Orange juice is a beverage extracted from the fruits of the orange tree. It is produced by squeezing or reaming the fleshy orange fruits. Three types of orange juice, not squeezed directly at the point of consumption, are in the market — frozen concentrated orange juice (FCOJ), reconstituted liquid juice, and not-from-concentrate (NFC) juice. However, FCOJ is the benchmark commodity for measuring the price of orange juice.
One orange juice futures market contract (OJ) is equivalent to 15,000 pounds of orange juice solids, and the price quotation is in cents and hundredths of a cent per bushel. The minimum price movement is 5/100 of a cent per bushel or $7.50 per contract.
Because FCOJ is the easiest to preserve and transport, the frozen concentrated orange juice futures are widely traded on commodity exchanges and remain the most important part of the multi-billion dollar orange juice industry.
|Orange Juice Futures Contract Specifications
January, March, May, July, September, and November
8:00 a.m. - 2:00 p.m. (New York time)
Last Trading Day
The 14th business day before the last business day of the contract month.
Uses of Orange Juice
Orange juice has been a staple beverage on breakfast tables in different parts of the world, especially in the western world. Some people even use the juice in making salad dressings and vinaigrette, ice pops, smoothies, marinades, ice cubes, citrus glaze, and fruit topping.
It is a very rich source of vitamin C. In fact, a cup serving of raw, fresh orange juice, which is about 248 grams or 8 ounces, has 124 mg of vitamin C — more than 100 percent of the RDI. Apart from vitamin C, the juice also contains potassium, thiamin, folate, and the antioxidant hesperidin, which are very important to health.
Owing to its nutritional importance and diverse uses, the orange juice futures contract is very popular among commodity traders all over the world.
The Largest Producers and Consumers of Orange Juice
Orange trees are mostly grown in tropical and subtropical regions with hot summers and mild winters. According to the United States Department of Agriculture (USDA), the top 10 producers of orange juice are Brazil, the US, Mexico, the EU-27, South Africa, China, Turkey, Australia, Morocco, and Israel.
The region that consumes the most orange juice is the European Union, followed by the United States and China. Other top consumers are Canada, Japan, Brazil, Australia, Russia, Korea Republic, Israel, Mexico, South Africa, Morocco, and Turkey. Frozen orange juice futures contracts are the most popular means of trading the commodity.
Why Trade Orange Juice Futures Contracts?
The reasons for trading orange juice futures vary from individual to individual. While some trade the futures contract for speculative purposes, others use it to hedge against inflation or diversify their investment portfolio. Stakeholders in the orange juice market, see FCOJ futures as an instrument for managing price fluctuations.
Securing a profitable price: Orange farmers and producers of FCOJ come to the orange juice futures market to secure a good price for their product, while orange juice distributors and other users buy the FCOJ futures contracts to ensure a stable supply of the commodity.
Speculation: Aside from the stakeholders in the orange juice industry, most of the traders in the FCOJ futures market trade the contract solely for speculation. For these traders, what matters is to benefit from the regular fluctuations in orange juice prices.
Portfolio diversification: Orange juice is very popular in the soft commodity category. Fund managers and retail investors often add it to their investment portfolio. Spreading investment across several asset classes helps to reduce your risk exposure.
Hedge inflation: While paper currency keeps losing its purchasing power when the economy is heated up, commodity prices rise with rising inflation. Thus, commodities like orange juice can be used as a means of hedging your wealth against inflation.
How to Trade Orange Juice Futures
Frozen concentrated orange juice futures is the benchmark for the orange juice industry. The contract is offered by the New York Board of Trade (NYBOT), which is now a part of the Intercontinental Exchange (ICE).
An FCOJ futures contract (OJ) is equivalent to 15,000 pounds of orange juice solids, and the price quotation is in cents and hundredths of a cent per bushel. The minimum price movement is 5/100 of a cent per bushel or $7.50 per contract.
The listed expiration months of the FCOJ futures contracts are January, March, May, July, September, and November. Trading terminates on the 14th business day prior to the last business day of the contract month. At expiration, the contract is settled by physical delivery. For speculative traders who don’t want to take or make delivery of the commodity, they can avoid that by rolling over to contracts in the next expiration months.
It is very easy to start trading orange juice futures. All you need to do is to create an account with the exchange through your futures broker and deposit the required margin. Since it is a leveraged instrument, you will not need to have the full dollar worth of the contract before you can trade it.
However, you have to be cautious about leveraged instruments — while they can make you more money, they can also make you lose more than you plan.
Orange Juice Trading Strategies
Finding a trading strategy on the orange juice futures market isn’t easy. In addition to being a hard market to find edges that work, it’s quite an illiquid market compared to for example crude oil. This means that an orange juice futures trading strategy needs quite a large average trade for there to be left enough profit once slippage has been paid.
If you manage to find an orange juice trading strategy that works, it will very likely blend in nicely with your existing portfolio, and help reduce risk and increase profits.
If you’re interested in edges and strategies to use as inspiration for your own strategies, be sure to check out our edge membership!
Orange Juice Futures Seasonality
Here is a seasonal chart over the orange juice futures market:
Factors That Affect Orange Juice Futures
There are so many factors that can affect the prices of orange juice futures contracts. As an FCOJ trader, you need to watch out for the following factors:
Weather Conditions: Orange trees are very sensitive to climatic conditions. They need specific temperatures and precipitation levels to thrive. As an FCOJ trader, you should always monitor climate conditions in key growing regions, such as Brazil and the US (Florida). Minimal changes in temperatures or rainfall can cause serious price volatility for the commodity.
Production estimates from the USDA: Every October, the USDA releases a forecast for orange production in the coming year. Supply shortages from the major producers, like Brazil and the US, can affect the prices.
Special regulatory policies: Orange farmers often use pesticides and chemicals to prevent insects and pests from damaging their plants. A ban on oranges treated with chemicals can cause an increase in orange juice prices.
Consumer demand: The demand for orange juice is not always stable. In fact, demand has been declining in the western countries and increasing in the emerging market countries, like Brazil, Russia, and China.
Orange juice is a liquid extract produced from oranges. Rich in vitamin C and other nutrients, orange juice is consumed all over the world. While there are other forms of the commodity, frozen concentrated orange juice futures is the benchmark for the industry, and the contract is traded on the ICE.
Here is our archive with articles about other tradeable futures markets.
Who Are the Largest Producers and Consumers of Orange Juice?
Brazil, the US, Mexico, and the EU-27 are among the top producers of orange juice. The European Union is the largest consumer, followed by the United States and China. Other significant consumers include Canada, Japan, Brazil, and more. Commodity traders worldwide actively engage in trading frozen concentrated orange juice futures contracts.
How Do Orange Juice Futures Trade?
The benchmark for orange juice futures is the Frozen Concentrated Orange Juice (FCOJ) contract traded on the Intercontinental Exchange (ICE). A contract represents 15,000 pounds of orange juice solids. Trading occurs in specified months, and settlement is by physical delivery.
What Factors Affect Orange Juice Futures Prices?
Various factors influence orange juice futures prices. Weather conditions, production estimates from the USDA, regulatory policies, and consumer demand play key roles. Monitoring climate conditions in major growing regions and staying informed about USDA forecasts are crucial for traders.