Traverse City Record-Eagle

Business

December 15, 2012

Futures File: Orange juice gushes higher

Orange juice prices jumped to a four-month high this week as the USDA reduced its estimate for Florida's orange crop by over 5%.

Florida is the United States' largest orange producer and accounts for around a quarter of global orange juice production. Crop forecasts were reduced due to dry weather and premature fruit dropping in Florida. Large portions of the state had nearly no significant rainfall for more than six weeks in November and December.

Some analysts warn that there have not yet been any significant forecasts of freezing weather to hit Florida's orange production. Should that change, orange juice futures could surge higher on fears that the crop could be damaged by freezing temperatures, a phenomenon that traders refer to as the "frost premium" in orange juice prices. As of midday Friday, frozen concentrated orange juice for delivery in January was worth $1.38 per pound.

Natural gas prices sour

Natural gas prices fell for the seventh consecutive trading session on Friday, dropping to the lowest price in over three months. Prices are falling as U.S. natural gas inventories continue to climb amid warmer-than-usual weather across much of the country.

In normal years, natural gas inventories are usually being drawn down at a rate of over 100 billion cubic feet per week by mid-December, but last week, inventories rose by 2 billion cubic feet. Rising supplies, along with ongoing concerns about the looming fiscal cliff, caused natural gas to fall as low as $3.26 per million British thermal units, down as much as 29 cents (-8.1%) during the week.

As a result of the currently low prices and forecasts for colder temperatures in late December, some analysts are expecting a rebound in natural gas prices. But seven straight downward trading sessions may have demoralized many would-be bulls.

In the meantime, homeowners and industrial users can enjoy these lower prices. As of midday Friday, natural gas for January delivery was worth $3.30.

Opinions are solely the writer's. Walt Breitinger is a commodity futures broker in Valparaiso, Ind. He can be reached at 800-411-3888.

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