Orange juice futures officially entered a bull market yesterday after a three-day rally sent the price for May delivery surging by 21% to $1.2795 per pound (454g). That was the biggest three-day rise in price in more than 16 years, and a sign that investors believe the price of orange juice will increase dramatically in coming weeks.
The whopping increase in futures prices says little about future demand for OJ, though, and plenty about the troubles that lie ahead for its producers. Americans now drink less orange juice than at any time in the past 13 years, and the driving force behind the recent surge in orange juice futures has been poor weather.
The US’s citrus regions have suffered from a lack of rain in the past month and another two weeks of dry conditions are expected. Combine that with the nasty citrus-greening disease that has been going around, and you have the perfect conditions for a spike in the price of orange juice futures. This year’s crop is set to be the smallest in over 40 years (paywall).
The orange juice industry faces a difficult choice: companies can raise the price of their orange juice to reflect the increased price of oranges, or swallow the difference, and expect lower profits.
Orange juice’s popularity is already waning because of dietary trends that stigmatize sugar (aside from the drink’s generous helpings of vitamin C, a glass of orange juice contains almost as much sugar as a Coke), and work habits that mean some Americans are foregoing breakfast entirely.
Raising prices at this stage doesn’t sound like a winning move.