Analys

Orange juice: Will Brazil make up for the decline in US supply?

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11 år sedan

den

2 april, 2014

The plant disease citrus greening and the aridity in important growing regions currently determine the price movements also on the market for frozen concentrated orange juice. In the US, production of oranges and orange juice is expected to decline massively. The US Department of Agriculture (USDA) is optimistic that this can be more than offset through production growth in Brazil and other countries. But the drought in Brazil and further reductions in US orange crop estimates for 2013/14 have caused prices for frozen orange juice concentrate to rise back to levels seen in early summer of last year

In March, the New York Board of Trade price for frozen concentrated orange juice returned to levels of over 150 US cents per pound that were seen in early summer 2013. In October, prices had temporarily dipped below 120 US cents per pound. The fact that prices have increased again is mainly attributable to the drought in Brazil that raised doubts as to whether an increasing Brazilian production could really offset the losses in the US.

The USDA has repeatedly made it clear that in the USA declining supply of oranges and orange juice has to be expected for the 2013/14 season. In the US, orange production is concentrated in only two states. Some 70% of oranges originate from Florida, while everything else – except for a negligible rest – comes from California. For this reason the USDA’s announcement that this year production in Florida will probably fall to the lowest level since 1990 has moved the market. A 15% drop on last year is expected. The main reason is that the bug-transmitted disease citrus greening has caused considerable damage to trees. This disease prevents sufficient nutrient uptake and thus stunts the growth of the fruit, causing it to drop prematurely. This season in Florida, the loss rate from droppage should be the highest in 50 years. Since the development of new plantations is expensive and the young trees have to be grown in a greenhouse to prevent infection, the orange plantation acreage in Florida has fallen to the lowest levels since records began in 1978. In Florida, the orange harvest is traditionally used almost completely for processing into juice. In California, the share of oranges for direct consumption is higher. But since this year the citrus greening will probably make a lot of fruit unsuitable for direct consumption, the share of juice processing will likely be higher than usual this year (chart 2).

In the US, the downward trend in production therefore probably continues: The USDA’s latest forecast from January expects a drop by 11% for both orange and orange juice production. Besides the citrus greening, the aridity in the US plays a role here: Whilst in the winter months the US Drought Monitor rated 28% of Florida as abnormally dry, moisture conditions are now classified as nearly 100% normal. Not so in California, where about half of the acreage is currently affected by extreme drought and another fourth suffers from an exceptional drought.

With regard to global production, the USDA is more optimistic: In January, it estimated that orange production in Brazil would rise by 8.5% in the coming harvest from May onwards due to bigger fruits. While the USDA counts this harvest for the 2013/14 season, in Brazil it is already counted as the crop of 2014/15. The production of orange juice is seen to increase even more strongly (18%) in the USDA report, as the yield from pressing is improved. But these impressive growth rates should not make us forget that in the previous season both orange production and orange juice production fell significantly, by 20% and 23%, respectively. Already in 2011/12, production had decreased. The orange acreage has been reduced in Brazil in the last few years – the world’s biggest orange producer by far with a share of more than one third and no. 1 exporter of orange juice (chart 3) – as many growers shifted to products such as soybeans, corn or sugar cane. Whether the effects of the drought on production in Brazil makes USDA forecast unrealistic, is still unclear.

Due to favourable weather, a whopping 12% increase in orange production is expected in the EU, which would mean a return roughly to 2008/09 levels after years of a steady decline. Juice production is seen to increase at an equally quick pace. The EU is also the biggest importer of orange juice, with a large part of its imports coming from Brazil and the US, whereas South Africa and Egypt are the most important sources for fresh fruit.

In China, production of orange juice shall also continue rising, with the level expected to quadruple compared to 2010/11. But since demand likewise continues to grow, the country still has to rely on imports. About half of the consumed quantity must be imported. But this corresponds to only 0.5% of the globally traded quantity of orange juice. China is still a negligible client compared to the EU, which accounts for half of the total import volume and imports eleven times as much as China.

Compared to the previous season, the increase in oranges as well as orange juice in Brazil and several other countries is expected to more than offset the considerable decrease in the US, and so the USDA reckons with a global growth of 5% in orange production and of 6% in orange juice production.

