Orange juice trading might become described as a rewarding option to speculating on a few of the conventional commodities markets. Discover to trade lemon juice and a few tips which may assist you through your time on the niches.

Orange juice CFD Futures Juice US buck Citrus
Callum Cliffe | Financial author, London

Orange juice advertising basics

Orange juice has been basically produced for individual consumption. It’s really a staple on breakfast restaurants around the world, and can be particularly applied as a cooking ingredient in most nations ‘ cuisines. Aside from their juice, oranges are used for their peels which can be turned into scented oil for candles and perfumes, as well as for their flesh which is extremely rich in vitamin C.

WithForexmn, you have the option to speculate on the price movements of frozen concentrated orange juice (FCOJ) with CFDs. While other orange juice products exist, FCOJ is the asset used to benchmark prices for orange juice, and is also the most frequently traded.

Where are oranges grown?

The top five producers of oranges in the world are Brazil, China, the EU, Mexico and the US. Brazil leads the way, having produced 16 million metric tonnes of oranges in 2017.1

Rank Top producers Orange production (in metric tonnes)
1 Brazil 16 million
2 China 7.3 million
3 The EU 6.4 million
4 Mexico 4.6 million
5 US 3.5 million

What moves the price of orange juice?

As with most commodities, the price of orange juice is affected by supply and demand. Some of the key drivers behind supply and demand for orange juice are:

  1. Weather
  2. Diseases in orange crops
  3. Consumer demand
  4. Economic performance of orange producers
  5. Strength of the US dollar

Essentially, if more people want to buy orange juice than sell it, the price will rise because it is more sought-after (the ‘requirement ‘ outstrips the ‘source ‘). On the other hand, if supply is greater than demand, the price will fall.

Weather

The weather can affect the supply of oranges by increasing or reducing the yield of a region’s orange crop. As a rule of thumb, orange trees grow best in areas that have 40-45 inches of rainfall annually, and do not do well in regions with extended periods of cold weather.

Exogenous shocks such as hurricanes, or a period of extended drought, in America or Brazil could greatly reduce the global supply of oranges in any given year, which would drive prices up.

Diseases in orange crops

Diseases in orange crops can also affect supply. ‘Citrus greening’ is the most common disease which affects orange groves. It is caused by an insect called the Asian citrus psyllid and there is no cure once a tree is infected. The psyllid infects the tree with a bacterium which inhibits the orange tree’s ability to take in nutrients, which ultimately leads to smaller and less ripe oranges being produced.
Citrus greening is currently rife in Florida and California in the US.

Consumer demand for orange juice

Data from the US Department of Agriculture shows that the global consumption of oranges has been on the decline since 2013-2014.1 Many commentators attribute the drop in consumer demand for orange juice to increased awareness about the sugar content of fruit juices, as well as the fact that people tend to have breakfast on the go rather than sitting down to eat.

The drop in consumer demand, paired with diseases like citrus greening and weather conditions, has caused American orange production to decrease from 6 million metric tonnes in 2013-2014 to 3.5 million metric tonnes in 2017-2018.1

Level of support and resistance

Breakout trading strategy

Breakout trading involves trying to spot the early stages of a trend and opening a position during this period. This enables traders to capitalise on profits once the trend moves above a level of resistance or, alternatively, once it breaks below a support level. In the context of orange juice trading, breakout traders will try to make a prediction about global supply for the upcoming year and open a position accordingly.

Fundamental trading strategy

Fundamental trading is a strategy in which traders depend heavily on the factors which affect levels of supply and demand. Fundamental traders will look at company-specific or region-specific events that could affect supply or demand for oranges at the particular point in time. They will then base a trade on their findings.

Orange juice trading hours

Location Trading hours*
New York 08:00 -14:00 (New York time)
London 13:00 – 19:00 (UK time)
Singapore 21:00 – 03:00 (Singapore time)

*Hours are set by ICE and may vary. Hours will shift between March and November as the UK and US change to and from daylight savings on different days, while Singapore remains on Singapore Standard Time (UTC 8) all year round.

Five steps to trading orange juice

There are five steps a trader should take before opening a position on FCOJ:

  1. Learn how CFDs work
  2. Create an account and deposit your funds
  3. Analyse supply and demand factors in the orange juice market
  4. Choose the trading strategy that works best for you
  5. Open, monitor and close your first position

1United States Department of Agriculture, 2017