Short term
Trade view / 14 September 2016 at 13:40 GMT

OJ lifted by poor crop prospects

Managing Partner / Spotlight Group
United Kingdom
Instrument: OJX6
Price target:
Market price:

I will ask my readers to cast their minds back to a trading comment released at the start of September, when it looked as though Hurricane Hermine might cause extensive damage to the Florida Orange groves...

I mapped out two strategies as it looked like Hermine would travel on a trajectory north of the Sunshine State's main citrus belt. Therefore, my play where prices retreated was put into action and I shorted the contract (OJX6) at 189.00, covering later at 185.08 for a gain of 2.12%.

Since then my second strategy has come into play as orange juice prices have been squeezed higher (pardon the pun) on the prospect of a combination of too much rain and a disease-spreading bug.

Entry: buy a break of 193.00.

Targets: 195.15... 198.17... 201.68... 208.20.

Stop: 189.00.

Futures surged to the highest level seen in more than four years as the world’s top suppliers face shrinking output. In Brazil, the No. 1 producer, excessive rain is raising the threat of fungal disease that can cut crop output says University of Sao Paulo research arm Cepea. 

In second-ranked Florida, a tiny insect is wreaking havoc on production by spreading the citrus-greening disease.
Source:,  Spotlight Ideas                                                                                                           
The time-based technicals are biased toward holding a long position as one ventures further out in time and as such I am inclined to let the original proposition from the "go long" scenario be my guide.

I say this because despite the fact that orange juice in New York has soared by 59% in the past year on declining supplies. The outlook is price positive.

Brazilian rains are coming as the country’s stockpiles have fallen to the lowest on record. In Florida, production in the year starting October 1 may slip by 25% from last year.

This leads one to believe that prices have just one direction to travel in and the path of least resistance is currently up, even if one sees a day or so, here and there of profit taking. Supply concerns are overshadowing any decline in demand.

Orange juice (five-year);
Source: Spotlight Ideas

Parameters (Orange Juice November 2016; OJX6, US cents/lb)

Entry: 193.00 September 8.

Targets: 198.17... 201.68... 208.20.

Stop: 189.00.

Time horizon: short term.

— Edited by Michael McKenna

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