Orange Juice Tops Virus-Era Markets
WHY YOU SHOULD CARE
The global markets can do with an immunity boost, and a shot of vitamin C.
By Emiko Terazono
Consumers fearful of contracting the coronavirus have been seeking to boost their immune systems the old-fashioned way: by loading up on orange juice.
Frozen concentrated orange juice, traded in New York, is the best performing of all commodities this year, according to Bloomberg data, rising 25 percent to $1.214 a pound since the start of January.
U.S. shoppers have rushed to stock up on the shelf staple, analysts say, while fears over labor shortages in factories and transportation have also given prices a lift.
“There is plenty of orange juice around, but it’s a bit like toilet paper — there’s no shortage, but people have been rushing to buy it,” says Neil Murray at IHS Markit’s Agribusiness Intelligence.
Jack Scoville at commodity brokers Price Futures Group in Chicago says prices have been boosted by worries over supply-chain glitches. “Traders are wondering if workers are around to man the plants in Florida and in Brazil,” he says. “In addition, there are not enough tankers or containers around for shipping the product to buyers.”
The jump in orange juice prices comes even as the market had been languishing amid a rise in production in Brazil, the largest producer and exporter, and Florida, says IHS. On the demand side too, consumption had been waning over the past few years as shoppers switched to water and other drinks with lower sugar contents.
Everyone in the supply chain is trying to get their hands on stock.
Carlos Mera, Rabobank analyst
Arabica, the high-grade coffee bean, has also experienced a sharp upswing, up 24 percent from a week ago to $1.277 a pound in New York. The commodity had sold off during the early stages of the viral outbreak, on concerns of falling demand in cafes and coffee chains, but analysts say the focus has now turned to securing supplies in the face of rising logistical risks.
“Everyone in the supply chain is trying to get their hands on stock,” says Carlos Mera, an analyst at Rabobank, noting strong demand from importers and roasters.
Retail demand has been solid too. In the U.K., for example, consumers have turned from cafes to retailers to fuel their caffeine addiction, buying coffee and beans from stores. In the week leading to March 14, retail sales were up 30 percent compared with the same period last year, and up 8 percent over the previous week, according to Nielsen data.
Wholesale coffee buyers have been spooked by calls among port workers in Brazil, the largest producer and exporter of coffee beans, to close ports. While this has yet to materialize, companies and importers are stocking up in case the flow of coffee dries up, analysts say.
Prior to the current price volatility, there had been concerns about overall supplies of coffee beans, especially in Central America, following several years of low prices. The threat of low levels of coffee in storage among exporters and producers has been supporting spot prices of beans, despite weakness in the futures market.
OZY partners with the U.K.'s Financial Times to bring you premium analysis and features. © The Financial Times Limited 2020.