Orange juice futures drop to 3-month low on weather, fund selling

Investing.com - Orange juice futures came under heavy selling pressure for the fifth consecutive session on Thursday, trading at the lowest level since late December as favorable weather conditions and speculation hedge funds were liquidating long positions weighed.

On the ICE Futures Exchange, orange juice for May delivery traded at USD1.6822 a pound during early U.S. morning trade, slumping 0.71%.

It earlier fell by as much as 0.9% to trade at USD1.6743 a pound, the lowest since December 30.

Orange Juice prices have lost nearly 12% since March 16, as favorable weather conditions in Florida, the largest citrus-growing state in the U.S., dampened sentiment on the commodity.

The likelihood of a freeze this season has becomes nearly non- existent, while the start of the annual Atlantic hurricane season is still two-and-a-half months away.

Florida is the largest citrus-growing state in the U.S., accounting for nearly three-quarters of U.S. concentrate supplies. The state is also responsible for 15% of global oranges.

According to Florida Citrus Mutual, the state’s leading industry group, the industry generates nearly USD9 billion a year in economic activity and employs almost 76,000 people across the state.

Meanwhile, continued market talk of hedge funds and large institutional investors liquidating long positions amid bearish chart signals further added to the selling pressure.

Prices fell through their 200-day moving average at USD1.8177 on Tuesday and then breached a key support level close to USD1.80, sparking technical liquidation which then touched off automatic pre-set computer sell orders.

Trading volumes on the orange juice futures market are thin compared to other commodities. It is the smallest agricultural market on the ICE Futures exchange and a large sell or buy order from funds can result in exaggerated price action.

Fundamentally, orange juice traders were waiting for further news from the U.S. Food and Drug Administration on what will happen to Brazilian juice imports.    

Back in January, prices rallied sharply to a record high USD2.27 a pound after the U.S. said it found a prohibited fungicide in imports of Brazilian juice, which accounts for half of all imports and around 10% of U.S. juice supplies.

The FDA conducted tests and excluded some shipments, but fears over a disruption to supplies receded amid optimism over the Florida crop.

Elsewhere, on the ICE Futures Exchange, cotton futures for March delivery eased up 0.03% to trade at USD 0.9647 a pound, while sugar futures for March delivery rose 0.88% to trade at USD0.2339 a pound.