Frozen concentrated orange juice futures on the Intercontinental Exchange in New York recently soared to $5/lb, a staggering 433% jump from the Covid lows of around $1/lb. This parabolic move in OJ prices has been mostly driven by sliding yields across the US and Brazil, now squeezing cash-strapped consumers.
Let's begin with the US. Hurricanes Ian and Nicole, freezing conditions, and citrus greening disease have decimated citrus groves across Florida in the last several years. Some of the latest industry figures show that US orange production is set to reach its lowest level in more than a century.
Shipments from Brazil, the world's top producer, soared to a record in 2023 to offset sliding production in the US. Demand for Brazilian juice has been strong, while global supplies remain tight.
Now, Brazil has been hit by a devastating drought and widespread crop disease that is severely impacting yields across citrus groves.
Harry Campbell, analyst at Expana, told the Financial Times that soft-drink companies use the futures market to hedge against soaring prices. He said these firms have been battered by out-of-control prices - calling the situation unfolding "extremely dire." He said, "They're just like 'we don't even know what to do.'"
Rabobank analyst Andrés Padilla warned that Brazil has slipped into the "worst drought in 50 years" and "there's really been very, very little rain across the citrus belt in the last four months, which is an important period."
Padilla said, "The smallest crop in 35 years, plus rising citrus greening disease, plus drought — it's the perfect storm," adding, "The market is really stressed."
"There's no juice in the market," Padilla warned, explaining, "That's why we're back to record high prices."
"For consumers, it means that an already expensive orange juice will get more expensive," Kees Cools, president of the International Fruit and Vegetable Juice Association, said, adding that there were "many more affordable healthy and tasty alternatives."
It's not just OJ prices. FT pointed out Apple prices are beginning to surge.
Food inflation is going nowhere. Get used to high prices.
If you complain, Biden's DoJ now labels you as 'Russian disinfo' ...
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