Orange Juice Surges on California Freeze (FCOJ futures)

Wall Street Journal ^ | 1/18/07 | Tom Sellen

[BurbankKarl]

Frozen-concentrated orange-juice futures on the New York Board of Trade set highs on speculative buying and news that a freeze in central California has possibly destroyed as much as three-fourths of the state's citrus crop.

Most-active March FCOJ rose 7.10 cents to $2.0755 a pound. The contract set a high of $2.0760, the strongest price ever for a March contract and the highest on a monthly continuation basis since December, when the front-month futures rose to $2.0940.

News that California lost from 50% to 75% of its citrus crop to subfreezing temperatures over the past several days was generally viewed as bullish for prices, even though 90% of oranges there are sold as fresh fruit and the remainder are processed into juice.

Some analysts, however, said the freeze is actually bearish for the market since California growers will salvage what fruit they can and put it into juice, thereby increasing juice supplies. Others counter California's lack of major processing facilities will prevent all of those oranges from being juiced and supplies will not rise.

"There's no real processors out in California, so there's no way they'll be able to get all of that fruit processed in time," said Jack Scoville, analyst and vice president of Price Futures Group in Chicago.

One trader said the freeze provided a psychological lift for prices amid smaller overall supplies.

The loss to the California crop comes at a time when Florida -- the nation's No. 1 orange producer -- is growing its smallest crop in 17 years, so shrinking U.S. supplies are viewed as bullish for prices.

The freeze has more than doubled wholesale orange prices out West, and values continue to climb, said Bob Blakely, director of grower services at California Citrus Mutual in Exeter, Calif.

[Pete from Shawnee Mission]

"Pork bellies, which are used to make bacon, as in a bacon, lettuce, and tomato sandwich."

And the Australian equivalent, "Mutton Flaps". (I don't know the Options symbol for Mutton Flaps. I'm not even sure which exchange trades mutton flaps. )

I purchased about 1/2 a bushel of oranges yesterday. They were sale priced at $0.39 per pound. Now I have to push my children to eat oranges. (They don't normally.)

[Shots]

Ah yes da oranges froze and just like the oil industry the store prices shot up overnight despite the fact store had not received any new shipments, thus they profited from oranges they bought at lower prices.:-(

[art_rocks]

SEll, SEll, Sell.

Winthrope, Get back in there and Sell!!!

[VRWCmember]

What is the replacement cost of the oranges they had in inventory? Should the stores have waited to raise prices to market price until they sold out their inventory? Then what happens to them if after they buy replacement inventory the market price comes back down?

[NonValueAdded]

I'll take "who is Clarance Beaks" for $600, Alex.

[Political Junkie Too]

-PJ

[RetiredArmy]

Ah yes da oranges froze and just like the oil industry the store prices shot up overnight despite the fact store had not received any new shipments, thus they profited from oranges they bought at lower prices.:-(

Which is really funny. We just came from the store and they have tripled at the Wal Mart here. 1 naval orange costs 75 cents!!!!!! People are saying to hell with that and are not buying them. Which is the really funny part. Because they say, shortage, we are selling them at a higher price. And, the majority of people are saying, hell no, we are not paying that high of a price, so the oranges rot on the shelves and get thrown in the trash. So that is stupid also. It is not like gas which keeps. Oranges not purchased, spoil and rot. So, no one is going to buy the damned over priced things anyway.

[Starstruck]

Global warming is a b*tch.

[biff]

It's called inventory replacement. You sell at today's replacement cost, not yesterdays.

[cmsgop]

WE ARE MOVING,WE ARE MOVING !!!

[Shots]

"1 naval orange costs 75 cents!!!!!! People are saying to hell with that and are not buying them. "

Darn you guys got off cheap here they went to one buck a piece.

[xarmydog]

OJ where I live is very expensive even prior to the global warming freeze.[s/]We go with other brands or a knock off derivative.The last time we wanted to buy OJ the price was over six dollars a gallon.Not in the budget.

[Shots]

"What is the replacement cost of the oranges they had in inventory?" That is not relevant, the fact is they raised the price to the new price knowing all along they would make a windfall profit on their current stock which they paid less for.

[VRWCmember]

That is not relevant, the fact is they raised the price to the new price knowing all along they would make a windfall profit on their current stock which they paid less for.

It IS relevant. Market price is NOT dependant on costs of inventory. If they were to sell at below market price, then they would forego profits. You, as a consumer, might consider that nice of them, but they are not in business for the purpose of your viewing them as nice.

Do you view their "windfall profit" as something immoral or unethical? If so, then you are buying into the leftist idea of economic fairness that leads people to vote for democrats and other Marxists.

[VRWCmember]

Where in the hell is Beeks?

See post #26.

[Freedom4US]

"But I'm sure in terms of tonnage, it's not enough to make up for the losses in California."

Maybe somebody needs to tell the futures traders that the juice industry gets its oranges mostly from Florida and Brazil, not Cali.

[rusty millet]

OJ - the new oil.

[G-Man 1]

Not to worry Brazil will take up the slack as they have been doing for years.Sell, sell.