11-23-2019: January Orange Juice: Supply Increase Simultaneous with Falling Demand

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Introduction
Intermarket
Parabolic

Nirvana
News
Point & Figure
Cyclic/Seasonal

Internal Progrm
Third System
Margin

Historic Range
Commitment
Volatility

Random Chart
Options
Calendar Spread

Level Table
Other Factors
Recommendation

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Introduction

There has been a significant delay in the production of this article due to computer problems at Zenith, so portions are somewhat out-of-date.

The supply of oranges for orange juice processors is decreasing, but that in turn forices processing plant closures and actually causes rising retail prices. Rising prices in turn encourage decreased retail demand for orange juice. As retail prices rise, futures prices fall. Oranges are getting rarer and more expensive. Florida battles with disease which has devastated much of the state's acreage and caused abandonment of farms, while raising costs of production for insectisides and fertilizers. Orange juice just isn't as popular as it once was in the U.S., and linked to weight gain, as one asks, "How many oranges are squeezed in order to make up a glass of orange juice?" One must be mindful, the OJ contract in futures is based upon squeezed, processed juice, not raw oranges which are considered more healthful.


Intermarket Analysis

We fed Orange Juice, Cocoa and Sugar into a neural network to get the following result:




Parabolic Chart

January Orange Juice:

Parabolic Chart


Nirvana Chart

January Orange Juice:

Initial Chart


News Analysis

The number of foxes containing Florida citrus is expected to hit 79 million in the 2018 to 2019 according to the USDA, a 76% increase from last year's production.of about 45 million boxes. Futures are stuck in a tight consolidation range over the past 4 weeks. However, we are starting to enter a volatile winter season for orange juice as a possible frost could hit the State of Florida, sending prices sharply higher as that situation has occurred inthe past. A bottoming-out pattern on charts limits downside action. But weather conditions continue to look ideal.

The Florida Citrus Commission voted to keep a citrus tax of 7 cents per box in place after a 71% increase in the tax was proposed. Smaller growers feared the money would be used to finance a more expansive orange juice marketing program that would benefit big growers more than small growers. Current taxes support a $15.1 million budget for the Citurs Department, of which $5.3 million goes for marketing. Grove caretaking costs rose significantly due to the fatal bacterial disease citurs greening, which requires more pesticides and fertilizers to keep trees productive.

Real orange juice sales have declined since the 2000-01 season. Demand for orange juice has collapsed. Florida processors are holding record levels of OJ inventories at their plants. The processors began building inventories following Hurricane Irma in 2017. They feared groves would not recover from tree damage. But the 2018-10 crop saw a rebound to 71.75 millioin boxes.

Orange juice sales nationwide have declined an average about 5% per year in recent years.

Fears related to recent Hurricane Dorian seemed to do little to boost orange juice futures prices.

One of only a handful of orange juice processing plants left in Florida has stopped processing fruit in yet another sign that imported juice, diseases, ahd Hurericane Irma have had on fortunes of the state's signature crop. U.S.Sugar-owned Southern Gardens Citrus announced the end of processing at its plant in southwest Florida, a month before the start of the next growing season in Florida. Forida orange juice processing is getting sequeezed out of business.

Imported fruit from Brazil and Mexico is also hurting Florida. Seven major processing plants have lewft the state recently, down from 30 processors wo years ago. Those plants were owned by Tropicana, Florida Natural, Peace River Citrus, and Curtale Citrus Juices. Over the past 12 to 15 years, the size of the crop has decreased dramatically. Across Florida, there were 400,000 acres of citrus-bearing land in the 2017-18 crop year, down from mtore than 777,000 acres in 1998-99, according to the Florida Dept. of Agrculture. Central Florida counties like Osceola, Lake, and Orange had the greatest decline.

A major study in Britain showed a daily glass of orange juice could cut the risk of life-threatening strokes by almost 25%.

