FCOJ Review: Modest Losses On Spreads, Rolling

Orange juice futures fell slightly as traders spread March and January contracts and continued to roll positions into March before first-notice day. Nearby January frozen concentrated orange juice lost 60 points on ICE Futures U.S. to settle at $1.3225 a pound. Most-active March fell 70 points to end at $1.3565. Both contracts finished near session highs.

March futures located support near $1.3200 with Tuesday’s decline and closed off the lows, but the contract could not generate enough follow-through buying interest by Wednesday to take prices north. Light volume ahead of the Christmas holiday ensured prices remained rangebound, a broker said.

While orange juice futures have fallen nearly 7 cents a pound from Monday’s rally high, the market could take another stab higher if traders decide to build more freeze premium into the market, said Jimmy Tintle, broker/analyst at TransWorld Futures in Tampa.

« I think we’re trading near fair value in the $1.30-$1.40 area, but prices could rise to near $1.50 a pound if a freeze threat materializes, » said Tintle. Futures have also been pressured this week by declining movement of Florida juice through marketing channels, a demand indicator, causing total juice inventories to rise.

While no freeze threat currently exists for the Florida crop, traders are watching California’s Central Valley amid freeze warnings issued for that citrus-intensive region of the state. The National Weather Service has issued freeze warnings for the San Joaquin Valley, the southern half of the Central Valley, for Wednesday night and Thursday morning. Readings are expected to drop to 28 degrees Fahrenheit or lower for a duration of four to nine hours, the NWS said.

Citrus sustains damage when readings fall to 27 degrees or below for four or more hours. Growers will implement frost protection measures–wind machines and irrigation–to artificially lift temperatures and possibly keep the crop from harm.

Joel Nelsen, president of California Citrus Mutual, said Thursday morning will be « critical » for the citrus crop. California grows mostly navel oranges for the peel-and-eat market, while Florida grows oranges destined mostly for juice processors. A widespread freeze in California can actually increase juice supplies because it forces growers to process any damaged fruit into juice and thus raise total U.S. supplies.

Sourc e: FutureSource