Relief From Brazil Is Insight For Orange Juice Lovers

Ouch!

Orange juice prices seemed to have reached nosebleed levels.

But if you can hold on a little while, there may be some relief in sight, experts say.

OJ futures were recently fetching $2.09 a pound, almost doubling from 1.15 in early November 2021, according to data collated by TradingEconomics.

Of course it doesn’t help that poor weather in Brazil and in Florida hurt the crop earlier this year. Brazil is the world’s largest orange producer, providing half of the world’s juice.

Still, economics tells us that high prices are the cure for high prices. That means farmers have an incentive to produce more of their crop when the price of fruit is higher than when it is lower.

That’s great news for lovers of OJ, and such people are probably thinking, ‘about time too.’

There’s also good news for investors who want to make some money from the forth coming collapse. The trick is to sell long-dated Frozen Concentrated Orange Juice futures contracts on the ICE Intercontinental Exchange with a view to buying them back when the price falls.

However, wise investors should wait for a likely forthcoming surge in juice prices. The cost of orange juice will likely peak shortly but we won’t really know it has reached such a top until prices start falling.

“Odds favor a major top to develop in the weeks ahead,” according to a recent report by Shawn Hackett at Hackett Financial Advisors.

However, when the beginning of the drop becomes apparent savvy traders should be able to move quickly.

The even better news is that the forthcoming Brazilian crop is set to be far larger than last year’s. In late July the U.S. Department of Agriculture forecast that Brazil’s 2021/22 crop would be 15% higher than the 2020/21 crop.

More recent USDA data forecasts a Brazilian crop of 1.14 million metric tons up 20% from 944,000 tons the year before. If the forecast is correct, the crop would be the highest since the 2018/19 season. The crop gets harvested between May and January depending of the plant variety.

Of course, not all of those oranges will get converted into juice. However, the availability of oranges is key to having orange juice.

There are risks to this trade. Freak weather could upend the forecast. And the world has had a lot of such meteorological hiccups lately.