FCOJ Review:March Falls 2.6%;Cold Fla Temperatures Subside

Orange juice futures for March delivery fell 2.6% Tuesday on profit-taking from the recent highs and as the coldest readings of the year didn’t damage the Florida orange crop. Nearby January frozen concentrated orange juice futures lost 310 points to settle at $1.3285 a pound, and most-active March fell 360 points to end at $1.3635.

After rallying to 17-month highs Monday on the freezing weather concerns as well as technical buying, traders decided to book profits and sell. « We did see some freezing temperatures in Florida, but not a hard freeze that could have harmed the orange crop, so traders took some money off the table today, » a Florida-based broker said.

High clouds during the early morning hours kept frost away from most of central Florida and readings are expected to climb back into the 70s Fahrenheit by Wednesday. Temperatures for next week don’t appear threatening for Florida citrus, so traders took some bullish bets off the table, an analyst said.

Traders have their eyes on the California crop, however, with a freeze watch in effect through Wednesday morning and again through Thursday morning for the citrus-intensive central and southern San Joaquin Valley. « Decreasing clouds and winds this evening will bring the threat of widespread freezing temperatures overnight, » the National Weather Service said in an advisory Tuesday. « Little change…or even slightly colder temperatures could occur Wednesday night. »

Citrus damage occurs when readings fall to 27 F or below for four or more hours. If widespread damage would occur, it would actually be bearish for FCOJ futures because growers would be forced to crush the affected fruit into juice, thereby increasing U.S. supplies.

In other news, speculators, or those traders who don’t have any use for the physical commodity, decreased short bets by 2,420 contracts for the week ended Dec. 18, lifting their net-long position to 19,653 contracts, ICE’s speculation and hedging report shows. Speculators also added 320 longs during the week.

Speculators have been adding length for weeks now in the run-up to the winter freeze season and on ideas that an already small Florida orange crop could potentially shrink further. Speculators are 56.1% net long, up from 48.6% last week. This is the strongest net long position speculators have taken since 2004 and represents a significant downside risk if liquidation occurs, an analyst said.

FCOJ movement, a demand indicator, slowed to 2.586 million gallons in the week ended Dec. 12, from 2.695 million the previous week, data from the Florida Department of Citrus said. FCOJ imports declined to 100,601 gallons versus 395,144 the previous week.

Orange juice inventories continued to climb, however, totaling 109.117 million gallons, up from 107.207 million the week prior. Inventories are up significantly from 94.492 million one year ago.

Source : FutureSource