Juice concentrate

FCOJ October Forecast

The forecast for the orange price is bullish in the USA; in fact, futures traders say that speculators have been buying steadily for most of the month. The uptrend has been advantageous to speculators and the trade is almost sold out, so the upside momentum is likely to continue. This bullish forecast is due to several factors. On the one hand in August was projected that Florida would harvest 60.5 million boxes – 25% lower than last season’s final production figure of 81.5 million boxes. The reason for this projection is the lower number of fruit on the trees, heavy post-bloom fruit-drop (PBFD), smaller sized fruit, impact from HLB/ greening disease and the high number of newly planted groves. PBFD is a fungal disease that reportedly really hit some areas hard this year due to the wet winter. Some areas of Southern Florida are on track to record 90 inches of rainfall in 2016 – the average annual rainfall is about 55 inches. On the other hand, hurricane Matthew is currently presenting a serious threat to the state’s groves and could hit Florida on the Atlantic side.

Due to these factors, the frozen concentrated orange juice (FCOJ) futures market has climbed hard over the past month. The front month is now trading around USD1.99/ lb, compared with USD1.87/lb at the start of September. Prices peaked on 27 September at USD2.09/lb. Brazil’s supply situation is the key market driver at the moment. One analyst suggested that the futures market might have finally accepted that the production from the crop in Brazil will only reach 245-250 million boxes, Florida’s crop will be about 70 million boxes and that the other producers cannot make up the shortfall. Brazilian FCOJ price levels in Europe are now comparable to pricing on the futures market. Futures analysts expect the market to be range-bound between USD1.85- 2.15/lb in the short-term. In terms of US supply and demand, FCOJ movement from Florida is up 5% and inventory is down 26%. Brazilian inventories are also going down. As a result, cash prices in Florida for the forthcoming season are expected to be very high – probably above USD2.50/lb.

None of the large producers are offering juice at the moment, which is a strong indication that they have already allocated the projected supply. The orange juice market is very firm due to the potentially short supply next year. Negotiations between buyers and producers are likely to be tense.

Brazil will increase its FCOJ price.

The forecast for the orange juice production in Brazil is a 18% lower than last season. Consequently, the Brazilian company Cutrale (the largest orange juice processor in the world), has announced a price increase for its frozen concentrated orange juice (FCOJ). It was around USD 1,850-1,900 per tonne, and the intent to raise the price to USD 2,300/tonne has been quite shocking.

A price increase was expected by the industry, but they were expecting a gradual one and, finally, a further increase in October during SIAL food fair in Paris.

Cutrale has been the only company who has shown its price proposal but it is expected that other companies (such as Citrosuco or Louis Dreyfus) announce a somewhat similar price.

A delay in this price increase would benefit bottlers and supermarkets chains. On the one hand, they could prepare their clients for new prices. On the other hand, they could increase the price of other kinds of juices. Today, apple juice and grape juice are quite cheaper than orange juice and pineapple juice. It would be an intelligent strategy for blenders, supermarkets chains and bottlers to increase the price of apple juice and grape juice with two purposes: in the first place, they could obtain higher benefits; secondly, it would be a smaller gap between the price of apple and grape juices, and orange and pineapple juice. In this way, orange juice price would not seem so high.

With regard to not from concentrate orange juice (NFC orange juice), Brazil has not announced any price yet. This country always tries to set a price for NFC orange juice that can compete with European manufacturers and processors. The lower orange production of the South American country is seen as an opportunity for Europe to offer cheaper prices than Brazil.

Orange Juice March Forecast.

In spite of the fact that orange production in the US is expected to be higher than previous forecast, it is going to be still too low.

The USDA has lifted the forecast for Florida’s current 2015/16 orange crop by 2.0 million boxes to 71.0 million boxes. The adjustment was made in the Valencia forecast which was increased to 35 million boxes, from 33 million boxes. Current Valencia fruit size is about average and is expected to be near average at harvest.

The forecast of non-Valencia orange production is unchanged at 36.0 million boxes.

The projection for frozen concentrated orange juice (FCOJ) yields remains at 1.45 gallons per box (42 brix), compared with 1.50 gallons per box last season.

Analysts in the US, suggest the upward amendment is attributed to a better-than-expected drop rate. The February report was predicting a drop rate of 40% and 225 pieces of fruit per box and the March figures showed a drop rate of 36% and 224 pieces of fruit per box – so droppage improved while the pieces of fruit (measure of size) remained almost the same. The March report last year showed Valencia drop rates at 28%, so droppage is still much higher than 2015 – just not as high as forecast.

With a crop this small, the harvest is expected to wind up early – sometime in May, say industry sources in Florida.

Mexico will not be able to fill the US gap in the orange juice production because its production will be as predicted. Mexican juice processors expect orange juice production to remain relatively stable in 2016, despite lower fresh orange production. Orange producers indicate strong demand from processors due to attractive orange juice futures prices.

However, Brazil is trying to increase its production. The 2015/16 processing campaign in Brazil ended last month, but the poor crop in the US has meant that Brazilian processors are continuing to run fruit in spite of the low yields at this time of year.