Investing.com | Dec 11, 2019 12:20
At a glance, it looks doomed, lying at the bottom of the heap with a loss of more than 20%—officially the worst performing commodity of 2019.
But scratch a little beneath the skin of its charts and fundamentals, and prices of orange juice look like they could make a splash in the coming months.
At Tuesday’s settlement of 98.33 cents a lb, the front-month December contract in frozen concentrated orange juice has rebounded far from the near 10-year low of 90.30 cents struck in May.
If it retains its bounce, the market could be headed for a second straight week of gains despite showing a slight loss for December, a 1.3% slide for the fourth quarter and a gaping 21.4% slump year-to-date.
Says Mike Seery, founder of Seery Futures, a commodities risk consultancy in Plainfield, Illinois:
“The chart structure is improving on a daily basis for OJ; therefore the risk/reward will become more in your favor in next weeks trade.”
“Prices are right at their 20-day average, but still below the 100-day.”
The 20-Day Moving Average for FCOJ is currently at 96.42 cents while the 100-DMA is at 97.96.
Investing.com’s Daily Technical Outlook, meanwhile, has a “Strong Buy” recommendation on December FCOJ, forecasting a top-end resistance at $1.0059.
America’s favorite breakfast staple has seen better, trading at $2.35 three years ago. But fundamentals have taken a turn for the worse since.
The U.S. Department of Agriculture reported last week that cold storage holdings of FCOJ reached 757.8 million pounds on Oct. 31, the highest total for the date in five years and nearly 200 mln pounds more than on the same dates in 2018 and 2016.
“Good growing conditions and increased oranges production estimates by USDA this season have been bearish.”
“The weather has been great for the trees as there have been frequent periods of showers and no severe storms so far this year.”
Scoville said orange groves in top growing state Florida have been dry lately, requiring irrigation. Usually at this time of year, deep freezes are common, severely stunting crop growth.
“Crop yields and quality should be high for Florida this year. Inventories of FCOJ in the state are high and are more than 35% above last year.”
Florida aside, Brazil, the world’s largest citrus grower, was also witnessing healthy output from dry weather. The weaker Brazilian real compounded the problem by making the country’s juice exports to the United States cheaper, indirectly weighing on locally-produced OJ.
Citrus growers in Brazil and Mexico have locked long-term contracts with big U.S. juice brands such as Minute Maid and Tropicana since 2017 after Hurricane Irma wiped out almost all of Florida’s orange crop in September that year. Those supply agreements virtually dictate U.S. juice prices now, aside from local fundamentals and FCOJ technicals.
Said Seery, the Plainfield-based commodities risk consultant:
“It looks to me that orange juice prices are bottoming, as we basically have gone sideways over the last 3 months. As we head into the very volatile winter season for Florida, a possible frost can devastate the orange juice crop.”
“It is still early at this point, but I'm looking to play this to the upside as I do believe the downside is very limited.”
Written By: Investing.com
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
Get free real time quotes, charts and alerts on stocks, indices, currencies, commodities and bonds. Get free top of the line technical analysis/predictors.
More content, faster quotes and charts, and a smoother experience is available only on the App.