Orange juice was one of the big commodity fallers of 2012 - but this year a severe outbreak of crop disease in Florida has helped to change all that.
Prices on the benchmark ICE Futures exchange in the US have risen by 35% since the start of the year, to £2,072/ tonne [Mintec 22/4/13], primarily over fears of a poor orange harvest in Florida following unusually dry weather in the Sunshine State. But speculation has also been heightened by a citrus tree disease called ‘greening disease’ that causes fruit to drop prematurely.
The spread of the disease has prompted the US Department of Agriculture (USDA) to gradually reduce its forecast for the 2012/2013 Florida crop from 154 million boxes in October to 138 million boxes two weeks ago. Fruit size is also smaller as a result of the dry weather.
Durum production down 5% rye up 21%
It’s been a tough year for anyone buying wheat, and the pasta end of the market is no exception. Global durum production is expected to be down 5% year-on-year to 35.1 million tonnes this season, and prices have responded, pushing durum up by 11% over the past month and 26.4% year-on-year.
By contrast, rye is offering a rare good news story in cereals. EU rye production is tipped to increase to 8.4 million tonnes for the 2012/13 season - up 21% year-on-year - and prices have fallen in response, by 6% over the past month and 16.5% year-on-year.
Electricity prices are also on a downward trajectory now the weather has warmed up, though they remain nearly 20% higher than this time last year.
It was a very different story last year. Prices surged briefly at the start of the year, after a controversial fungicide was found in Brazilian juice exports to the US, but once it became clear there wasn’t a widespread problem with fungicide contamination, prices were firmly on a downward trajectory for the rest of the year. Good weather in Florida also helped, pushing orange juice prices on the ICE down by £1,000/tonne during the first half of 2012.
“Crops were good in Florida and Brazil, and since the recession demand has been weaker on both sides of the Atlantic,” Rabobank analyst Francois Sonneville told The Grocer.
However, although demand was expected to remain weak this year, orange juice prices were heading up in 2013 and beyond, Sonnevilled warned.
“Last year’s prices were not sustainable because the cost base is so much higher than it was 10 years ago,” he said, with a succession of minimum wage increases in Brazil and crop diseases driving up production costs.