In recent years, the per-capita consumption of orange juice in the US has declined considerably as many consumers prefer beverages with lower sugar contents. In the EU, the biggest consumer of orange juice, consumption is also considerably lower now than it was only a few years ago. Since these two regions account for two thirds of global orange juice consumption, prospects are rather cloudy on the demand side.

However: The unsolved problems with the citrus greening and concerns about the consequences of the drought in Brazil should support orange juice prices for the time being.

Relaterade ämnen:commerzbank research fcoj orange juice

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Crude stocks fall again – diesel tightness persists

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9 timmar sedan

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29 augusti, 2025

Redaktionen

U.S. commercial crude inventories posted another draw last week, falling by 2.4 million barrels to 418.3 million barrels, according to the latest DOE report. Inventories are now 6% below the five-year seasonal average, underlining a persistently tight supply picture as we move into the post-peak demand season.

Ole R. Hvalbye, Analyst Commodities, SEB

While the draw was smaller than last week’s 6 million barrel decline, the trend remains consistent with seasonal patterns. Current inventories are still well below the 2015–2022 average of around 449 million barrels.

Gasoline inventories dropped by 1.2 million barrels and are now close to the five-year average. The breakdown showed a modest increase in finished gasoline offset by a decline in blending components – hinting at steady end-user demand.

Diesel inventories saw yet another sharp move, falling by 1.8 million barrels. Stocks are now 15% below the five-year average, pointing to sustained tightness in middle distillates. In fact, diesel remains the most undersupplied segment, with current inventory levels at the very low end of the historical range (see page 3 attached).

Total commercial petroleum inventories – including crude and products but excluding the SPR – fell by 4.4 million barrels on the week, bringing total inventories to approximately 1,259 million barrels. Despite rising refinery utilization at 94.6%, the broader inventory complex remains structurally tight.

On the demand side, the DOE’s ‘products supplied’ metric – a proxy for implied consumption – stayed strong. Total product demand averaged 21.2 million barrels per day over the last four weeks, up 2.5% YoY. Diesel and jet fuel were the standouts, up 7.7% and 1.7%, respectively, while gasoline demand softened slightly, down 1.1% YoY. The figures reflect a still-solid late-summer demand environment, particularly in industrial and freight-related sectors.

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Increasing risk that OPEC+ will unwind the last 1.65 mb/d of cuts when they meet on 7 September

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4 dagar sedan

den

25 augusti, 2025

Redaktionen

Pushed higher by falling US inventories and positive Jackson Hall signals. Brent crude traded up 2.9% last week to a close of $67.73/b. It traded between $65.3/b and $68.0/b with the low early in the week and the high on Friday. US oil inventory draws together with positive signals from Powel at Jackson Hall signaling that rate cuts are highly likely helped to drive both oil and equities higher.

Bjarne Schieldrop, Chief analyst commodities, SEB

Ticking higher for a fourth day in a row. Bank holiday in the UK calls for muted European session. Brent crude is inching 0.2% higher this morning to $67.9/b which if it holds will be the fourth trading day in a row with gains. Price action in the European session will likely be quite muted due to bank holiday in the UK today.

OPEC+ is lifting production but we keep waiting for the surplus to show up. The rapid unwinding of voluntary cuts by OPEC+ has placed the market in a waiting position. Waiting for the surplus to emerge and materialize. Waiting for OECD stocks to rise rapidly and visibly. Waiting for US crude and product stocks to rise. Waiting for crude oil forward curves to bend into proper contango. Waiting for increasing supply of medium sour crude from OPEC+ to push sour cracks lower and to push Mid-East sour crudes to increasing discounts to light sweet Brent crude. In anticipation of this the market has traded Brent and WTI crude benchmarks up to $10/b lower than what solely looking at present OECD inventories, US inventories and front-end backwardation would have warranted.

