It Looks Like A June Orange Squeeze

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Includes: FIZZ, FTFT, FUD
by: Mary Jane Fountain

Summary

Frozen Concentrated Orange Juice (FCOJ) usually finds a seasonal low mid summer, this year looks no different.

Brazil reports increased fruit production for 2017-2018 but juice inventory is down.

OJ reverses off an anticipated support level, at the same time as COT chart positions infer a low.

The USDA reports that Florida's orange fruit yield is up for the current season, yet juice yields are down. Brazil, (the largest international supplier of oranges), also reports that juice yields are down, despite the coming orange season expected to be in surplus. This has to be positive news for Frozen Concentrated Orange Juice (FCOJ) futures. The market appears to have bounced from an anticipated technical low on the price chart.

Orange blossom wikimedia

According to Fruit Juice focus:

The USDA forecast on Florida's 2016/17 crop is up, with an increase to 1.00 million boxes, but projected frozen concentrated orange juice yields is lowered to 1.41 gallons/box.

As Brazil is the largest producer of oranges, it's as well to note the current situation for OJ: According to a report by 'Citrus BR', worldwide inventories of Brazilian frozen orange juice, decreased by 32% from the year before, to 31st December 2016, at 28,865 tonnes.

BRAZIL - Orange Juice

The Brazilian industry's 'Citrus BR' has forecasted global inventories of Brazilian 'FCOJ'

Would fall by a whopping 80% carried into the 2016/17 crop on 30 June 2016.

The Fruit Juice focus report includes other countries as well, so the entire report is worth reading to fully appreciate the market. The situation is mixed, Brazil is forecasting an increased supply of oranges for the coming season, with a reduced amount available for the Frozen Orange Juice inventory. Seasonally however, the summer is usually strong for FCOJ. Historically, short positions have been difficult.

orange juice seasonal

The COT chart (Barchart.com), shows traders positions, consolidated together in a typical 'low' pattern. While OJ hasn't as yet broken out of the recent down-trend (grey diagonal line), the weekly candlestick pattern through June appears to be building support. A break over 150.00 would confirm the beginning of a bull leg.

ORANGE JUICE cot This is the long term chart I introduced in March. We can see that the current reversal point is now in the higher 'support band'. Trading has consolidated in this area for several weeks now, although the current weekly candle (COT chart) appears to be closing down.

OJ LONG TERM TRADING VIEW

Investing in Orange Juice

Apart from the 'Futures market', opportunities to invest in orange juice include the beverage manufacturers, Coca Cola (KO), Pepsi (PEP), (FIZZ), a Chinese company Sky People has just changed its ticker to (FTFT) and is due to open an orange juice factory any time soon.

The UBS E-TRACS CMCI Food Total Return ETN (FUD) holds a basket of agriculture futures contracts, including OJ, but OJ only accounts for 2.5% of the ETN's holdings.

Future Investing

Trading has bounced from the expected higher technical support band on the long term chart, and with the numbers already circulated for FCOJ for 2016/7, coupled with the bullishness of the season, it seems likely that this level will hold. Confirmation of the start of a bullish leg would be a break over 150. There may however be a short term reactive bounce as OJ breaks through the trend channel.

Disclosure: I am/we are long FTFT.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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