Orange Juice – Commodity

Min Spread *
Target Spread *
Swap point Long/Short
-15.08 / -14.93
Nominal Value of one lot
1 000
Trading hours
15:00 – 21:00

Instrument description

Nearly everyone likes to get refreshed, drinking a cold and enjoyable juice on a warm day. There are a wide variety of natural juices available, and many of the companies also make juices by taking flavor and pulp of fruits and adding preservatives. Some of the popular juices include orange juice, apple juice, pineapple juice, lemonade, grape juice, and cranberry juice.

Orange juice is one of the most widely consumed juices all over the world, and people love it due to its delightful and exquisite taste. Orange juice is a beverage that is known for its nutritional value, and it contains Vitamin C, potassium, folate, and other antioxidants. Orange juice is a healthy drink with many health benefits such as decreasing inflammation, improving the function of heart, and reducing the risk of chronic diseases.

The top five biggest orange juice producing regions according to 1000 metric tons are

  1. Brazil - 1260
  2. S.A - 312
  3. Mexico - 170
  4. European Union - 103
  5. China - 42

History of Orange Juice

The precise origin of oranges is still not confirmed but experts suggests there is mention of oranges in Chinese manuscripts that dates back to 2200 B.C. It was not until the 15th century when Spanish explorers introduced oranges to the western world, and till the 19th century, orange trees commonly began to grow in Florida, USA.

Since ancient times people have been taking out the pulp from orange to make drinks and juices, but large scale orange juice production was first done by Cedric Donald Atkins in the 1940s; he invented a process that made it possible to produce a juice in a concentrated form that could be frozen. The advancement of technology in the late 1950s also saw common use of refrigeration to store the food, and it also paved the way for Frozen Concentrated Orange Juice (FCOJ) to be sold to millions of consumers. Today FCOJ is worth a multibillion Dollar industry and has become a popular commodity similar to coffee, cocoa, rice, and sugar.

Oranges are mostly grown in regions that have tropical to sub-tropical climates where summers are warm, and winters are cold. There are over 600 different types of oranges that are grown all over the world. But when it comes to commercial usage and distribution, then there are 10 major types which are

  1. Mandarin
  2. Navel
  3. Valencia
  4. Satsuma
  5. Seville
  6. Blood
  7. Clementine
  8. Hamlin
  9. Jaffa
  10. Pineapple

Oranges are categorized into two broad variety, which are sweet oranges and bitter oranges. The sweet variety of oranges includes Valencia oranges, Navel oranges, Blood or pigment oranges, and acid less oranges. Valencia organs are the most common and popular types of oranges.

The orange trees are climate-sensitive and need certain temperatures and a certain amount of rainfall to thrive. The FCOJ traders must monitor the climatic conditions of regions where oranges as slight changes in warm temperatures or rainfall can affect the supply and cause volatility in the market.

The orange trees can tolerate drought conditions, but it produces less fruit. The oranges grow best when the trees receive 40 to 45 inches of annual rainfall. The orange trees are also sensitive to extreme winter conditions, and it can be a concern if the frost like conditions continues for weeks.

Nearly all the citrus fruits, including oranges, ripen on trees. However, the harvesting period for each variety of oranges is different. For instance, the most common Valencia oranges are harvested from March to July. The oranges in the main orange producing state of Florida bloom in March and April. The farmers in Florida usually harvest the oranges by hand and using ladders and pick sacks. The oranges are placed in tubs that can hold 900 pounds of oranges and then oranges are placed on tractor-trailers that can hold 45000 pounds of oranges

  • The process of making Orange Juice

The FCOJ juice, along with not-from-concentrate (NFC) juice and reconstitute liquid juice, is not squeezed at the time consumption. During the mid-1980s, NFC exceeded FCOJ in sales, but FCOJ is considered to be easier for storage, and it is not perishable. The FCOJ is the benchmark when it comes to measuring the price of oranges in the commodity market. The producers in Florida take the following steps

➢ Taking a sample of orange to ensure the quality
➢ Cleaning and washing the oranges
➢ Recovering orange oil from the peel of the orange
➢ Extracting juice from the oranges, almost half of the orange contains juice
➢ The juice is screened to remove the seeds and big chunks of pulp
➢ The juice is heated to inactivate enzymes that affect the taste and quality of juice
➢ A high vacuum evaporator is used to remove the water and transform the juice into a concentrated form
➢ The concentrate is then kept in a frozen state
➢ The concentrate is blended with fresh juice to enhance its flavor

More than 90% of the oranges grown in Florida go into the production of juice. The orange juice is only consumed as a healthy drink, and the orange juice does not have any other consumer or industrial use.

