OJ Gets Squeezed…
Now that November has drawn to a close, it’s the perfect time to look at the top-performing assets over the past month.
And this time around, we have a surprise winner…
… Orange Juice.
That’s right, the tangy commodity beat all other assets with a hefty November gain of 14.5%. Ever since the start of the month, the price of orange juice has squeezed dramatically higher.
As a matter of fact, orange juice had only three small down days since October. This remarkable price action sent the commodity surging from $1.20 a pound up to $1.40 in recent trading.
What’s going on?
A recent USDA report revealed much of Florida’s orange groves are under attack by a bacterial infection known as citrus greening disease. The affliction stunts the growth of oranges, making them fall from the tree too early. As a result, growers are left with piles of green, undeveloped oranges.
As you may know, Florida has the largest orange groves in the US. In fact, 70% of US orange production and 90% of the country’s orange juice supply comes from the southern state.
And thanks to the greening disease, the USDA estimates Florida growers will collect a mere 11.2 billion pounds of oranges this crop year.
That’s a 7% drop from last year and the smallest harvest since 1990.
But greening disease is just the start of the problems…
Old Man Winter is making an early arrival in the eastern US.
As a result, colder than normal temperatures are dipping into Florida, increasing the odds of a fruit tree freeze. Should severe cold harm production, November’s jump in orange juice prices will look small by comparison.
Given the current fundamental and technical data, orange juice will likely test the 52-week high of $1.50 a pound by the end of the year. If things really get out of hand in Florida, the commodity could make a run at the multi-year high of $2.20 set in early 2012.
Is there a way you can capitalize on this potential bullish run?
Unfortunately, there isn’t any orange juice specific commodity ETFs.
The only way to trade the potential rally is through the futures market. And as loyal readers know, I don’t recommend futures unless you have extensive knowledge of how those complicated markets work.
Here at Commodity Trading Research, we focus specifically on commodity ETFs.
What are the other top-performing assets for the month?
Soybean meal and heating oil had hefty November gains of 7.8% and 4.7% respectively. Heating oil is jumping thanks to the cold temperatures enveloping the Eastern US while soybean meal is surging due to strong Chinese import data.
Until Next Time,
Justin Bennett
Category: Commodities
