A gnat-sized insect, the Asian citrus psyllid, forced Dean Mixon to replace about 1,000 orange trees in the past two years on the 50-acre Florida farm his grandfather started in the 1930s. The bug spreads a disease called citrus greening, causing fruit to shrink and drop early.
“This is the worst we ever had to deal with,” said Mixon, 62. “Young trees can’t develop strong roots, and the quality of the fruit is also affected. We have been able to slow the spread of the disease, but not eradicate it.”
Florida, the world’s largest orange grower after Brazil, will harvest 121 million boxes of the fruit in the season that began Oct. 1, the fewest since 1990, the U.S. Department of Agriculture estimates. Orange-juice futures (NYBOT:OJF14) in New York will rally 18% to $1.6465 a pound by the end of June, up from $1.3945 today, according to the average estimate of nine traders and analysts surveyed by Bloomberg News.
Futures entered a bull market this month as dry weather compounds the damage from citrus greening. Some types of oranges, including early and mid-season varieties, are projected to drop prematurely from trees at the highest level since 1961, the USDA said Dec. 10. The shrinking crop may boost costs for companies including Pepsico Inc., the maker of Tropicana juices, and Coca Cola Co., which sells Minute Maid and Simply Orange brands. U.S. consumers spend about $1.45 billion on the juice annually.
“We’re in uncharted territory,” said John Ortelle, who has been following the industry for more than 30 years and is vice president for McKeany-Flavell, an Oakland-California based broker whose clients have included Dole Food Co. and Kraft Foods Group. “Whatever producers have tried to tackle the disease has had a minimal effect so far. Growers took out trees and added extra nutrients. You just don’t know when and if the effects will be positive.”
Orange juice rose 19% this year on ICE Futures U.S. in New York, trailing only natural gas and cocoa among the 19 raw materials tracked by the Thomson Reuters/Jefferies CRB Index, which declined 4.1%. The MSCI All-Country World Index of equities rose 19%, while the Bloomberg Treasury Bond Index fell 3.2%. The Bloomberg Dollar Index, a gauge against 10 major trading partners, rose 3.7%.
Growing areas in Florida received as little as 2 inches (5.1 centimeters) of rain from Oct. 1 through Dec. 22, according to Kyle Tapley, a meteorologist with MDA Weather Services in Gaithersburg, Maryland. That compares with the 30-year average of as much as 8 inches. About 28% of the state is experiencing “abnormally dry” weather, according to the U.S. Drought Monitor.
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