Orange-Juice Futures Surge as Florida Crop Seen at 29-Year Low

Apr 09, 2014 2:43 pm ET

April 9 (Bloomberg) -- Orange-juice futures rose to a two- year high after the U.S. Department of Agriculture said that the crop in Florida, the world’s second-largest grower, will shrink to the lowest since 1985 amid crop disease.

Output will be 110 million boxes, trailing the estimate of 112.7 million by analysts in a Bloomberg survey, USDA data showed today. Last month, the agency forecast 114 million. Growers harvested 133.6 million in the previous season.

A gnat-sized insect, the Asian citrus psyllid, spreads citrus greening, causing fruit to wither and drop early. In December, futures entered a bull market, and the USDA formed an “emergency response framework” to combat the bugs. Dry weather has hurt crops in Brazil, the top producer.

“Crops continue to be impaired by greening and further aggravated by droughts,” Shawn Hackett, the president of Hackett Financial Advisors Inc. in Boynton, Beach, Florida, said in an e-mail. “This process will continue throughout 2014 and reach historic tightness danger levels that will require a rationing of demand.”

Orange juice for May delivery rose 3.1 percent to settle at $1.603 a pound at 1:38 p.m. on ICE Futures U.S. in New York. Earlier, the price reached $1.618, the highest since April 4, 2012. Trading doubled compared with the 100-day average for this time, according to data compiled by Bloomberg.

Futures have jumped 15 percent this year. The rally may boost costs for Pepsi Co., the maker of Tropicana juices, and Coca Cola Co., which sells Minute Maid and Simply Orange brands.

A box weighs 90 pounds, or 41 kilograms. Florida’s crop in the season that ended in 1985 was 103.9 million.