The hunt for Vitamin C amid the coronavirus pandemic has sent this unexpected commodity rising higher.
Consumers’ rush to stockpile groceries amid the coronavirus crisis has fueled a rally in a rather unexpected commodity: orange juice.
As consumers have sought vitamin C to boost their immune systems, orange juice has become as hot a commodity in grocery stores as eggs, toilet paper, and Lysol spray.
“There is plenty of orange juice around, but it’s a bit like toilet paper – there’s no shortage, but people have been rushing to buy it,” said Neil Murray at IHS Markit’s Agribusiness Intelligence unit. “People are buying it as prophylactic against COVID-19.”
Since March 19, the price of frozen orange juice concentrate futures for May delivery trading on the Intercontinental Exchange has surged 24% to more than $1.20 per pound.
This spike in prices has come even as global stock markets and other assets tumbled as concern grew about the pandemic, with the S&P 500 dropping -25% in the same timeframe.
“When people get the flu, they drink more orange juice because of the vitamin C, and although it’s not confirmed that this will really help against the coronavirus, it does boost your immune system. So demand has been relatively strong,” said RaboBank senior analyst for beverages Francois Sonneville.
Sonneville added that consumers are less likely to skip breakfast as they’re hunkered down at home amid the crisis, with orange juice found on most breakfast tables, thus demand should remain strong as people are ordered to stay home.
Murray added that the rising orange juice prices are producing a “bubble.” “This is speculators piling in,” Murray said, “and they do that with orange juice at the first sniff of something happening because the orange juice futures market can be very, very volatile.”
Sonneville also noted that prices are being driven up by supply issues.
Brazil is the world’s biggest orange juice exporter, and bad weather has meant that farmers are already expecting a poor harvest for 2020 and 2021.
“In this unprecedented time, we also see bigger risk of supply chain disruptions, and that means people start to think this orange juice might not come from Brazil to other places in the world,” Sonneville said. “That’s another risk factor and therefore the price should be rising.”
Price Futures Group’s Jack Scoville also acknowledged that prices have been supported by worries about weak spots in the supply chain.
“Traders are wondering if workers are around to man the plants in Florida and in Brazil,” Scoville said. “In addition, there are not enough tankers or containers around for shipping the product to buyers.”
However, there are signs that the OJ high won’t last, with Murray noting that “demand is in long-term decline.”
Prior to the coronavirus pandemic, orange juice futures had fallen to “really low levels” as demand waned for the past few years as shoppers switched to drinks with lower sugar content, and Rabobank had expected that demand would continue to decline into 2021.
“Whether we would fall back very quickly to below a dollar after the crisis, I don’t think so, given the problems there are with the 2020/2021 harvest,” Sonneville said. “But whether we would go up to $1.50, I wouldn’t dare say.”