Back to the Futures: Orange juice, oats sharply higher and natural gas collapse

Published: January 10 2014 | 1:00 pm - Updated: 29 March 2014 | 1:55 am in

[Editor's note: Every Friday visit the Business 380 for "Back to the Futures," a quick discussion of the week's grain, livestock, gasoline prices and other topics.]

Orange juice wakes up

Orange juice futures shot sharply higher this week on fears that the nationwide cold snap could damage Florida’s sensitive orange groves. Although the Sunshine State was spared from the blisteringly cold temperatures that spread across northern states, temperatures did plunge into the 30s, which can put orange groves at risk.

By the end of the week, it appeared that most Florida groves escaped freezing temperatures, and the market’s focus shifted to a USDA report that was going to update traders on the state of the US orange crop. Leading into the report on Friday morning, there was a sudden ten-cent move that some traders described as being reminiscent of the Duke Brothers in the 1983 film Trading Places. The market held onto half of the rally after a USDA report showed that this year’s OJ crop would be smaller than previously expected, trading Friday near $1.47 per pound.

Oats hop higher

During the week, oats futures gained over fifty cents per bushel (+15%), topping out over $3.95. Amazingly, oats prices neared that of corn, which is usually a much more valuable commodity. Just last year, corn was worth more than twice as much as oats.

The rally in oats came in spite of a large oat crop last year in the US and Canada. Prices are rising primarily due to logistical issues; farmers can’t get their oats quickly enough to end users like food companies or livestock feeders, which is creating a short-term shortage and helping prices surge.

Midday Friday, the USDA released a slew of reports about the grain markets, which initially caused a rally in the corn and soybean markets, seemingly confirming an old adage “oats knows” as the oats markets began rallying well before the rest of the grain complex.

Natural gas melts lower

Despite record-breaking cold temperatures this week, natural gas prices collapsed, a sign that too many investors had bought into the market before the cold hit. When demand fell short of expectations, traders liquidated, driving prices down to a one-month low on Friday.

Trading near $4.00 per million British thermal units, natural gas prices are still relatively high, and weather in the coming weeks could affect prices significantly.

Opinions are solely the writer's. Walt Breitinger is a commodity futures broker with Paragon Investments in Silver Lake, KS. He can be reached at (800) 411-3888 or www.indianafutures.com. This is not a solicitation of any order to buy or sell any market.

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