It is estimated that Oranges have been cultivated in China and south-east Asia for at least 4000 years, and people have enjoyed them as a luxury item ever since. The juice of the orange in particular has been always been a highly desirable drink, known for its considerable health benefits. Up until 1947 however, there was no way to preserve the juice for long periods of time, so trading orange juice was a limited, difficult endeavour. This changed in 1947 however, when a technique was invented by which concentrated orange juice could be frozen, which greatly increased its shelf life and potential for trade. It is this frozen concentrated orange juice, or FCOJ that is still traded today by open outcry on the commodity market. Orange juice futures are traded under the ticker code of OJ.
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The orange juice commodity is appealing to traders on the futures market for a number of reasons. One of the most important factors to consider is that orange groves tend to be most heavily farmed in the United States of America and Brazil. Since there are only two geographical regions that have industrial-scale production of oranges, it is easy to see the potential for those who wish to conquer the export market. There will always be a worldwide demand for the orange juice commodity, and the demand will inevitably always outstrip the supply.
The main orange juice market is, and always has been, the US domestic market. Orange juice is renowned for its health benefits, namely its high quantity of vitamin C, and so can be seen being drunk in many settings. It is a popular accompaniment to continental breakfasts, and is also frequently provided to children in schools. In terms of production, Brazil is currently the worldwide leader. Florida was the primary orange juice exporter until 1962, but hurricanes and other severe weather systems damaged its ability to be competitive in orange juice trading. Brazil now currently supplies approximately 80% of the worldwide export of FCOJ. Brazil also currently supplies the US with at least 50% of its imported FCOJ.
In terms of orange juice trading and FCOJ prices, there are several factors to consider. The most salient point traders need to be aware of is that since there are only really two regions that produce orange juice, severe weather patterns can suddenly and catastrophically devastate crops. A drought in Brazil can significantly reduce the worldwide availability of FCOJ, and FCOJ prices will suddenly increase accordingly. Similarly, Florida and other US states can be prone to frost in the winter, which can also negatively impact crop yields. As Brazil and the US are on different hemispheres (Southern and Northern respectively), they experience these weather systems at different times: the drought season for Brazil occurs between July and November while the winter frost in Florida occurs between December and March. If both areas of production suffer misfortune one after the other, the potential for decreased supply and an inability for producers to meet global demand is suddenly very apparent.
FCOJ futures are traded primarily at the Intercontinental Exchange (ICE), with the contract code OJ. They are one of that exchange’s primary commodities.
When trading in orange juice futures is worth considering that although orange juice commodities are a valued item and there will always be demand, sometimes orange juice is supplanted by other juices in the public eye, leading to short term depression of FCOJ futures prices. However this has always been a temporary change, and is often dependant on whichever new diet is being promoted. Demand for orange juice usually returns to standard levels in a relatively short amount of time. Given this, FCOJ traders should think long-term rather than short-term.
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