The market for orange juice is up more than 16% since June 25 and is currently trading near $ 1.45 per pound. It's almost a complete liquidation price recovery was triggered in late June, Departmental Report Cold Storage Agriculture, which showed a 2% increase in inventories. Much of the event giving rise to the 1st $ 55 reached in May was due to speculative buying on the basis of reports "citrus greening". Citrus greening found in all major producing areas of Florida and gives the smaller and less juice orange. However, the expected decline in production of Florida will be more than offset by other global challenges, which remain less pressure on the market from these levels.Global demand for orange juice declined rapidly as the European economy began to crumble. The truth of the matter is that the orange juice is a luxury item. Application of orange juice as strong in 1998 with global per capita consumption of 5.87 gallons per year. This amounts to a total supply of 1.8 million gallons or 250 million boxes of oranges first. The downward trend in demand has been extremely stable with 2,008 providing little increase in demand over the past 15 years. The estimated current consumption amounts to 3.85 liters per capita or less than 75 million cases of total production.
The effect of the global decline in global consumption of orange juice has taken its toll on the world's largest exporter, Brazil. They are responsible for about 80% of total world production. His effort to gain market share in the United States during the last decade has led to an imbalance in the current market. This led to a change in its agricultural strategy is expected that the government of Brazil to reduce up to 9% of the total area of orange juice and redirect their efforts toward the cane sugar has a higher profit margin.
The macro trend of declining production of orange juice is not lost in the merchants. Throughout the 1990s and into the 2000s, traders were using the futures market orange juice to ensure supply. This means that traders were usually long and net producers finish line first conversion of oranges in the finished products were more concerned about high prices than they were at the lowest prices. Therefore, the peaks of the commercial purchase often leads to long positions between 8,000 and 12,000 contracts. Most of these commercial purchasing follies were followed by gains of over 10% in the futures market, demonstrating that their actions have merit in the pricing structure of orange juice.
The last time traders over 12,000 contracts was in June 2008. Note that this was the year of drought and agricultural products soared. Perhaps the penultimate accumulation of more than 12,000 contracts more instructive June 2004. That was when the orange juice trading at a multi-year, $ 0.55 per pound. At present, the net external position is long only 1,300 contracts. This tells me that the end executive producers are not afraid of citrus greening, which affects the entire market. He also said he is not worried by blocking future production at these prices.
Macroeconomic factors, which we spoke again to the resumption of the current market, I think is going to act like a dead cat bounce. Therefore, we intend to sell the futures contract in September orange juice at the first sign of a change of the head of the child. The current recovery seems to be exaggerated and hopefully lead to a divergence of momentum cue our first entry. This brief exchange also coincides with the lowest point in mid-summer before Hurricane fears of late summer and early winter frosts caused orange juice futures to start background. As always, we will protect our position with stop loss orders placed just above everything ends up being high. After all, if we are right or wrong is not as important as the preservation of capital. Meanwhile, the continuous search for low risk, high reward opportunities will be responsible for capital appreciation.
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