Orange juice prices rebounded this week as Tropical Storm Ernesto entered the Caribbean.
Prices languished near two-month lows, but the potential for a storm to hit Florida shot prices sharply higher. Florida produces nearly 80 percent of the U.S. orange crop, making the orange juice market extremely dependent on stable weather in Florida.
Although most major weather forecasters do not expect the storm to make landfall in Florida, the potential threat put the market on edge. Those traders who sold short orange juice futures, expecting to profit from lower prices, have been getting increasingly nervous, buying back their short positions and accelerating the price rally.
As of midday Friday, frozen concentrated orange juice for delivery in September was trading for $1.13 per pound, up 7 percent from its recent low.
Investors ignore USDA, buy corn
Two major reports released this week show the drought-stricken U.S. corn crop is in significantly worse shape than government estimates.
One report, a survey of over 1,800 farmers, estimated yields would fall to a pitiful 114 bushels per acre. Another, published by a private analytical firm in Chicago, placed the corn yield at 131 bushels/acre. Both estimates dramatically contradicted the USDA's most recent guess of 146 bushels/acre.
Rather than wait to see if the next USDA report would fall in line with private estimates, investors continued to plow funds into the corn market, causing December corn futures to explode to $8.20 per bushel — an all-time high.
Prices tumbled this week as gold investors were disappointed by relatively bland comments made by the U.S. Federal Reserve and the European Central Bank.
Many analysts expected central banks to announce programs aimed at reducing unemployment and achieving higher inflation rates in the world's two largest economies. In the week leading to the announcements, inflation-sensitive gold futures rose $50.
When both Fed Chairman Ben Bernanke and ECB boss Mario Draghi failed to make dramatic announcements, gold fell as much as $40 per ounce. August gold futures were trading at $1,630 as of Friday afternoon, rebounding moderately after strong U.S. jobs data.
Walt Breitinger is the president of Breitinger & Sons LLC, a commodity futures brokerage firm in Valpairaiso, IN. He can be contacted at (800) 411-3888 or www.indianafutures.com.