US orange crop falls to 86-year low, OJ futures hit new record -Braun

US orange crop falls to 86-year low, OJ futures hit new record -Braun

12 Apr    Finance News, PMN Business, REU

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NAPERVILLE — Dan Aykroyd and Eddie Murphy got rich in the 1983 movie “Trading Places” by creating a fake crop report from the U.S. Department of Agriculture saying the U.S. orange crop would be bad, tricking the film’s antagonists into driving up orange juice futures before it was revealed the crop was fine.

But this year, the U.S. orange crop is anything but fine and is forecast to be the smallest since 1937. Output has generally been in decline since peaking 25 years ago, though this year’s losses in typical top producer Florida are extremely sharp.

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This has driven up imports for both oranges and orange juice, although the U.S. remains a net exporter of the fresh fruit. The loss of production has notably reduced the United States’ ranking in the global market, though it matches slowing domestic demand for orange juice, once a breakfast staple.

USDA on Tuesday pegged the 2022-2023 U.S. orange crop at 62.25 million boxes (2.57 million tonnes), an 86-year low and down 23% on the year. That is less than 20% of U.S. output in the record 1997-1998 season.

Florida, which has previously accounted for more than 80% of the annual U.S. orange crop, is seen producing an 87-year low of 16.1 million boxes, down 61% on the year. That will boost California’s output share to 72% at 45.1 million boxes, up 15% on the year but 5% below the five-year average.

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Florida has grappled with a widespread disease known as citrus greening for more than a decade, shrinking the state’s output. This year’s plunge in Florida’s orange crop is largely due to severe damage from Hurricanes Ian and Nicole last fall.

GLOBAL MARKET

About two years before “Trading Places” was released, Brazil permanently overtook the United States as top orange producer. The United States is now the sixth largest grower while Brazil remains at the top, producing twice as many oranges as No. 2 China.

The United States is still a top five orange exporter, though it is expected to account for 6% of global shipments this season versus a peak share of 23% two decades ago. The United States was the leading orange exporter in 1983, but it had been trading off with Morocco and South Africa.

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U.S. imports of fresh oranges have increased in recent years, though not to the degree the production losses would suggest as demand has fallen. However, the United States imported a record 230,619 tonnes of fresh oranges in 2022 with Chile, Mexico and South Africa supplying 86%.

Brazil does not export fresh oranges, though it is by far the leading producer and supplier of orange juice, and the United States is the world’s top consumer.

But U.S. consumption is down more than 50% from its peak a quarter century ago, attributable not only to the decline in production but to shifting habits. That includes skipping sit-down breakfasts where juices are most often consumed and an increased focus on health-conscious, lower sugar drinks.

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ORANGE JUICE FUTURES

The villainous Duke brothers would have had better luck betting on a frozen concentrated orange juice (FCOJ) futures rally in 2023 versus 1983 when the crop report failed to produce their bullish narrative.

On Tuesday, front-month ICE traded FCOJ futures hit a record $2.87-1/2 per pound, up nearly 40% so far this calendar year. However, adjusted for inflation, FCOJ futures traded mostly above today’s levels throughout the 1980s. The adjusted price had topped Tuesday’s high as recently as 2016.

The insider trading portrayed in “Trading Places” was not actually illegal until 2010, when a provision now known as the “Eddie Murphy Rule” was passed, banning the use of non-public, ill-gotten government data in the marketplace. Karen Braun is a market analyst for Reuters. Views expressed above are her own.

(Editing by Sonali Paul)

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