Orange Juice Prices to Spike After Fungicide Scare
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That glass of orange juice is about to cost you more, after the U.S. Food and Drug Administration found traces of a banned fungicide in Brazil-imported oranges. The prices of orange juice futures contracts hit a 34-year high on Tuesday, just days after a cold snap in Florida sent frozen orange juice concentrate futures soaring 26 percent.
It’s no longer just about commodities like oil and gold. Last year, peanut butter prices hit the roof after a poor peanut harvest. This year, orange juice prices too, are set to hit the roof.
That glass of orange juice is about to cost you more, after the U.S. Food and Drug Administration found traces of a banned fungicide in Brazil-imported oranges. The prices of orange juice futures contracts hit a 34-year high on Tuesday, just days after a cold snap in Florida sent frozen orange juice concentrate futures soaring 26 percent.
It’s no longer just about commodities like oil and gold. Last year, peanut butter prices hit the roof after a poor peanut harvest. This year, orange juice prices too, are set to hit the roof.
Related: Peanut Butter Prices to Rise After Poor Peanut Harvest
Following the discovery of traces of a potentially harmful fungicide in Brazilian-imported oranges, orange juice futures soared 9.7 percent as traders feared the find could lead to a sharp supply disruption.
Brazil is the largest orange juice producer in the world, supplying more than half the world’s supply of orange juice.
In a letter to the industry dated Monday, the Food and Drug Administration said “low levels” of the fungicide carbendazim had been found in juice from the 2011 orange crop from Brazil. The FDA said the fungicide was discovered by a U.S. juice company, but kept the name of the company confidential.
While it is banned in the United States, carbendazim is used legally in Brazil to treat moulds that grow on trees.
Michael Smith, president of T&K Futures and Options, told the BBC that news of the fungicide combined with existing supply worries explains Tuesday’s big price move. According to Smith, the orange juice futures markets is volatile simply because the market is so small – the smallest of all agricultural markets traded on the ICE Futures.
Orange juice futures have already climbed nearly 40 per cent since September, reaching prices not seen since the 1970s.
The United States, the second-largest producer of orange juice, has also had a direct hit to its supply levels in recent weeks.
About 25 per cent of Florida’s citrus-growing region suffered a hard freeze during the first week in January. In just six trading days, frozen orange juice concentrate futures soared 26 percent, to close at $2.1275 a pound on Tuesday on the ICE Futures.
But while the price hike would affect many consumers, the orange juice drink has lost its popularity in recent years. Orange juice consumption has fallen 37 percent in the last decade, as consumers now have a wide range of other drink alternatives.
“People go in the store now and buy a bottle of water,” James Cordier, a Florida-base commodity trader, said. “Ten years ago they’d go in and buy a bottle of orange juice. The only time people drink orange juice now is on vacation at the hotel.”
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