Here is this week’s edition of Futures File, our weekly commodities wrap-up:
Orange Juice Spikes as Dorian Looms
Orange juice prices jumped this week as Tropical Storm Dorian formed in the Atlantic Ocean. The storm is currently projected to head westward toward the Bahamas and Cuba, putting it within striking distance of Florida, home to a quarter of global orange production.
Storm damage could add to already widespread damage from a disease known as “citrus greening” which has caused trees to prematurely drop fruit, decreasing production in Florida by over 10% this year.
Some analysts warn that this rally could peter out, especially if Florida’s groves escape this hurricane season without major damage. Global orange juice consumption has been dropping in recent years, a trend that has been accelerated by economic problems in Europe, home to more than a third of the world’s OJ drinkers.
As of midday Friday, frozen concentrated orange juice for delivery in September was worth $1.44 per pound, up 20 cents (+16%) over the last month.
Soybean prices collapsed this week, falling nearly $2.00 per bushel (-13%) in less than three days.
The move began early Tuesday morning, when prices had been sitting near one-year highs at $15.26 per bushel. Some farmers in the Midwest were still holding onto the last portion of last fall’s soybean harvest, hoping that demand for US soybeans would continue pushing prices higher. Instead, when the market was hit with rumors that China was selling three million metric tons of soybeans, the news triggered a quick turnaround.
Farmers and traders began rapidly selling off their soybean holdings, while potential buyers held off, waiting for lower prices. By Friday morning, prices had fallen as low as $13.30 per bushel, one of the fastest declines ever seen in the soybean market.
Going forward, market participants will continue to monitor soybean export demand and growing weather in the Midwest.
Silver rallied over $1.00 per ounce during the week (+5.5%), reaching the highest price in over a month. Recently, silver has been following news from the US Federal Reserve, as many investors’ appetite for silver is linked to US stimulus efforts. Comments by Fed Chairman Ben Bernanke this week indicated that stimulus may not taper off as quickly as some analysts expected, sparking the rally.
Despite the recent rise, silver prices are still down nearly 40% during the last year, making Friday’s price at $19.70 per ounce seem relatively cheap to some traders.
Opinions are solely the writer's. Walt Breitinger is a commodity futures broker in Valparaiso, Ind. He can be reached at (800) 411-3888 or www.indianafutures.com. This is not a solicitation of any order to buy or sell any market.