Orange Juice Derivatives

June 03, 2008

Dissecting the volatile yet attractive qualities of FCOJ futures.

  • Orange Facts 101
  • Whither its popularity?
  • Florida vs. Brazil


Since we've already looked at pulp for making paper, it's back to orange juice. Oranges prove to be nearly entirely usable fruits. Little of an orange needs go to waste.

When the juice has been extracted from a juicing orange - which accounts for about 50% of its weight - you are left with peel, pulp and seeds. While some of the remaining pulp may be added back in for those "Loads o' Pulp" cartons of juice, together with the peel and seeds, the pulp actually makes healthy feed for cattle. The oil found in the peel (in the flavedo and albedo parts of the orange) can be extracted as citrus essential oil and used to make both flavors and perfume. All in all, a productive piece of produce.




When oranges are juiced on a commercial basis, the resulting liquid is made into either chilled juice or frozen concentrated orange juice (FCOJ). In Florida, where the vast majority of America's juicing oranges are grown, 49.1 million boxes of oranges were turned into FJOC in 2005-2006 alone, and some 90.2 million boxes were turned into chilled juice. (Note: A box, equivalent to 90 pounds of oranges, is a 1-3/5 bushel, 2-compartment, open-top wooden container used in the field to hold citrus fruits during harvesting operations).

Although there are no chilled orange juice derivatives, there are futures and options on futures contracts for FCOJ. These are traded on the NYBOT (now a wholly owned subsidiary of IntercontinentalExchange [ICE]).

Some Orange Facts

Florida is the U.S. home of orange juice.

The first orange trees in Florida were planted (probably by the Spanish explorer Ponce de Leon) around St. Augustine in the mid-1500s, and citrus has been cultivated commercially in the state since the mid-1800s.

Florida now has more than 80 million citrus trees (grapefruit, oranges and specialty fruit, e.g., tangerines), planted in 575,000 acres of citrus groves. Each can take up to 15 years to reach maturity. The industry employs some 80,000 Floridians and is a $9 billion industry. While production peaked in the early 2000s, it has dropped off dramatically since the hurricanes of 2004 and 2005.[1]

The fresh orange season in Florida is from October through June; grapefruit from September through June. The season for a number of specialty fruits lasts from October through April.

In contrast with the apple juice consumed in the U.S., most of which is imported from China (see China: A Growing Player In Fruit And Vegetables), America's orange juice is made from over 75% Florida oranges. And of Florida's citrus production itself, around 90% is turned into canned, chilled or frozen concentrated juices. America's fresh oranges for eating are predominantly grown in California, with a very small proportion grown also in Texas and Arizona.

This year's latest Florida all-orange forecast (dated May 9) from the United States Department of Agriculture (USDA) Agricultural Statistics Board anticipates a production level of 168.5 million boxes.

According to the USDA: "If achieved, this forecast will be the most produced since the 242.0 million boxes in 2003-4, prior to the two hurricane seasons." In addition, the USDA all-orange projection of FCOJ will surpass last season's record.

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