Orange juice futures jump 3.6% to US$1.846/lb. in trading Jan. 13 on expectations Mexico's crop may have been hurt by drought

NEW YORK , January 13, 2012 () – It's been a bungee-jumping kind of week for orange juice futures.

Orange juice for March delivery rose 3.6 percent Friday to close at $1.846 per pound on expectations that Mexico's orange crop may have been damaged by drought. During the wild week, the price jumped to the highest level in nearly five years Tuesday, then fell 11 percent over Wednesday and Thursday.

Concerns about Mexico's crop were the latest in a series of events that have raised questions this month about the global orange crop. First, a cold snap threatened Florida's crop. Then, the Food and Drug Administration this week began testing for a fungicide that was found in low, but still safe levels in orange juice on retail shelves.

The FDA is examining shipments of orange juice at the border and retail products but has said it won't remove juice from stores because it doesn't believe the levels that have been found are harmful.

The fungicide, carbendazim, isn't approved for use on U.S. citrus, but is used to combat mold on orange trees in Brazil, which exports orange juice to the United States. Brazil is the world's largest orange producer and supplies about 25 percent of the U.S. market. The rest comes primarily from Florida.

The developments have occurred during a period of stronger demand as people reach for orange juice as a defense against colds and the flu, said Michael Smith, president T&K Futures and Options Inc. At the same time, Florida growers still are rebuilding from damage caused by weather and disease in previous years.

"We're going to see a lot higher prices for orange juice unless we start to really get some extra production out of Florida, but all these bad things keep happening," Smith said.

Orange juice futures are one of the smallest futures markets, so price swings can be exaggerated. Smith expects that volatility to continue until there is a clearer picture of global supplies.

In other trading, commodity prices were mostly lower on word that Standard & Poor's may follow through on warnings to cut its credit ratings for European governments. A downgrade of triple A nations, such as France, could affect the ability of Europe's bailout fund to support struggling countries.

Standard & Poor's warned last month that 15 countries that use the euro were at risk of getting downgraded, citing higher borrowing costs for top-rated governments and disagreements among European leaders.

Gold for February delivery fell $16.90 to end at $1,630.80 an ounce. In March contracts, silver declined 60.2 cents to $29.522 an ounce, copper fell 1.2 cents to $3.637 per pound and palladium declined $6.20 to $635.05 per ounce. April platinum settled down $11.30 at $1,488.80 an ounce.

Benchmark oil fell 40 cents to $98.70 per barrel on the New York Mercantile Exchange. Heating oil decreased 2.69 cents to $3.0272 per gallon, gasoline futures rose 0.29 cent to $2.7342 per gallon and natural gas fell 2.4 cents to $2.713 per 1,000 cubic feet.

In March agriculture contracts, wheat fell 2.75 cents to end at $6.0225 per bushel, corn fell 12 cents to $5.995 per bushel and soybeans settled down 24.25 cents to $11.5825 per bushel.

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