Last week, the USDA National Agricultural Statistics Service (NASS) released a decrease in their domestic orange production estimate for 2015/16; this follows their reduction in 2014/15 output as well, so the orange juice futures market may be moving towards a supportive pricing structure in 2016. The chart below (from barchart.com) shows activity over the last five days for November-15 futures; with today’s trading exhibiting a 6% increase from yesterday.
Supply speculation is figuring heavily into current market activity. The NASS’ 2015/16 estimate for US production is now at 5.77 mm tons, which could lead to the second consecutive year where global demand outstrips supply. Much of this anticipated decline is coming from Florida, where greening has been taking a toll on Florida output since 2013. Greening is spread via an insect vector, and using aWhere’s conditions-conducive disease indices on factors linked to leaf area and wetness may help growers manage the risk around the coming winter months. As the typical cooler and wetter conditions associated with positive phase El Niño in the southeastern US may be favorable for insect growth, risk factor exposure may be higher in the coming months. We also advise readers to closely monitor performance of companies with domestic orange physical and financial exposures.