Opinion

FCOJ Futures Rise To Record Levels As Hurricane Ian Worsens Florida’s Citrus Supply

Orange Juice
United States
Published Oct 30, 2022
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Frozen orange juice concentrate (FCOJ) futures in the US have risen significantly following the devastating effect of Hurricane Ian in Florida. Prices surged to USD 2.18 per pound, the highest on record, as the market reacted to the dark cloud over the Sunshine State. The state’s citrus crop was expected to be the smallest since 1935 due to dry weather conditions and the crippling effect of the citrus greening disease. However, Hurricane Ian has worsened Florida’s harvest. Farmers may opt not to hire seasonal workers this season, given the low harvest figures, and will have to strategize on replanting the damaged trees, which could take up to five years to produce a decent crop. This supply crunch could result in FCOJ futures remaining elevated for the season.

Frozen orange juice concentrate (FCOJ) futures in the US have risen significantly following the devastating effect of Hurricane Ian in Florida. Prices surged to USD 2.18 per pound, the highest on record, as the market reacted to the dark cloud over the Sunshine State. Early estimates show that farmers could suffer agricultural losses of up to USD 1.5 billion, with USD 300 million affecting the citrus industry.

The state’s citrus crop was expected to be the smallest since 1935 due to dry weather conditions and the crippling effect of the citrus greening disease. However, Hurricane Ian has worsened Florida’s harvest, as the damage led to farms flooding, trees getting uprooted, and oranges dropping from branches. In parts of the state, such as Polk, Highlands, Hardee, and DeSoto, up to 90% of the crop was affected. In South Florida, the damage was severe, and industry experts anticipate that many farmers may sell their farms to cut costs.

Farmers may opt not to hire seasonal workers this season, given the low harvest figures, and will have to strategize on replanting the damaged trees, which could take up to five years to produce a decent crop. The most recent estimate of 28 million boxes, significantly lower than the 41 million boxes harvested last year, is likely to be revised further downwards to account for the losses suffered. Consequently, FCOJ production could drop significantly this year.

In September, US stockpiles of FCOJ plunged by 43% compared to the previous year, the lowest level since 1977. This supply crunch has kept prices bullish, with futures rising above USD 2.00 per pound in Oct-22 for the first time since 2016. To meet consumer demand, the country is expected to import record amounts of orange juice this season, which could bode well for major suppliers such as Mexico and Brazil. Last year, US imports grew by 45% and 6%, respectively. The country also increased its FCOJ purchases by 27% and is set to increase significantly this season.

This supply crunch could result in FCOJ futures remaining elevated for the season. The category-4 hurricane lasted only a few days in September, but the impact will stay for years.

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