The price of orange-juice futures sharply rose on Friday amid worries about decreasing supplies as the U.S. government looks into Brazil's use of a fungicide that the U.S. has not approved for human consumption, according to published reports.
The commodity endured its largest drop in value since 2008 over a two-day period on Wednesday and Thursday as fallout from the discovery of carbendazim in orange juice found in the U.S., Bloomberg reports. Brazil, the globe's top grower of oranges, routinely uses the fungicide but the U.S. Food and Drug Administration has prohibited its use.
The U.S. Department of Agriculture slashed projections of the crop from Florida, which trails only Brazil for production. Though the Agriculture Department's 2 percent reduction is exclusive of Florida's orange crops that were damaged during last week's freezing temperatures, losses due to that inclement weather are likely to reduce supplies as well.
"The realization that FDA will test all imports is probably driving" up the price of oranges, states a Friday email penned by vice president Jack Scoville with Price Futures Group in Chicago, according to Bloomberg. "The damage to Florida, if any, is unknown."
The past 14 days have seen the price of orange-juice futures advance 13 percent. The price of the rich source of Vitamin C touched its top value January 11 in nearly four years. Orange juice purveyors such as PepsiCo and Coca-Cola, the respective parent companies to Tropicana and Minute Maid, are likely to see expenses and costs advance for their oranges.
The FDA's probe is likely to include significant amounts of testing to determine the extent to which the fungicide is in the U.S., which Scoville told the news source is likely to be time-consuming, drawn out and influential for the price of the commodity.
"This testing could turn out to take a while, not just a quick bump in the road," the vice president told Bloomberg. "That is what has people buying again."
Siobhan DeLancey, spokeswoman with the FDA, told Bloomberg that the U.S.' testing is aggressive and diligent.
Testing by the U.S. is administered on "imports as they come in," states a Thursday email authored by the spokeswoman to the news source. "We have three preliminary test results that are negative for carbendazim. Once those results are final, we'll be allowing the shipments to enter the country."
The Wall Street Journal reports Coca-Cola did determine that some of the banned fungicide was found on its orange juice and that of its competitors though it did not disclose the brands. The company did state the orange juice was a product of Brazil.
Despite the hullabaloo over the fungicide, the U.S. Environmental Protection Agency said the ingestion of orange juice with the amount of carbendazim level that has been reported does not pose a threat to public health, according to The Wall Street Journal.
The Star-Ledger reports investigative teams from the FDA are aggressively looking into imports of orange juice concentrate that came into the U.S. from Brazil via Port Newark.
At least 33 percent of the concentrated orange juice that enters the U.S. passes through that port, 96 percent of which derives from Brazil, the New York and New Jersey Port Authority indicate.
The majority of orange juice merges domestic and imported juices. The product from the South American nation tends to be more tart so it is offset by the U.S.' sweeter product.
But in a letter to trade group Juice Products Association from the FDA, the federal agency underscored that a safety issue is not at hand.
"Consumption of orange juice with carbendazim at the low levels that have been reported does not raise safety concerns," the letter states. "FDA does not intend to take action to remove from domestic commerce orange juice containing the reported low levels of carbendazim."
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