As orange juice futures spike, consumers feel bite

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Never mind oil, gold, copper or even corn. The commodity that's really surging these days is lowly orange juice. And that's going to put the squeeze on consumers across North America.

Orange juice futures have already climbed nearly 40 per cent since September, reaching prices not seen since the 1970s. Cold weather in Florida and a drop in production has fuelled much of the recent runup. The price could soon get an even bigger boost from the U.S. Food and Drug Administration, which is considering banning imports of Brazilian oranges because farmers in that country use a fungicide that's not permitted in the United States.

Brazil is by far the world's largest producer of oranges, having surpassed Florida a few years ago. The South American country now accounts for about half of global orange juice production. If the FDA bans Brazilian oranges, consumers will pay for it, said James Cordier, president of Tampa., Fla.-based Liberty Trading, which specializes in commodities.

"You could see a 20-per-cent increase [in prices]at the retail level, easily," Mr. Cordier said Tuesday. The retail price of orange juice has already increased nearly 8 per cent in the U.S. and Canada in the past year.

News of the FDA's potential action sent orange juice prices up 11 per cent Tuesday to $2.07 (U.S) a pound in New York. The price of many commodities like orange juice can only move within certain daily limits, meaning the price could jump again Wednesday and the rest of the week.

In a letter to an association of fruit juice producers sent this week, the FDA said it was concerned about traces of a fungicide called carbendazim that were found in some orange juice concentrate. Carbendazim is used by farmers in many countries to kill fungal spores that can damage fruit. In Brazil, it is used to ward off a type of mould that grows on orange trees. However, it has not been approved for use on oranges in the U.S.

The FDA said the amounts detected were at low levels and that it was not ordering a recall. However, the agency said it would begin testing more orange juice samples as well as imports from Brazil. If it "identifies orange juice with carbendazim at levels that present a public health risk, it will alert the public and take the necessary action to ensure that the product is removed from the market," the letter said. The FDA said it will also ban imports of juice shipments "that test positive for carbendazim."

Carbendazim has been registered for some uses in Canada but there are no concerns about orange juice in this country, according to Health Canada. "Health Canada has a set maximum residue limit (MRL) of 10 parts per million for carbendazim," agency spokeswoman Leslie Meerburg said. "In Canada to date orange juice that has tested falls below the MRLs."

While a jump in the price of orange juice will hit many consumers, the drink has lost much of its popularity in recent years. Orange juice consumption has fallen 37 per cent in the last decade, as consumers turn to a multitude of other drinks and juices. Florida still supplies the bulk of North American orange juice, but production from the state has fallen sharply as consumer tastes changed. The real estate boom a few years ago also wiped out thousands of acres of Florida orange groves. Florida farmers will grow about 150 million boxes of oranges this year, down from 242 million in 2004. Each box equals 90 pounds.

"People go in the store now and buy a bottle of water," Mr. Cordier said. "Ten years ago they'd go in and buy a bottle of orange juice. The only time people drink orange juice now is on vacation at the hotel."