By Julie Wernau
Orange juice futures were on track Friday to end the year as one of the best-performing commodities of 2016.
The tiny frozen concentrated orange juice futures market, among the most thinly traded commodities, has soared 33% this year because of diseased groves in Florida, home to the most oranges in U.S. juice.
Orange juice for March, the most actively traded, was up 0.8% Friday at $1.92 a pound on the ICE Futures U.S. exchange.
Citrus greening disease, which causes fruit to drop before it is ripe, has decimated crops in Florida and forced the U.S. to push up imports of juice from Brazil, the largest producer of citrus for juice.
Imports have exceeded domestic juice in the concentrated market since the 2013/2014 season, according to data from the Florida Department of Citrus.
But Brazil, the go-to provider for the U.S., also struggled with its crop in 2016 because of drought that cut into yields.
Traders say they are expecting a recovery in 2017 that could be bearish for prices. This month, the U.S. Department of Agriculture released an attache report from Brazil that predicts a 37% increase to the orange crop in the Sao Paulo region of Brazil for the 2016-17 season to 340 million boxes from 249 million boxes last year. Sao Paulo is the most crucial growing region for the orange juice market.
At the same time, consumer demand for juice has been on the decline. Americans drank 5.3% less juice year-over-year in 2016, according to Nielsen data, setting a new record low of 464 million gallons in data going back to 2002.
"Reductions in retail sales of orange juice are resulting from a number of angles included perceptions that orange juice is not trendy," said Judith Ganes Chase, president of commodities research firm J. Ganes Consulting LLC of New York, "that it is loaded with sugar and therefore should be banned from diets and that there are a wide range of other healthful beverage choices that are being touted as containing superfoods, making them to appear as a more nutritious choice."
In other markets, cocoa was on track Friday to end 2016 as the worst performing commodity. Cocoa prices have dropped 32.2% this year and recently traded at $2,177 a ton in the March contract.
The cocoa market is solidly a short bet for the first time in four and half years. For the last two weeks, more hedge funds and money managers have been betting on lower prices than those betting on a rising market with 974 more bets in the bear camp than the bull camp as of Tuesday, according to Commodity Futures Trading Commission data.
These last two weeks are the first time since June 2012 that most investors are expecting the market to fall. Rising production in West Africa has been blamed for the futures slump.
Arabica coffee for March was up 1.6% Friday at $1.3.65 a pound, on track to end the year up 8.3%. Cotton for March was up 1.4% at 71.48 cents a pound, on track for a 13% gain on the year and raw sugar futures jumped 0.7% to 19.62 cents a pound, closing in on 29% rise for 2016.
Write to Julie Wernau at email@example.com
(END) Dow Jones Newswires
December 30, 2016 11:47 ET (16:47 GMT)
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