Recent fears concerning a fungicide found in Brazilian oranges that caused orange prices to climb in anticipation of a supply shortage have turned out to be a false alarm. The prices of orange-juice futures soared after the U.S. Food and Drug Administration (FDA) detected the fungicide carbendazim in orange supplies from Brazil, the world's top orange grower. Although carbendazim is used in limited amounts Brazil to prevent black-spot fungus, the chemical is not approved for use on oranges in the United States and the FDA had indicated that importers might have to sell their Brazilian juice somewhere else or destroy it if the levels of the chemical were found to be unsafe.
Futures of frozen orange-juice concentrate hit an all-time record high of $2.26 a pound on the Intercontinental Exchange in January as investors worried that there would be shortages if imports containing the fungicide were banned in the U.S. Imported oranges currently account for about a fourth of all U.S. orange-juice supplies. Fears of a shortage began to disappear shortly after the FDA issued recent reports saying although the agency had detected carbendazim in supplies from Brazil, Canada as well as some domestic inventory, it would not ban any imports or pull product from the supermarket shelves because of it. The FDA said the levels of carbendazim were so minor as to not be a health threat and basically waived off any concerns by not issuing a ban.
However, because the orange industry now has fewer weather risks to deal with as well as fresh new supplies of U.S. oranges.coming to market, demand is still expected to weaken, and prices will probably continue to slide until the U.S. harvest tapers off in the summer of 2012. Industry analysts predict retail demand will decline even further as the high price of orange juice drives more consumers to choose a variety of different popular beverages ranging from exotic fruit juices to vitamin water products. The effects of the higher prices can be seen in a Florida Department of Citrus report showing that as orange juice prices increased by over 25% over the five seasons ending last September, the average U.S. consumption dropped from 4.5 gallons per capita per season to just 3.6 gallons over the same period. Add the fact that the U.S. Agriculture Department (USDA) is predicting that domestic orange output will increase by 5% in 2012, and you have a weak market with too many oranges and not enough people to consume them.
Orange Juice Futures StabilizeAfter a decade of falling prices, orange juice sales are starting to recover from the lows seen last February, and the prices are continuing to ...