Supply and Demand of Orange Juice

The supply and demand principle significantly affects the price of orange juice in the commodity market. Oranges are grown in most parts of the world that ensures a constant supply of oranges. However, there is a marked decline in demand for oranges in the USA and some countries in Europe.

How to read the price change of Orange Juice

The orange juice is quoted in U.S Dollars and measured per pound (Lbs.) if we analyze the price chart of Orange Juice, we the prices from the range of $95.00/Lbs. to $105/Lbs. from July 2019 to March 2020. The orange juice prices have seen a Bullish trend from Mid-March. The lowest value in recent months was $108.50/Lbs. on April 30, 2020. The current price of orange juice price is also the highest, which is $130.7/Lbs. The Bid price is $130.50/Lbs., while the Ask price is $130.70/Lbs.

How to Trade Orange Juice

Both the short term traders and long term investors can try to take advantage of the orange juice commodity and avail the opportunity to profit. Investing in orange juice is quite a suitable way to expand your portfolio and hedge against inflation. You can invest in a basket of commodities that includes orange juice along with other commodities such as metals and energy. Investing in multiple commodities helps to protect against inflation and also prevent the volatility of a single commodity.

The common ways to invest in orange juice are through Exchange Traded Funds (ETFs), Futures Contracts, Options, Contract for Difference (CFD), and buying shares of orange juice companies. The FCOJ contract is offered on the Intercontinental Exchange (ICE), which contains 15000 pounds of orange juice solids. The expiration months of the Future contracts are January, March, May, July, September, and December. Future contracts is a popular derivative option that allows you to make leveraged bets on orange juice prices. Upon expiration, the contracts are physically settled through delivery.

Another way to trade orange juice is to trade CFDs, which is a derivative product that allows you to speculate on underlying FCOJ prices without the need to buy or store the orange juice. Trading CFDs gives the advantage of using leverage and speculating on both the Bullish or Bearish trends to try and potentially gain from it. With CFD, you can profit but also suffer considerable losses, but a risk management strategy can be implemented.

What causes the price change of Orange Juice?

The factors that influence the prices of orange juices are

  • Consumer Demand

The consumer demand for orange juice is said to be more volatile as compared to other agricultural commodities. In the last few years, the demand for orange juice is decreasing, particularly in the U.S. The decline is due to high sugar content in orange juice and fading out the importance of breakfast. However, in some countries, the demand is increasing, such as in China, Russia, and Brazil. The traders need to monitor the consumption patterns to depict current and future prices of orange.

  • Weather

The weather plays a crucial role in determining the price of nearly every agricultural commodity. Florida is the hub of orange juice production, and the state faces some very volatile weather conditions with hurricanes frequently affecting the region. An upcoming hurricane causes sudden price fluctuations, and the prices can get back to normal if the damage of the storm is less than expected.

  • Food Safety Concern

Food safety concerns can also lead to an increase in orange juice prices. The farmers may use pesticides and chemicals to protect the crop, but many times the use of pesticides has led to import bans and high orange juice prices

  • USDA Production Estimates

The United States Department of Agriculture (USDA) releases an estimate of orange production every year in October. The modern estimating tools make it easier to predict the yield. However, there can be errors that can lead to increased supplies called ‘supply surprises,’ which can result in price volatility, particularly if it occurred in Brazil. Even in declining global demand, the prices of orange juices have remained stable in the USA and Brazil even with supply shortages

  • Diseases

The orange trees are prone to diseases, and in the past, trees in the USA and Brazil have been badly affected due to diseases. Once the diseases are eradicated for good, then it can have an impact on the orange juice prices.

The emerging markets have resulted in constant demand for orange juice. As developing countries are witnessing a stable economy, then the demand for orange juice is said to increase even more. Like most commodities, orange juice is also valued in U.S. Dollars, and traders need to monitor the value of USD and its quote with other global currencies. The U.S. Federal Reserve is also known as the Fed, usually, keeps the interest rates at minimum to prevent price hikes during inflation.

The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.

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