Investing in Orange Juice through Future Market Contracts - dummies

Investing in Orange Juice through Future Market Contracts

Orange juice is one of the few actively traded contracts in the futures markets that’s based on a tropical fruit. Because oranges are perishable, the futures contract tracks frozen concentrated orange juice (FCOJ). This particular form is suitable for storage and fits one of the criteria for inclusion in the futures arena: that the underlying commodity be deliverable.

The FCOJ contract is available for trade on the New York Board of Trade (NYBOT). The NYBOT includes two versions of the FCOJ contract: one that tracks the Florida/Brazil oranges (FCOJ-A) and another one based on global production (FCOJ-B). Here are the contract specs for both:

FCOJ-A (Florida/Brazil) FCOJ-B (World)
Ticker symbol OJ OB
Contract size 15,000 pounds 15,000 pounds
Underlying commodity FCOJ from Brazil FCOJ from any
and/or Florida only producing country
Price fluctuation $0.0005/pound $0.0005/pound
($7.50 per contract) ($7.50 per contract)
Trading months January, March, May, July, September, November

Oranges are widely grown in the western hemisphere, particularly in Florida and Brazil. Brazil is by far the largest producer of oranges, although the United States — primarily Florida — is also a major player.

Top Orange Producers
Country Production (Tons)
Brazil 17,804,600
United States 8,266,270
Mexico 3,969,810
India 3,100,000
Italy 2,533,535
China 2,412,000

Source: United Nations Statistical Database, 2005 figures

The production of oranges is very sensitive to weather. The hurricane season common in the Florida region, for example, can have a significant impact on the prices of oranges both on the spot market and in the futures market. Make sure to take into consideration weather and seasonality when investing in FCOJ futures.