PRUDENTIAL SECURITIES, INC.
One New York Plaza, New York, New York
212-776-1000(March 13, 2000) ORANGE JUICE: The USDA's new production report, released last Friday, raised the Florida 1999/2000 orange production forecast to 226 million boxes, an increase of 7 million from the February report. The entire increase fell on the early and mid-season category; the Valencia production forecast was unchanged. Based on Friday's report, Florida's 1999/2000 orange output will be almost 22% above the freeze-affected production level of 1998/99, but still about 7% below the record crop of 1997/98. The report made no change in the anticipated Florida 1999/2000 FCOJ yield of 1.54 gallons per box (42.0 degrees Brix).
The market generally had been looking for a substantial increase in the Florida 1999/2000 production figure, with some traders anticipating a gain of as much as 5-6 million boxes. The USDA's increase was just above the high end of expectations, initially prompting a bearish reaction. However, futures had been under downside pressure since late February, so we believe that some of the bearish impact already had been discounted.
Florida FCOJ movement for the week ended March 4 was reported at 5,412,563 gallons versus the year-ago level of 5,065,937 gallons. Cumulative seasonal movement was reported at 98.98 million gallons, well below the year-earlier level of 106.97 million. Cumulative seasonal imports were reported at 17.29 million gallons versus the year-earlier level of 22.51 million gallons.
Brazil's cumulative seasonal FCOJ production (as of March 5) was reported 1.21 million tonnes (66 degrees Brix) versus the year-ago level of 1.12 million. FCOJ inventories on the same date were reported at 660,610 tonnes, up from the year-earlier level of 580,674 tonnes.
Although last Friday's USDA report was negative, we do not share some traders' strongly bearish view because we believe the market's earlier price action has discounted some of the bearishness. We would need to see May futures trade through 85.00 cents per pound to turn us more bullish on a near-term basis.
Arthur Stevenson
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