Here’s why the orange juice price surged to a record high

Orange juice price has defied gravity this year as demand has continued to outstrip supply. Its price surged to a record high of $3.05 per pound this week, meaning it has soared from the 2021 low of less than $0.9.

Supply concerns remain

Orange juice is a popular commodity that is consumed by millions of Americans every day. Recently, these consumers are having to spend more money since prices have gone parabolic.

There are two main reasons for this orange juice crisis. First, Florida, the biggest orange juice producer in the US, went through two challenges. The state has over 375k acres of orange trees and contributes over $6.6 billion to the economy.

In the past two years, the region has gone through two huge hurricanes that have led to destruction of citrus crops in the state. These hurricanes, Ian and Nicole, led to economic damage worth over $1.07 billion. Citrus farmers lost over $247 million.

At the same time, there was freezing temperatures in the state as well as a menacing disease that affected prices. The disease, known as Huanglongbing, spread across farms in the state, leading to low yields. Therefore, analysts believe that it will take more time for Florida to boost production since citrus trees take time.

Therefore, orange juice price is rising as America boosts imports from Brazil, the biggest producer in the world. Brazil is not seeing more production as well. 

Orange demand dynamics

Analysts believe that demand destruction could help to moderate prices. For one, while orange is already popular, demand has not been growing at a faster pace in the past few years because of elevated inflation. In a recent note, analysts at Rabobank said:

“This could bring prices to a still high, but more moderate level, compared to the record prices seen in Q1 2023. For now, the base case is for elevated prices for longer, but demand destruction at high prices is a growing risk for volume sales this year.”

The challenge is that inflation is falling, which could push consumers to more discretionary products like orange juice. The most recent data showed that the US consumer inflation dropped to 3.0% in June from the previous 4.1%. 

Still, in the medium term, I suspect that orange price will continue rising, which is in line with my previous view. As shown above, the price remains above the 50-day moving average, which is a positive thing.

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