“Luxury good” OJ: Is orange juice getting more expensive now?

The price of orange juice goes up and up. Poor harvests are cited as justification. However, the commodity markets are already signaling a slight relaxation.

Getting rich with orange juice: Dan Aykroyd and Eddie Murphy demonstrate how this works in the film “The Soldiers of Fortune”. Using a false report from the US Department of Agriculture about an allegedly bad orange harvest, they drive up the price of orange juice futures. The two sell – just before it is announced that everything is in fact fine with the US crop and the price has plummeted. The film, originally called Trading Places, was made in 1983.

40 years later, the US orange harvest is indeed miserable, even worse than at any time since World War II. And that has consequences – not only for the price of orange juice futures on the commodities exchange in New York, but also for German consumers.

Fruit Juice Association expects rising prices

According to estimates by the Association of the German Fruit Juice Industry (VdF), these are likely to be confronted with price increases for their favorite fruit juice drink in the coming months. “The goods are scarce and the raw material costs are rising. This means that consumers also have to adjust to the fact that orange juice is becoming more expensive,” said VdF Managing Director Klaus Heitlinger of the dpa news agency.

The boss of the Mönchengladbach-based juice manufacturer Valensina, Tino Mocken, had already warned when the annual report was presented in February that price increases were “inevitable” in view of the increased costs for energy, raw materials, packaging and logistics.

Orange juice on the stock exchange at a record high

“The fruit juice producers are relatively late with their announcement of price increases – the big price increase was already there, the prices on the futures markets have recently fallen slightly again,” criticizes market expert Robert Rethfeld from Wellenreiter-Invest. Overall, the prices for raw materials have recently come back, even in the food retail sector, prices have fallen again in some cases.

So how dramatic is the situation with orange juice really? A look at the latest developments on the New York commodity exchange helps to put this in perspective. There, the price of orange juice rose to a record high of $2.88 in April. With an increase of around 21 percent since the beginning of the year, orange juice is the raw material with the second strongest price increase among the so-called “soft commodities”. Only the price of sugar rose even more sharply by around 33 percent.

Agricultural commodities are referred to on the stock exchange as “soft commodities”. In addition to orange juice and sugar, these include coffee, rice, wheat, cotton – and pork bellies. Incidentally, it is not the liquid orange juice that is traded on the stock exchange, but futures contracts (futures) on a frozen concentrate: the oranges are pressed, the juice is then evaporated and frozen.

Orange juice price more than doubled

The brilliant price rally for orange juice becomes even clearer if you open up the time horizon a little: the price has more than doubled within two years. But why has orange juice become so expensive in recent months? Traders are pointing to the US harvest this year, which will be the weakest it has been since 1937.

Producers in Florida have been fighting with “citrus greening” for years. The disease, also known as yellow dragon, is caused by a bacterium and devastates entire plantations. Damage from last fall’s hurricanes Ian and Nicole finished off Florida’s orange crop.

World export champion Brazil sends relaxation signals

To make matters worse, other growing countries such as Mexico, the European Union and Brazil are also struggling with weather-related problems. The Brazilian harvest is crucial here, as around 80 percent of the orange juice traded globally comes from Brazil. Recently, however, somewhat better harvest conditions had become apparent in the South American country.

The forecast for the 2023/2024 harvest envisages only a minimal decrease compared to this year’s harvest with 309 million boxes (41 kg oranges each). The weather conditions are positive, it was said from Brazil, because it had recently rained 50 percent more than the historical average. This in turn caused the prices of orange juice futures on the New York commodity exchange to fall. In general, the orange juice charts signal relaxation; OJ is currently trading almost twelve percent below its record high.

Experts such as Robert Rethfeld from Wellenreiter-Invest are convinced that the big increase in orange juice prices has already been overcome and expect prices to continue to fall slightly – albeit at a higher level.

Consumers also have a say

In addition, sharp price increases themselves harbor a certain risk. “Demand for orange juice should be quite price-elastic,” explains Rethfeld. “Consumers are more likely to be able to do without the daily ration of orange juice than many other foods. But if the price of orange juice rises significantly, then demand will drop and the price will fall again.”

It is therefore entirely up to the customer whether the fruit juice manufacturers can implement the announced price increases in the medium to long term. The big question will be: What is the consumer’s real value of their glass of orange juice for breakfast?