Last week’s Brazilian fungicide scare, in the wake of concerns about frost damage to Florida’s orange crop, have made orange juice concentrate an early contender for commodities rollercoaster ride of 2012.

Prices in New York soared nearly 20% last week after US regulators announced they had found traces of carbendazim - a pesticide legal in Brazil but banned in the US - in Brazilian concentrate, and temporarily halted imports. This followed a price rally at the start of the year after frosts in Florida threatened to reduce yields.

With news this week that the USFDA could take until July to complete tests on Brazilian orange juice - all the while leaving its import ban in place - the price of orange juice in the US is likely to stay high in the foreseeable future.

However, prices this side of the Atlantic could actually fall. Although the vast majority of orange juice - the most popular juice in the EU - is imported from Brazil, Europe has higher tolerance levels for residues of carbendazim than the US, and to date EU regulators have opted not to impose restrictions or extra tests on Brazilian imports.

Since EU countries already pay less for orange juice concentrate than the US because of import tariffs on Brazilian importers to protect US producers, that price difference could become even greater if the EU decides to keep the door open for Brazilian orange juice and supply increases, says Mintec analyst Robert Miles.

“The EU is the main importer of Brazilian orange juice, so we could get cheaper orange juice if the Brazilians lose some of their former US market,” he adds.

At present, EU orange juice prices are already down 0.4% month-on-month, to £1,651/t, but remain slightly up year-on-year. Whether EU prices can indeed be expected to fall in 2012 is likely to become clearer next month, when the EU is set to discuss its approach to monitoring carbendazim in orange juice. Watch this space.

Commodity prices

After an eventful 2011, the cocoa market looks set to return to more normal levels this year. Unrest in Ivory Coast and higher demand from Asia caused powder prices to trade at an unusually high premium over butter early last year, but prices have started to fall due to economic concerns in key markets and, at £2,892/t, are down 6.3% year-on-year and 3.3% over the past month.

Cocoa butter prices have already been falling over the past 18 months after unusually high prices dampened demand, and buyers opted for cheaper alternatives such as palm kernel and coconut oil. These alternatives have recently become more expensive, and this month’s 10.6% rise in cocoa butter to £1,742/t suggests buyers are returning.