Orange Juice Gains on Speculation Storm-Driven Slump Overdone

By Yi Tian

Aug. 20 (Bloomberg) -- Orange juice rose on speculation yesterday's slump went too far, amid predictions of a major crop decline in Florida, the world's largest grower of the citrus fruit after Brazil.

Orange-juice futures fell the most in three weeks yesterday after Tropical Storm Fay failed to reach hurricane strength over Florida's citrus groves. Crop forecaster Elizabeth Steger last week projected a 150 million-box harvest in the new season, a 12 percent drop from the previous year.

``There was so much disappointment yesterday and the market sold off too low,'' said James Cordier, a portfolio manager at OptionSellers.com in Tampa, Florida. Fay weakened as it moved north along Florida's eastern coast today, forecasters said.

Orange-juice futures for November delivery rose 3.1 cents, or 3 percent, to $1.0765 a pound at 10:57 a.m. on ICE Futures U.S., the former New York Board of Trade. Yesterday, most-active futures fell 3.8 percent, the biggest drop since July 24.

``The market was overdone on the downside -- we're recouping some of that today,'' Cordier said. He said prices may stay ``slightly higher'' tomorrow.

Florida's production fell to a 17-year low of 129 million boxes in the marketing year through June 2007 after high winds and heavy rain battered citrus trees and spread diseases in 2004 and 2005, according to the U.S. Department of Agriculture. The orange crop rebounded to almost 170 million boxes this season, the USDA estimates. A box weighs 90 pounds (41 kilograms).

Steger, the founder of Citrus Consulting International Inc. in Kissimmee, Florida, cited a lower tree count and a decrease in yields for her forecast for the season that starts in October. Louis Dreyfus Citrus Inc. of Winter Garden, Florida, said the crop may fall 8.2 percent to 156 million boxes.

``We're going to have a large decrease in production,'' Cordier said, which should support higher futures prices.

To contact the reporter on this story: Yi Tian in New York at ytian8@bloomberg.net.