A tiny insect, a citrus psyllid, is spreading huan long bing, and invastive splecies of bacteria into Florida groves. Citrus psyllids reproduce so rapidly, they develop a resistance to insectisides within a year. Growers are spending more than $553 per acre than they did the year before the discovery of the bacterium, a 54% increase. The bacterium originatedin China. The pathogen prevents taw freen fruit from ripening. Thousands of growers have already quit, leaving "ghost groves" in their wake. Of 7,000 farmers that grew citrus in 2004, nearly 5,000 have dropped out.

Zenith trades also noted a similar situation in a large grove near Blythe, CA, which plowed under many acres of recently-planted orange trees in favor of growing date palms instead.

However, on the plus side, the reduction of growers caused Tropicana to announce a 10% wholesale price hike by the end of this month, which could increase retail prices by as much as 39 to 40 cents per gallon. How high orange juice prices could rise at the supermarket depends a lot upon how much OJ can be imported from Brazil.

Our bottom line assesment of the news is that rising orange juice retail prices will further crimp demand and increase problems of excess inventory.


Point & Figure Chart

235.0|                                                                  R 11/11
     | ICE - Mar-20 Orange Juice, 15000 lbs, c/lb. Cm.=0.20  Lim.=10.0
     |        X X
     |        XOXO
     |        XOXO
215.0|________XO_O_____________________________________________________________
     |      X X  O
     |      XOX  O  X
     |      XOX  O  XO
     |      XOX  O  XO          X
195.0|______XOX__O__XO______X___XOX____________________________________________
     |      XOX  O  XO      XO  XOXO
     |    X XO   O  XO    X XO  XOXO
     |    XOX    OX XO  X XOXO  XO O
     |    XOX    OXOXOX XOXOXO  X  O
175.0|____XOX____OXOXOXOXOXO_OX_X__O___________________________________________
     |    XOX    O O OXOXOX  OXOX  O
     |    XO         O OXO   OXOX  O
     |    X            OX    OXO   O
     |    X            OX    O     O
155.0|____X____________OX__________O___________________________________________
     |    X            OX          O
     |    X            OX          OX
     |  X X            O           OXO
     |  XOX                        OXO
135.0|__XOX________________________O_O_________________________________________
     |X XOX                          O
     |XOXOX                          O
     |XOXO                           O
     |XO                             OX
115.0|X______________________________OXO_______________________________________
     |X                              OXO
     |                               OXO
     |                               O O
     |                                 O
 95.0|----|----|----|----|----|----|----|----|----|----|----|----|----|----|---
             11111        1111
      1234578001221233458900121346783457
      2222020021013202001201002221012010
      1930495344120767735239872161340851
Our computer tells us a non-conventional reactive approach works best for Orange Juice on p&f charts. Therefore the above chart is taken as giving a buy signal.


Cyclical and Seasonal Factors

We are headed toward a cyclical high and a seasonal down period.

Cyclicals Cyclicals Seasonals
Seasonals


Internal Program

Our best-performing internal program is "Pattern". It is giving a sell signal.

Internal Printout 1 Internal Printout 2

Results of "Pattern" for Orange Juice (blue lines = successful trades, red, unsuccessful): (Always in the market.)

Results


Third System Confirmation

Our third system has triggered a buy signal. (Note, disregard the year on the chart. Our regular readers know this is not a Y2K-compliant system, but it still works.)

Third System


Margin

The point value is $150. Initial margin on a single contract is $1,386. Use of options not advised.


Historic Range

Scale trade buyers are entering the market for the long term in this price range.

Historical Chart


Commitment of Traders

Commitment 1

In the chart below, the yellow line is the futures price, read on the right axis. All other colors are read on the left axis. Blue is small speculators. Red is large speculators. Green is commercials. Large speculators with the best track record are remaining short.

Commitment 2

Interpretation of a Different Site Below (Their trader categories may vary from ours):

Commitment 3


Volatility / Probable Range

FB 1 FB 2

The average volatility shown below suggests that a change in major trend to up is at a volatility low point.

