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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Oil prices climb, but fundamentals will keep rallies in check

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3 dagar sedan

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18 mars, 2025

Redaktionen

Brent crude prices have risen for three consecutive days, gaining USD 1.7 per barrel since last Thursday’s close. On Friday afternoon, prices briefly dipped to USD 69.9 per barrel before rebounding to a high of USD 71.8 per barrel yesterday morning. As of this morning, Brent crude is trading at USD 71.67 per barrel, up USD 0.77 per barrel since midnight.

Ole R. Hvalbye, Analyst Commodities, SEB

Why?

1. Chinese economic data
Two days ago, China released better-than-expected consumption, investment, and industrial production data for the start of the year, signaling economic resilience despite the need for further stimulus. With Donald Trump’s tariffs posing a risk to growth, China has responded by committing to policies aimed at boosting incomes, stabilizing equity and real estate markets, and reviving economic consumption – all of which naturally support crude and refined product demand.

2. U.S. strikes on Yemen’s Houthis
The U.S. airstrikes on Yemen’s Houthis on Sunday, March 16 served as a stark reminder of geopolitical risk, a factor that has not been fully priced into the market recently.

3. Rising tensions in the ME
Escalating tensions in the Middle East are currently (short-term) overshadowing concerns about a potential global oversupply. Overnight, Israel launched a series of military strikes on Gaza, breaking a nearly two-month ceasefire.

4. U.S. sanctions on Iran
Iran’s Oil Minister stated over the weekend (March 15) that Iranian oil exports are “unstoppable” and that Iran will not relinquish its share in the global oil market. The new U.S. administration has already imposed sanctions on Iranian crude, but these have yet to impact production levels significantly.

As of February 2025, Iran’s crude production stood at 3.23 million barrels per day (bpd), remaining above 3 million bpd since September 2023 (Platts data). Of this, Iran exports approximately 1.7 million bpd. For comparison, under Trump’s previous presidency, the U.S. withdrew from the Iran nuclear deal, and Iranian crude production fell to 1.95 million bpd by August 2020, significantly reducing its export capacity.

If the Trump administration reintroduces maximum pressure sanctions on Iran, the market impact could be substantial. In a worst-case scenario, where Iran loses its entire 1.7 million bpd of exports, and if Saudi Arabia or other major producers do not immediately compensate for the loss, global oil prices could theroretically see an upside of as much as USD 10 per barrel (Platts).

Bearish fundamentals still loom:
Despite these bullish factors, crude remains on track for a quarterly loss due to fundamental market weaknesses. Escalating global trade tensions threaten oil demand. OPEC+ is set to increase production from April, adding additional supply to a market already at risk of oversupply.

As a result, while geopolitical risks and bullish headlines provide short-term support to prices, SEB: forecasts that fundamental market conditions limit the potential for sustained price rallies.

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Analys

Chinese stimulus measures drive Brent up and out of the USD 69-71/b trading range

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4 dagar sedan

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17 mars, 2025

Redaktionen

A tight sideways range last week. Bearish equities on tariff fears. Brent crude rose 0.3% last week with a close of USD 70.58/b. It traded in a range of USD 68.63 – 71.25/b. Closing wise it held well within the USD 69 – 71/b band, held down by S&P 500 moving into correction mode and the Russel 2000 index moving into bear territory. Brent is up 0.6% this morning at USD 71/b with a high so far today of USD 71.8/b. That is the highest intraday price point since 3 March. Brent crude is thus pushing towards the upper boundary of the trading range over the past 8-9 days.

Bjarne Schieldrop, Chief analyst commodities, SEB

Chinese stimulus measures feed some optimism back in crude. The upwards move this morning is driven by news that politicians will boost people’s income, revive consumption and stabilize the stock and real estate market. The Chinese economy has been struggling for a while following Covid-lockdowns and a tanking real estate market. The tariffs from Donald Trump are now an additional challenge making it even more imperative to support the Chinese economy. While the signaled measures are supportive and positive, words like ”reasonable” growth in wages are used. There isn’t any sense of ”bazooka” stimulus measures as of yet.

Moving up with the negative fallout from the Trump tariffs is left for another day to worry about. The oil market is thus in a balance between the negative effects of Trump’s tariffs versus the positive effects of Chinese stimulative measures. The global oil market isn’t in surplus yet if we look at the 1-3mth time-spreads as a measure. The bearish downwards pressure on oil has come from the forceful selloff in US equities with natural fears that the tariffs from Trump will give both the US and the global economy a hard, negative kick. But today it seems that the positive political signals from China on stimulus there is set to lift Brent crude up and out of the depressed range it has traded in over the past 8-9 trading days. The negative fallout from the Trump tariffs is left for another day to worry about it seems.

Brent crude 1mth has traded in a tight range over the past 8-9 trading days when it has closed between USD 69-71/b. Today it looks set to move up and out of that range.

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Analys

Large drop in total commercial petroleum inventories

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1 vecka sedan

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13 mars, 2025

Redaktionen

Brent crude prices have risen by USD 0.8 per barrel so far this week since Monday’s opening. However, prices touched a weekly low of USD 68.6 per barrel on Tuesday before reaching a weekly high of USD 71.20 per barrel this morning.

Last week, U.S. crude oil refinery inputs averaged 15.7 million barrels per day, up by 321 thousand barrels per day compared to the previous week. Refineries operated at 86.5% of their total operable capacity during this period. Gasoline production declined to an average of 9.6 million barrels per day, while distillate fuel production also fell, averaging 4.5 million barrels per day.

U.S. crude oil imports averaged 5.5 million barrels per day, a decrease of 343 thousand barrels from the prior week. Over the past four weeks, imports have averaged 5.8 million barrels per day, reflecting a 10.6% year-on-year decline compared to the same period last year.

Total commercial petroleum inventories fell by a large 6.0 million barrels, contributing to some positive price movements observed yesterday evening and this morning. Although commercial crude oil inventories (excluding the SPR) increased by 1.4 million barrels, this was notably lower than the 4.3-million-barrel build forecasted by the API on Tuesday. With the most recent build included, U.S. crude oil inventories now stand at 435.2 million barrels, down by 12 million barrels compared to the same week last year.

Gasoline inventories decreased by 5.7 million barrels, exceeding the API’s reported decline of 4.6 million barrels. Despite this, gasoline stocks remain 1% above the five-year average. Distillate (diesel) inventories dropped by 1.6 million barrels, compared to the API’s forecast of a 0.4-million-barrel increase, and are currently about 5% below the five-year average.

Over the past four weeks, total products supplied, a proxy for U.S. demand, averaged 20.7 million barrels per day, a 3.9% increase compared to the same period last year. Gasoline supplied averaged 8.7 million barrels per day, showing a modest increase of 0.1% year-on-year. Diesel supplied averaged 4.1 million barrels per day, up by 9.5% from the same period last year. Additionally, jet fuel supplied saw a 1.5% year-on-year increase.

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