OJ isn’t doing great. I’m not talking about the former football boob, who recently got himself sent down the river. I’m talking about the stuff some of us drink, sometimes.
It’s that “sometimes” bit that makes being an orange farmer such a pain. And it’s something that reveals the reality that not all ag commodities are the same, and the ones the prairie farmers grow have about the best underlying demand base of any.
Orange juice is the stuff of good times. When you’ve got a few extra bucks in your pocket, you’re likely to throw financial caution to the wind and order a $3 glass of orange juice with your hotel breakfast, or buy a few litres for your fridge, it seems. In that, it’s like bacon, which people consume in much bigger amounts in economically confident times.
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But when the bottom drops out of the market, and – more importantly – out of people’s confidence about where the economy is going, they slash their orange juice consumption. You can see that in the FCOJ charts at the Intercontinental Exchange. (www.theice.com) FCOJ means Frozen Concentrated Orange Juice.
You may have heard about that contract before. It’s the one that is the subject of some of the hilarity of the Eddie Murphy/Dan Akroyd 1980s comedy hit “Trading Places.” It represents the value of stored orange juice in the U.S. market. (A few years ago I actually got to stand near the FCOJ pit at the New York Board of Trade, during a visit, at the open, a treat seldom allowed to reporters, who are banned from the trading floor. I can’t claim to have been allowed in there because of my grand importance – my NYBOT host and I had to walk all the way across the floor, past the NYMEX pits and past the NYBOT’s sugar, coffee, cocoa and FCOJ pits, because the elevator to the admin offices was broken, and walking across the trading floor was the only way we could get there. Because we were there anyway, my host let me hang out for 15 minutes, soaking up the vibes.)
FCOJ futures have been sliding not just since last spring, like canola and wheat, and not just since July, like most of the other commodities, but for two full years, since before the beginning of 2007. That puts it at odds with most of the other ag commodities, but completely in line with two other parts of the U.S. economy, which it mirrors: the housing market and unemployment. Housing started to go sour in early ’07, and the unemployment rate began rising then too. As housing and employment have sunk, so too has FCOJ. From about $1.80 per pound FCOJ has dropped to about $0.80. According to an analyst of FCOJ this week, the downride isn’t nearly over. He is estimating FCOJ has another 30 percent to fall this year, to 50 cents, which can’t make you happy if you’re an OJ rancher in Florida.
Things have been bad too in the big prairie ag commodities, such as wheat, canola, oats, barley, etc. But they’ve only been bad for a little while and they haven’t dropped as much. While OJ has been falling most of the other prairie ag commodities have hit all time highs, before this recent setback. It’s unlikely consumers will totally stop eating wheat and vegetable oil-based foods in bad economic times, but they could easily completely cut OJ out of their diets, leaving it the preserve of the idle rich.
I must admit to a certain schadenfreude about OJ. At one time I was a wage slave at a high end London, England restaurant, and my most exhausting and physically painful task was to produce large amounts of freshly squeezed OJ every day for the Eurotrash businessmen who would frequent the place. I’d have to spend about an hour and a half every morning, racing against the clock. to produce big vats of the stuff. After a hour of slicing cold oranges and pressing down on them atop the spinning juicer my hands would go numb with cold and vibration, and I’d begin slipping, and my hands would slip onto the juicer and they’d get bruised and sometimes have shreds of flesh torn off. Occasionally one of my Swiss supervisors would criticize me for not squeezing out every last drop of each orange half, pressure which would just increase the likelihood of slips and pain. Ever since then I’ve had an uneasy relationship with OJ.
I wish the best to orange farmers. But to me, OJ will always be a cursed commodity that belongs in commodity hell.
