From the February 01, 2011 issue of Futures Magazine • Subscribe!

Bundled up OJ

While orange juice may be great at helping us get over a cold, what do you give an orange tree that catches one in the winter? As cold weather has swept the nation, Florida has not been passed-over and freeze scares have driven the price of orange juice to three-year highs.

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According to Spencer Patton, chief investment officer at Steel Vine Investments, the cold weather is the cause for concern. "If you get temperatures around 28 degrees, you stand to lose a significant portion of the crop," he says. "When orange trees get damaged from frost, they are done. It really impacts supply for the next decade when we get a freeze." He warns that if we see further freezes, prices may really take off from here. He puts support for the March contract at $1.60 per pound with resistance at $1.90.

Shawn Hackett, president of Hackett Financial Advisors, largely agreed, but also points to the condition of Florida’s orange groves. "Because of years of poor pricing, the trees are aged, gone beyond their productive life and very susceptible to disease and weather stress. They don’t have the heartiness a younger tree would have," he says. Hackett says another hard freeze could bring orange juice prices to record highs. He puts support for the March contract at $1.50 and resistance at the 2006 highs of $2.09.

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