The Great Eddie Murphy/Dan Aykroyd 1983 Movie trading places features two chumps running a massive commodity futures scam. They were orange juice futures. They made their fortune betting on the orange crop in Florida.
Thanks to Hurricane Irma ripping a path of destruction through Florida, you can do the same today.
After Brazil, Florida is the world’s second largest producer of oranges.
The orange juice industry is in a massive decline. Sales fell 14%, a drop of about $98 million from 2012 to 2016. Some food exchange-traded funds that once held futures no longer use them as an investment.
It doesn’t help that we now know it’s bad for you. It has the nutritional value of soda.
Business Insider called orange juice the “biggest scam of your life.” That’s important, as the US is the world’s largest consumer by many times, more than any other country in the world. Last year we consumed more than 630,000 metric tons of the beverage.
Irma’s impact
Frozen orange juice futures have tumbled over the past year. After reaching a high of $225 in October 2016, the JPMorgan Orange Juice Price Index fell 44% to a low of $125 in July 2017.
The price rose 21% in two weeks as Hurricane Irma grew and targeted Florida.
The Florida orange crop looked particularly strong this year. Shannon Shepp, executive director of the Florida Department of Citrus, wrote:
Before Hurricane Irma, there was a very good chance that we would have over 75 million boxes of oranges on the trees this season. Now we have much less.
To put that in perspective, last year’s crop, the worst since 2005, was around 77.9 million boxes. That crop sold for $800 million. In Florida, 90% of oranges are made into juice.
This year, the orange harvest looks set to be the lowest in 50 years. As you can imagine, that sent the futures price up.
Unfortunately, unless you’re trading commodities, regular investors struggle to get into this position. One way is the Items Agriculture Total Return ETN (NYSE:RJA). It owns 1.8% of its assets in orange juice futures.
That’s the best way I found to trade what could be a nice winner in orange juice. That’s typical with these trends. Sometimes it’s hard to find a way to capitalize on them, even when you find a great opportunity.