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212-778-1000(March 27, 2000) ORANGE JUICE: FCOJ futures traded uneventfully last week, extending the basically sideways price action of the last seven weeks. Daily trading ranges were very small, and trading volume was thin. There were no fresh fundamental developments to give futures a new impetus.
Florida's orange groves recently received welcome rainfall, but irrigation continues to be used throughout the major growing areas. Trees are in various stages of bloom, and new vegetative growth is abundant. Overall, the bloom appears to be more uniform and stronger than a year ago. The Valencia harvesting pace is picking up.
Following several years of U.S.-China trade negotiations, China recently stated that it would permit the entry of U.S. citrus products. Although it will be some while before the potential ramifications of actual off-take become clear, the trade breakthrough was hailed by the industry and by Florida officials. According to Florida's agriculture commissioner, about 300 million of China's 1.2 billion citizens "could be in the market for fresh Florida citrus," and that within a few years, China would become a leading market for the state's citrus products. Futures showed virtually no response to this development, which we view as potentially long-term price-supportive.
Rainfall levels in Sao Paulo, Brazil's principal orange-growing state, have been normal since January, and trees reportedly are in good condition. Recent reports indicated that earlier drought conditions probably had only minimal impact on the region's production outlook.
Table 3
Brazil FCOJ Data
(tonnes; 66 degrees Brix; July/June)-- 1998/99 1999/2000 % Change For the week March 13-19 Production 0 0 -- Exports 30,404 23,001 -24.35 Internal Market 397 308 -22.44 Inventory 548,686 615,357 12.15 Cumulative Seasonal Data Production 1,123,086 1,207,444 7.51 Exports 796,827 840,612 5.49 Internal Market 13,513 11,304 -16.07 Source-ABECITRUS Table 3 gives a statistical overview of Brazil's FCOJ sector. (In this context, Brazil and Sao Paulo are essentially synonymous). As of March 19, cumulative seasonal production was reported at 1.21 million tonnes, 7.5% above the year-ago level. Production has wound down for the season and was zero for the week ended March 19. Inventories stood at 0.62 million tonnes, 12.2% above the year-earlier level.
May FCOJ futures have traded between about 80.00 cents and 87.50 cents per pound since the beginning of February. More sideways price action is the most likely near-term price scenario. A move through the 87.50-cent level is needed to signal a move to the upside.
Arthur Stevenson
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