Orange juice futures extended their gains on Friday and put together a tepid weekly jump. The classic breakfast staple has been the top-performing commodity in the global financial markets, driven mainly by lackluster supply. Can orange juice prices top $3 this year?
May orange juice futures rose $0.0155, or 0.56%, to $2.769 per pound on Friday on the US ICE Futures exchange. Orange juice prices posted a modest 0.25% weekly gain, adding to their year-to-date rally of nearly 36%. Over the last 12 months, the agricultural commodity has surged close to 57%.
The classic breakfast staple is trading at its best level in 11 years, with prices flirting with record highs. Now, the orange juice contract is thinly traded and open interest can result in volatile price swings.
Market experts purport that a lack of sufficient liquidity can trigger wild price movements. According to data from Barchat, sugar had nearly one million contracts, followed by cocoa with more than 323,000 contracts. Orange juice? Fewer than 10,000 contracts.
That said, the fundamentals do support higher prices for the agricultural item.
Recent US Department of Agriculture (USDA) data show that domestic output is down 23% in the current marketing year, totaling 62.25 million boxes, or 2.57 million metric tons. This is the lowest production level in more than eight decades.
Brazil, the world’s largest orange producer, is not doing any better. Despite maintaining a climate perfect for production, “Brazil has dealt with a La Niña weather pattern that reduced production of some of their main crops such as sugar, coffee, and soybeans at a time when demand for many of these commodities continues to increase, creating tight supplies,” said Darin Newsom, Barchart senior market analyst.
Since the coronavirus pandemic, orange juice consumption has been renewed, with more consumers looking to inject their bodies with more vitamin C to combat viruses.
In other agricultural commodities, May corn futures tumbled $0.115, or 1.84%, to $6.145 per bushel. May wheat futures dropped $0.06, or 0.83%, to $6.745 a bushel. May soybean futures declined $0.1925, or 1.31%, to $14.4925 per bushel.