Range/Volatilitiy Chart


Possible Future Prices

Random Chart


Option Recommendation

Our option trade recommendation is to Buy (1) March Orange Juice 115 Call and Sell (1) Orange Juice March 110 Call @ 0.55 to the buy side or less.


o 1o 2 o 5


Calendar Spread

What the Jan. - Jul. calendar spread suggests to us is that buying the near contract and selling the far one is at most times profitable, which we think is a sign that these futures may go up in the long run. The best time to enter or leave the above spread is when it is at -6.00 or narrower buying the far as prices are rising and then selling the near, and exiting or entering when it is at -10.00 or wider selling the far as prices are falling and then buying the near. At this time, we appear to be midway with no particular trend detected in either direction.





Level Table:

Level Table

The path of least resistance is down.

To view the chart below correctly use Microsoft Internet Explorer.

174.0|                                                                  R 11/12
 ICE - Mar-20 Orange Juice, 15000 lbs, c/lb. Cm.=0.20  Lim.=10.0
     |
     |BBBBB
     |AAABBBBB
164.0|AAAAABBBBC_______________________________________________________________
     |AAABBBCCCCC
     |ABCCC
     |AABC
     |AAAC
154.0|AC_______________________________________________________________________
     |CCC
     |CCJJ
     |DDJJJKKK
     |DDDDDDJJJJKK
144.0|DDDDDDDDDJJJJK___________________________________________________________
     |DEEEFJJJKKKK
     |EEEEEEFFFFFFGGGGJKKKKKK
     |EEEFFFGGGGGGGHJJKKKK
     |FFFGGGHHJJK
134.0|GHHHHHHHHJK______________________________________________________________
     |HHJL
     |L
     |LL
     |LLLL
124.0|LLLLLLL__________________________________________________________________
     |LLLLLOO
     |MOOP
     |MNNOOOPPPP
     |MMMNNOOOPPPPP
114.0|MMMNNOOPPPPPPPP__________________________________________________________
     |MMNNOOPPPPPQQV
     |MNNNOOOQQQQQQQQRRRRSVV
     |MNNNOOQQQQQQQQRRRRRRRSSSSSSSSTTTTVV
     |MMMNNNOQQRRRSSSTTTTTTUVVVVVX
104.0|MMMNNRTTTTTTUUUUUVVVVVWWWXX______________________________________________
     |MMNNTUUUUUUUVVWWWWXXXXYYYY
     |MNNUUUVVWWWXXXXXXYYYYYYZ
     |UWWZZZZZZZ[
     |ZZZZZ[[   <<<
 94.0|Z________________________________________________________________________
     |
     |
     |
     |
 84.0|-A-B-C-D-E-F-G-H-J-K-L-M-N-O-P-Q-R-S-T-U-V-W-X-Y-Z----|----|-- TPO=-0.200
       1 1 1 1                                       1 1 1           1
       1 1 2 2 1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 8 9 9 0 0 1           1
       1 2 1 2 1 2 0 2 1 2 0 2 0 2 0 1 0 1 0 1 2 1 2 1 2 1           1
       4 8 2 7 1 5 8 5 1 5 8 3 7 1 5 9 3 8 1 5 9 3 7 4 8 1           2


Other Factors

Multiple Chart Indicators Summary
Multiple Chart Indicators Summary


Here's an intraday chart for a previous day ( 11/13 ).

Intraday Chart


                 Risk Versus Opportunity Report
                ________________________________

                  OJF0    January Orange Juice

                      High Price:  106.46
                   Current Price:  98.55
                       Low Price:  94.67

                            Risk:  0.077
                     Opportunity:  0.157

                    (O/R) Ratio =  2.039


Overall Recommendation

Decision Weighting Factors
FactorsWeighted Points
Inter-Market Analysis + 1
Parabolic Chart + 1
Nirvana Chart + 1
News - 1
Point & Figure + 1
Cyclicals + 1
Seasonals - 1
Internal System 1 - 1
Internal System 2 0
Third System + 1
Historic Range + 1
Commitment of Traders - 1
Range/Volatility + 1
Level Table - 1
Other Factors - 1
Total + 2
Place 10 January Orange Juice on a Buy Watch with stoploss @ -8.40 below the get-in point when recent price is represented as "98.55".
____________________________________________________________________________________________________________________________________________F.C..