DJ ICE FCOJ Review: Falls Ahead Of USDA March Crop Report

Orange juice futures for May delivery gave backrecent gains Tuesday in a corrective session ahead of the U.S. Agriculture Department’s key monthly crop production report. Most active May orange juice fell 215 points, or 1.4%, to settle at $1.4715 a pound. Nearby March lost 175 points, or 1.2%, to end at $1.4915.

Weak chart-based factors and profit-taking contributed to the selling interest, along with a bearish mood in commodities at the hands of a firmer U.S. dollar, brokers said. Japanese candlestick chart analysis revealed a bearish « hanging man » formation after Monday’s session, which can lead to selling interest and will often signal a top in the market.

Volume was extremely light, which made it easy to force prices lower, they explained. The surge to two-month highs Monday and subsequent lower close left the market vulnerable to technical selling, which pressured prices. The market had also reached technically overbought levels, sparking a corrective downward trade.

Still, traders anticipate the Florida orange crop estimate will come in in a range from unchanged at 129 million boxes to down 3 million boxes on Wednesday when the USDA issues its March production report at 8:30 a.m. EST. The USDA in February cut its estimate by 6 million 90-pound boxes due to the freeze, small fruit and higher-than-normal drop rates.

The March report will include the oranges that were lost after the initial survey was conducted Jan. 26-27. Analysts feel that a 3 million box reduction is already factored into prices, so a number of 3 million or less may likely be met with selling interest. A cut of 5 million or more boxes would likely spark a rally, they said.

Speculators added 2,755 longs to orange juice futures in the week through March 5, raising their net long position to 16,572 contracts. Speculators are 45% net long, versus 42.5% last week, ICE’s Speculation and Hedging report showed.

Source : FutureSource