The Covid-19 Pandemic Is Set To Push Orange Juice Prices To Record Levels

Orange juice prices could soon jump by up to 60% from current levels, or even higher, due to the pandemic.

That’s big especially when they’ve already increased 30% since the end of January.

Covid-19 Promoting Healthy Diets

The Covid-19 crisis seems to have more people thinking about healthy eating. That’s lead to a massive increase in demand for foods rich in vitamin-C such as orange juice (OJ.) The nutrient is seen as a good way to build resilience against a slew of diseases.

That recent increase in demand has already pushed the price for orange juice futures contracts to $1.25 a pound recently up from 96 cents at the end of January, according to data from Bloomberg. But that rally is likely only the beginning of a far greater trend, experts say.

“This market has $200 [$2/lb] target potential written all over it,” states a recent report from Hackett Financial.

In other words, another 60% rally is in the cards and investors who are willing to speculate could profit from the likely move. Risk takers might try purchasing long-dated orange juice futures contracts on the ICE exchange.

Juice Demand Up Supply Down

The core issue behind the idea of a mega rally in juice prices is a supply-demand imbalance. On the one hand, demand for OJ is up as people crave healthy foods to help fight off any illness that might come their way under lockdown.

But at the same time, the orange juice industry is set to produce a small crop this this year, likely around 1.6 million metric tons, Hackett estimates. A decade ago the industry produced 2.5 million tons, according to the U.S. Department of Agriculture. The reduction in output over the decade has in part been due to consumers steering clear of sugary drinks, and for many that included OJ.

But then the pandemic hit, and suddenly consumers want jugs of juice in their refrigerator again. But in this case, they will have to quickly learn to pay more for the juice than they did earlier this year.

Futures prices could even hit record highs above $2.35 a pound if a hurricane hits Florida, Hackett writes.

Perfect Storm For OJ Supply

Shawn Hackett says that this year’s hurricane season is likely to be very active and that makes Florida, a key orange growing region, very vulnerable to crop damage. Such supply interruption would ultimately send OJ prices higher, perhaps to record levels.

“Higher prices prices are not pie in the sky,” he says. And he says that the Brazilian orange crop will be one of the lowest in 20 years.

“Its a perfect storm,” he says.