The Slow Death of a Former Breakfast Table Star; Americans bought just 563.2 million gallons of orange juice, the lowest since at least the 1998-99 season

Oct 14, 2013

The Slow Death of a Former Breakfast Table Star

By Alexandra Wexler

Picture an American family at the breakfast table. Now remove the pitcher of orange juice. Once a morning staple, orange juice is on the outs. Total U.S. retail sales of the juice fell to the lowest level in at least 15 years during the 2012-13 season, according to Nielsen data published by the Florida Department of Citrus on Monday. Americans bought just 563.2 million gallons of the beverage during the season that ended on Sept. 28, the lowest since at least the 1998-99 season, the oldest data available from the FDOC.Analysts have said that a greater variety of beverages, including more exotic fruits like acai, and energy drinks have taken market share away from orange juice. Prices have also soared.

The spread of citrus greening, a disease that chokes off nutrients to fruit and causes them to drop prematurely from the tree, has reduced U.S. orange supplies and helped drive up prices. Ten years ago, the average price for a gallon of orange juice was $4.40 a gallon. Today, it’s $6.20.

Investors are souring on the juice as well. Open interest, or the number of outstanding positions in the market, fell to a 20-year low of 14,892 Friday, data from the ICE Futures U.S. exchange showed Monday. That’s the smallest open interest in the market since Oct. 27, 1992.

“It’s a bit frightening, really—these two data points, one being the open interest and one being the consumption,” said James Cordier, president of Tampa, Fla.-based brokerage Liberty Trading Group. “This is what happens before markets go off the board. Orange juice could be seeing the twilight of its contract.”

The market is also suffering from a lack of news, with no government crop production forecasts due to the government shutdown, and no weather threats to the groves in No. 1 orange-producing state Florida.

Orange juice for November delivery on the ICE Futures U.S. exchange was recently 1.4% lower at $1.2470 a pound. It’s on track for its lowest close since March 7.

Orange-juice futures, which began trading in 1966, once attracted a broader array of investors and juice processors, who for decades traded in rowdy pits on the floor of the New York Board of Trade in lower Manhattan. The contract was immortalized in the 1983 movie “Trading Places,” in which Dan Aykroyd and Eddie Murphy foil a plot by the Duke brothers to corner the frozen orange-juice market.

Although the Dukes may be down for the count, don’t cry for the orange-juice retailers, which include beverage giants Coca-Cola Co. and PepsiCo Inc. Revenue from orange juice sales has been more resilient than sales by volume, thanks to rising prices for the beverage.

Orange juice retail sales for the 2012-13 season totaled $3.49 billion, down just 5.2% from 10 years ago, as consumers buy less of the juice at a higher price point. Sales by volume, on the other hand, have dropped by a third over the last decade.