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Orange Juice increased 48.25 USD/Lbs or 23.38% since the beginning of 2023, according to trading on a contract for difference (CFD), and the rally still continues. Orange juice futures have almost doubled to $2.60 per pound over the last year, up from $1.40 a year ago, leading to price surges in stores. Orange juice futures rose 8.82% in February to $238.53, up 15.57% at the beginning of the year. So, we contemplate one of the smoothest and unabated price growth stories across the entire soft commodities group.

The global Orange Juice market size was valued at USD 6.3 billion in 2022 and is expected to expand at a CAGR of 3.79%, reaching USD 7.9 billion by 2028. Brazil is the top global supplier of orange juice, but Florida is the leader in U.S. production. Citrus farmers in Florida rely heavily on the juice industry, as approximately 90% of their crop is produced for all forms of juice. As global demand for orange juice increases, so has the strong supply growth from the EU, China, and Mexico.

The price increase highlights a serious problem for Florida – the state that is often featured as the orange and produces the most orange juice in the country, while also remaining one of the top exporters worldwide. But the past year’s Florida woes have opened up an opportunity for Brazil, the world’s largest exporter of orange juice. Orange juice shipments from that country were up 58% in the first four months of this season as Florida oranges saw a small yield.

This season the U.S. agriculture department predicts the state will produce 16m 90lb boxes of oranges, a 61% drop compared with last season when the state produced 41m boxes (a box weighs 90 pounds (41 kilograms)). It’s a worrying decrease but nothing compared with the fall from its peak in the 1990s when the state was producing 200m boxes a year. According to the U.S. Department of Agriculture’s monthly World Agricultural Supply and Demand report, or WASDE, Florida will likely produce 20 million boxes of oranges in the season that runs Oct. 2022 to Sept. 2023, down 51% from the year-ago period — the biggest drop in data going back to 1913. That would also be the smallest output since 1937. 

The shortage raises the cost outlook for beverage makers including Minute Maid owner Coca-Cola Co. and PAI Partners, which owns Tropicana, that could be passed onto American consumers at the breakfast table. As a result, farmers are looking at a 60% decline in production this season compared to last season, with about 16 million boxes of oranges expected to be produced this season.  Analysts estimate almost $375 million expected in production losses associated with the failing crop. 
 

Summary of Outlook:

One month ago, we initiated coverage of orange juice concentrate futures, assigning this commodity a Strong Buy rating. One month after, events keep developing in favor of a scenario where orange juice concentrate can theoretically double in price over the next couple of years and can be viewed as a unique hedging tool against classic financial and stock markets’ woes.

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