New York orange juice futures rallied to three-month highs on Tuesday amid concerns about falling supplies after the U.S. government slashed its orange crop forecast for Florida, the country's top growing state, for the 2012-13 marketing season.
In its first crop report since October, the U.S. Department of Agriculture cut its crop forecast for Florida by 8 million boxes, or 5 percent, to 146 million boxes. That was much more than the 2 million to 4 million boxes many in the market had expected.
"That was a little bit of a surprise," said Kevin Sharpe, a commodity broker at Basic Commodities in Winter Park, Florida.
The half-a-billion-dollar orange juice futures market rose as much as 7 percent to $1.34 per pound soon on the news. That was its highest level since mid-September when prices were buoyed by a hurricane premium. Prices had eased off those highs as the threats of storms faded and hurricane season ended.
Rather than driving winds and flooding from tropical storms damaging the Sunshine state's orange groves, a lack of rainfall since then has hurt growths. The region hasn't had substantial precipitation since late September.
"Unless (the crops) get substantial soaking good rain and some better growing weather, (farmers) will get small fruit and there may be a drop in yield overall. We need rain," said Sharpe.
On Tuesday, the USDA kept its yield estimate for Florida frozen concentrated orange juice at 1.61 gallons per box unchanged. That is down 1 percent from last season.
Early, midseason and Navel varieties in Florida are forecast at 67 million boxes, down 9 percent from the October forecast and 10 percent from last season, the USDA said.
The Florida Valencia forecast of 79 million boxes is down 1 percent from October, but up 9 percent from the 2011-12 crop.
In a particularly alarming statistic, the USDA said the fruit droppage rate is projected to be the highest since the 1969-1970 season, while the fruit sizes will be below average, the USDA said.
It kept its forecasts for California and Texas unchanged.
As the buying ebbed later in the day, the most-active January frozen concentrated orange juice on ICE Futures U.S. settled up 3.6 percent at $1.299 per pound.
Prices are still well below the record $2.20 per pound set in January when U.S. authorities restricted imports of Brazilian juice due to the use of a banned fungicide.
As the Northern Hemisphere winter approaches, experts will watch for damage to fruits from freezing weather.
© 2015 Thomson/Reuters. All rights reserved.