of the fungicide carbendazim in its products and those of its competitors, according to a January 9 letter to advocacy group Juice Products Association.
Reuters reports the unapproved fungicide was found in Brazil and is likely to temper imports of the commodity from the South American nation.
This rally in orange juice futures is trumping that of the one in 2005 and 2006 when citric crops in Florida were hammered by hurricanes repeatedly hammering the region. Ailments such as citrus greening, which causes the premature demise of citrus trees, spread as a consequence of the hurricanes.
The FDA is likely to intensify its testing efforts as a result of the fungicide, Reuters reports. The product is approved for use in Brazil but not in the U.S.
"Brazil used it last year supposedly, and it wound up in some of the orange juice of at least one (U.S.) company processing the oranges," president James Cordier with Liberty Trading Group of Tampa told Reuters. "We lost oranges on the freeze last week but this certainly trumps that," he said. "If they ban Brazilian orange juice OJ has … another 20 to 30 cents on the upside at least."
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