FCOJ Review : Closes Higher On Smaller Crop Ideas

Orange juice futures rose Thursday on light speculative fund buying linked to expectations for a smaller Florida orange crop, brokers and analysts said. Most active May orange juice added 95 points, or 0.64%, to settle at $1.4945 a pound.

Traders continue to price in the potential for a smaller Florida orange crop when the U.S. Agriculture Department issues its March crop production report on Wednesday. Many analysts expect the government to shave a few million boxes off of a crop that is already on the threshold of the being the smallest in 20 years, helping to take prices higher.

The USDA in February estimated the 2009-10 crop at 129 million 90-pound boxes, down from 135 million a month earlier, owing to a prolonged January freeze, small fruit and higher-than-normal drop rates. « From what the market is pricing in, you’re going to see another drop [in production], » said Mark Julias, market strategist at Lind-Waldock in Chicago.

With May futures trading near $1.5000 a pound, the market likely has the smaller crop already factored into prices, he said, unless the USDA would reveal a shocking number. Analysts contacted expect the USDA to either leave its projection unchanged or lower it by 2 million boxes.

A deeper cut of 4 million to 5 million boxes would likely get bulls’ attention, a broker said. Temperatures continue to run below normal to much below normal over Florida’s citrus belt, though no crop-damaging cold is forecast, private forecaster DTN Meteorlogix said.

The National Weather Service has issued a freeze warning, however, from 4 a.m. EST to 8 a.m. EST Friday morning for the counties of Glades, Hendry, inland Collier and inland Palm Beach. Readings are expected to fall into the upper 20s to around 30 degrees Fahrenheit, for three or four hours.

Citrus can be damaged when temperatures fall below 28 F for four or more hours.

Source : FutureSource