Bulls Starting to Get ?Juiced? Over O.J. Futures

Today’s Spotlight Market
Both large and small speculators have become bullish on O.J. futures according to the Commitment of Traders (COT) report.? The most recent COT report shows non-commercial and non-reportable traders holding a net- long position totaling 7,560 contracts as of April 1st. This is prior to the recent upside price breakout that occurred last week. Commercial traders are net-short O.J and it would not be a surprise to see additional hedge selling occur should the market begin to approach the $2 price level. ?

 

Fundamentals
While traders are focusing on the tumultuous activity in the equity markets of late, a potentially robust bull market appears to be quietly forming in a market that is not normally on the radar screens of most market participants?Frozen Concentrate Orange Juice (FCOJ).

Front month futures are now trading at their highest levels in nearly 2 years after the USDA once again lowered their estimate for the size of the Florida orange crop this season. The USDA this past Wednesday estimated the Florida Orange crop at 110 million 90-pound boxes. This compares to a crop of 133.6 million boxes last season.? If the USDA estimate proves accurate, this will be the lowest orange harvest out of Florida in nearly 30 years!

Florida?s citrus groves have been plagued by an outbreak of ?Citrus Greening? disease which causes affected trees to drop their fruit before maturity. In addition, there are still some concerns by analysts that dry weather will also curtail production out of Brazil, the world?s largest orange producing nation.

Lower Orange production should continue to force retail Orange Juice prices higher, but in return may trigger a continued reduction of consumer demand for this popular breakfast drink. Retail sales of O.J. fell by over 5% in March vs. year ago levels as consumers balk at paying high O.J prices at the grocery store and have a slew of alternate options to meet their breakfast beverage needs. This lack of retail demand may help to dampen any extreme price moves as end-users may eventually begin to balk at chasing the market higher should prices approach the $2 level. ?

 

Technical Notes? -? View Today’s Chart
Looking at the weekly continuation chart for O.J. futures, we note that historically, O.J. prices have been unable to sustain price rallies above the $2 per pound price level, a feat that has only occurred 5-times in the past 40 year. Although the current bull market is still well shy of historic price levels, we should note a rather strong price base has formed from which prices have broken out to the upside. Trading volume has waned starting in 2008 due mainly to a lack of large speculative interest. Near-term resistance for the front-month May contract is seen at 170.00, with support found near the 135.00 price level.??

MondayAPR14

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