Quite a few pockets of strength. Dubai sour crude is trading at a premium to Brent crude! The front-end of the crude oil curves are still in backwardation. High sulfur fuel oil in ARA has weakened from parity with Brent crude in May, but is still only trading at a discount of $5.6/b to Brent versus a more normal discount of $10/b. ARA middle distillates are trading at a premium of $25/b versus Brent crude versus a more normal $15-20/b. US crude stocks are at the lowest seasonal level since 2018. And lastly, the Dubai sour crude marker is trading a premium to Brent crude (light sweet crude in Europe) as highlighted by Bloomberg this morning. Dubai is normally at a discount to Brent. With more medium sour crude from OPEC+ in general and the Middle East specifically, the widespread and natural expectation has been that Dubai should trade at an increasing discount to Brent. the opposite has happened. Dubai traded at a discount of $2.3/b to Brent in early June. Dubai has since then been on a steady strengthening path versus Brent crude and Dubai is today trading at a premium of $1.3/b. Quite unusual in general but especially so now that OPEC+ is supposed to produce more.

This makes the upcoming OPEC+ meeting on 7 September even more of a thrill. At stake is the next and last layer of 1.65 mb/d of voluntary cuts to unwind. The market described above shows pockets of strength blinking here and there. This clearly increases the chance that OPEC+ decides to unwind the remaining 1.65 mb/d of voluntary cuts when they meet on 7 September to discuss production in October. Though maybe they split it over two or three months of unwind. After that the group can start again with a clean slate and discuss OPEC+ wide cuts rather than voluntary cuts by a sub-group. That paves the way for OPEC+ wide cuts into Q1-26 where a large surplus is projected unless the group kicks in with cuts.

The Dubai medium sour crude oil marker usually trades at a discount to Brent crude. More oil from the Middle East as they unwind cuts should make that discount to Brent crude even more pronounced. Dubai has instead traded steadily stronger versus Brent since late May.

The Brent crude oil forward curve (latest in white) keeps stuck in backwardation at the front end of the curve. I.e. it is still a tight crude oil market at present. The smile-effect is the market anticipation of surplus down the road.

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Brent edges higher as India–Russia oil trade draws U.S. ire and Powell takes the stage at Jackson Hole

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1 vecka sedan

den

22 augusti, 2025

Redaktionen

Best price since early August. Brent crude gained 1.2% yesterday to settle at USD 67.67/b, the highest close since early August and the second day of gains. Prices traded to an intraday low of USD 66.74/b before closing up on the day. This morning Brent is ticking slightly higher at USD 67.76/b as the market steadies ahead of Fed Chair Jerome Powell’s Jackson Hole speech later today.

No Russia/Ukraine peace in sight and India getting heat from US over imports of Russian oil. Yesterday’s price action was driven by renewed geopolitical tension and steady underlying demand. Stalled ceasefire talks between Russia and Ukraine helped maintain a modest risk premium, while the spotlight turned to India’s continued imports of Russian crude. Trump sharply criticized New Delhi’s purchases, threatening higher tariffs and possible sanctions. His administration has already announced tariff hikes on Indian goods from 25% to 50% later this month. India has pushed back, defending its right to diversify crude sourcing and highlighting that it also buys oil from the U.S. Moscow meanwhile reaffirmed its commitment to supply India, deepening the impression that global energy flows are becoming increasingly politicized.

Holding steady this morning awaiting Powell’s address at Jackson Hall. This morning the main market focus is Powell’s address at Jackson Hole. It is set to be the key event for markets today, with traders parsing every word for signals on the Fed’s policy path. A September rate cut is still the base case but the odds have slipped from almost certainty earlier this month to around three-quarters. Sticky inflation data have tempered expectations, raising the stakes for Powell to strike the right balance between growth concerns and inflation risks. His tone will shape global risk sentiment into the weekend and will be closely watched for implications on the oil demand outlook.

For now, oil is holding steady with geopolitical frictions lending support and macro uncertainty keeping gains in check.

Oil market is starting to think and worry about next OPEC+ meeting on 7 September. While still a good two weeks to go, the next OPEC+ meeting on 7 September will be crucial for the oil market. After approving hefty production hikes in August and September, the question is now whether the group will also unwind the remaining 1.65 million bpd of voluntary cuts. Thereby completing the full phase-out of voluntary reductions well ahead of schedule. The decision will test OPEC+’s balancing act between volume-driven influence and price stability. The gathering on 7 September may give the clearest signal yet of whether the group will pause, pivot, or press ahead.

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