Orange Juice Prices Soaring in Global Markets
While
demand has risen, supply has been hit as producers struggle to transport goods
due to transport restrictions.
This
has driven a rise in the so-called "futures" price of orange juice,
which indicate its cost for delivery in the coming months.
Orange
juice futures are the best performing asset so far this year.
"The
Covid 19 outbreaks are hitting both the supply and demand for orange juice. The
immune-boosting properties are the demand side attraction while there are
simply not enough tanker spaces with airlines not flying to bring the product
to markets," said Stephen Innes, chief global market strategist at broker
AxiCorp.
On the supply side,
there are also issues with not having enough workers as plantations introduce
restrictions such as social distancing. "Traders are wondering if workers
are around to man the plants here in Florida and in Brazil," said Jack
Scoville at trading firm Price Futures Group in the US.
Orange
juice futures have seen their biggest monthly gain since October 2015, at a
time when global stock markets are being battered. In London, the FTSE 100
index is down more than 13% in the last month, while on Wall Street the Dow
Jones Industrial Average has fallen more than 16%.
Talking
about whether the spike in orange juice futures prices will mean higher prices
for orange juice in shop, Mr Innes added: "The pass-on effect will be
quick as orange juice producers pass the price rises onto to supermarkets and
other buyers".
Most
commodities have a "future" price, which can be traded on an
exchange, such as the Intercontinental Exchange (ICE). Futures contracts help
companies lock into a fixed price in the future to protect them from potential
spikes in prices.
Futures
contracts are common for soft commodities like oranges and wheat which are
vulnerable to sudden price rises due to bad harvests and natural disasters.
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