Florida's Department of Citrus used to market the state's leading export with the tagline "A day without orange juice is like a day without sunshine." Traders may be beginning to think that a portfolio without orange juice futures lacks some sunshine, too.

The United States and Brazil are the world's principal orange juice producers, and more than 98% of the U.S. crop comes from Florida. Orange production in the Sunshine State, at 170 million boxes (a box contains 90 pounds of fruit), is up 32% from the previous season, a fact reflected in the recent price trend in orange juice futures. The prices for January 2009 delivery have fallen 39% since July.

ICE/NYBOT Orange Juice (January 2009)

Fall's choppy downtrend has now given way to an equilibrium market in which commercial interests - the so-called "smart money" - have lightened their net short positions considerably, indicating diminished fears of lower prices. To boot, small speculators - the contrarian trader's bellwether of wrong-headed sentiment - have become less bullish. Part of this is certainly related to the general liquidation seen in the commodity complex, though the reduction in orange juice open interest since the July peak - at 18% - was lighter than that seen in many other commodities.

Orange Juice Futures Interests

Florida will likely have another good orange harvest, according to the U.S. Department of Agriculture. Government estimates for the 2008-2009 crop are down from the previous year's production, but greater than analysts' previous forecasts.

Keep in mind, though, that the orange juice market is more weather-sensitive than most other commodities. Its geographic concentration in an area susceptible to freezes and tropical storms can easily shock the market, especially when it's in equilibrium.

Domestic production falls short of meeting local demand for orange juice, so the U.S. is importing at near-record levels from Brazil. Brazilian supplies, however, could be compromised.

Brazil has been losing millions of orange trees to disease, and looks to lose even more as a new outbreak spreads through the country. In the first half of 2008, Brazil's exports were down 16% from year-ago levels.

How's that for a little sunshine?