|The demand for orange juice increased but supply is affected as producers struggle to export the goods because of transport restrictions. / Photo by Carlos Horta via Shutterstock|
While the global stock market plunges amid coronavirus fears, it has been a major boon for the future of orange juice as its price has surged worldwide. This month alone, it has surged by more than 20% as many consumers are looking for healthy products, reports BBC.
Orange juice “futures” shot up
The demand for orange juice increased but supply is affected as producers struggle to export the goods because of transport restrictions. Thus, the increase of the orange juice “futures,” which indicates the cost of its delivery for the coming months. The orange juice futures show it as the best performing asset in 2020, so far.
The futures market is a central financial exchange where people can trade standardized futures contracts or the contract to purchase certain quantities of a commodity. Futures can be traded in the Intercontinental Exchange (ICE), for instance. Future contracts help firms lock a fixed price in the future so they remain protected from possible spikes of prices. It is common for soft commodities, like wheat and oranges, as they are most vulnerable to sudden price increase due to natural disasters and bad harvests.
Pandemic affecting the supply and demand of oranges
Foreign exchange company AxiCorp’s chief global market strategist Stephen Innes said that the pandemic hit both the demand and supply for orange juice. On the demand side, people were after the immune-boosting properties of the orange juice but it hit the supply because airlines are not flying to bring the product to the markets and there are not enough tanker spaces to carry the liquid cargo. There are also concerns about not having enough employees as plantations have introduced safety measures, like social distancing. Jack Scoville from the US-based trading firm Price Futures Group said that traders have been wondering if there are enough workers to man the plantations in Brazil and Florida.
Since October 2015, when the global stock markets were also battered, orange juice futures have had the highest monthly gain. The Financial Times Stock Exchange 100 Index, which is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization, also dropped 13% in a week as the pandemic sparks a one-week fall since the 2008 financial crisis. UK-based foreign exchange company CMC Markets’ David Madden commented that what started as a tumble turned into panic selling in stocks because traders were “terrified” of the possibility that Europe is heading into a possible recession or is undergoing an economic slowdown.
Bank of England Governor Mark Carney also said that Britain should prepare for an economic hit of the pandemic. Meanwhile, the stock market index Dow Jones Industrial Average, which measures the stock performance of 30 large companies in the US, has also fallen by more than 16%. There are only 5 stocks seen setting up in the US and this includes Amazon, Alibaba, Netflix, semiconductor company Advanced Micro Devices, and technology-driven education company GSX Techedu.
The pass-on effect from “future” price to store price
Innes added that the increase in the prices of orange juice futures may have a pass-on effect to store prices because orange juice producers will likely pass the increase of prices to supermarkets as well as other buyers.
In the data provided by the American news site Axios, US orange juice futures were about $1.00 per pound in January this year but surged to $1.17 per pound as of March 24, 2020.
The orange juice domestic consumption in the US between 2008 and 2009 was estimated to reach approximately 865 metric tons at 65 degrees Brix. The Degrees Brix (symbol °Bx) is the sugar content of an aqueous solution. One °Bx is equaled to 1 gram of sucrose in 100 grams of solution. In 2009-2010, the orange juice consumption was estimated at 832 metric tons, 2010-2011 (210), 2011-2012 (699), 2012-2013 (733), 2013-2014 (700), 2014-2015 (663), 2015-2016 (631), 2016-2017 (581), 2017-2018 (572), and 2018-2019 (530). Database firm Statista recorded the data from 2008 to 2019.
The new research published by consulting firm Global Market Insights, Inc., meanwhile, shows that the orange juice market in China is projected to reach US$ 1 billion by 2026. What will cause the rapid shift from soda and traditional drinks to orange juice are the changing consumer perceptions adopting nutrition and low-calorie beverages. The research also shows that rising awareness among people toward the health benefits of unconcentrated and pure orange juice will boost the market demand and encourage consumption. Manufacturers are also investing in cold fruit processing techniques and attractive packaging.
|Manufacturers are also investing in cold fruit processing techniques and attractive packaging. / Photo by Radu Bercan via Shutterstock|
Global juice market
Trade magazine for the food and beverage industry Asia Pacific Food Industry said that the top juice consuming countries are Japan, Germany, and the US, consuming a combined 9.9 billion liters of juice in 2015. In 2017, orange was still the most popular flavor of juice globally, accounting for 46% of juice sales, followed by apple (17%), mixed fruits (6%), mixed vegetables (4%), tomato (3%), grape (3%), grapefruit (2%), pineapple (2%), mango (1%), cranberry (1%), and others (15%). The common product trends that are driving the growth in 100% juice are “vegetable nutrition” and “all-natural.”
There is no denying that a cup of raw and fresh orange juice is an excellent source of Vitamin C. It fortifies the immune system and prevents common cold but it is unlikely going to help people fight off the new coronavirus, said Vanderbilt University Medical Center’s professor of preventive medicine and infectious diseases Dr. William Schaffner. No evidence has yet shown that vitamin C supplements can help prevent the novel coronavirus. Researchers at Zhongnan Hospital of Wuhan University conducted a clinical trial with 140 patients in February to know whether ultra-high doses of vitamin C administered intravenously will treat the viral infection more effectively than a placebo. No results are yet available as the trial will be completed in September.
Nevertheless, vitamin C is important to health and supports the body’s normal immune function. There are also no harmful side effects in taking vitamin C unless taken in excess. Not to mention that people are now encouraged to keep their immune system healthy during the pandemic. People only have to be cautious as the US FDA has already issued warning letters to seven firms selling fraudulent immune-boosting products.