NEW YORK – Orange juice futures (search) uncorked a sizzling rally Thursday to end up and near a 2-1/4-year high on all-around buying after a surprisingly huge cut in USDA's projection of the hurricane-hit Florida citrus crop, dealers said.
The New York Board of Trade's (search) key May juice contract shot up 7.65 cents or 8.18 percent to settle at 101.20 cents a lb, ranging from 98.50 to 101.85 cents. It was the loftiest close for a benchmark contract since juice futures finished at 102.05 cents on Nov. 27, 2002.
July juice shot up its 5.00-cent limit to 99.80 cents.
The rally was sparked by the monthly supply/demand report of the U.S. Department of Agriculture (search) in which it cut by a more-than-expected 9 million boxes its estimate for citrus output in Florida in 2004/05 to 153 million (90-lb) boxes from last month's forecast.
The trade had expected a more modest decrease of 2 million to 5 million boxes.
"Juice looks very strong," said James Cordier of Liberty Trading Group, adding the market's bull run was buttressed by talk of dryness for the 2005/06 citrus crop in Florida, which is the country's top growing state.
Florida's citrus production continued to suffer from the effects of the three hurricanes that slammed into the Sunshine State within six weeks of mid-August 2004.
Traders also cited more cases of citrus canker in Florida and green disease in leading producer Brazil. Both diseases would sharply curtail output in the orange groves.
Futures exploded from the opening bell as fund and speculative buying ignited automatic buy-stop orders which fueled the rise. Producer sales hit May juice once it hit the psychological 100-cent mark and profit-taking briefly pruned the market's gains, dealers said.
Then "The funds just piled in, and we jumped again," a trading house broker recounted.
Eventually, analysts believe the USDA will slice the crop by the end of the 2004/05 season in July to 150 million boxes and possibly even lower.
Analysts said initial resistance in the May FCOJ contract would be at 102 cents and then up to 105 cents. Support lies at 100 and 98.50 cents.
Floor dealers said estimated final volume reached 5,400 lots from Tuesday's tally of 2,554 lots. Options volume amounted to 1,600 lots. Open interest rose 429 lots to 28,521 contracts as of March 9.