I must have been in second grade when my parents first showed me “Trading Places.” Some might argue against my parents’ choice to ignore the R-rating, but my dad thought the opportunity to teach us about commodity trading was too valuable to pass up. In retrospect, I know he just couldn’t tolerate kids movies but at least I was able to learn early on about the orange trade. The economic lesson was simply supply and demand - the more oranges the crops produce in any given year, the less they will cost. The bonus lesson from the movie was about the workings of another market - prostitution.
Back to oranges though - this year’s crop trade appears to be a bit more complicated. In fact, it seems less logical than Eddie Murphy dating a Spice Girl. Orange production is up. Consumer demand is down. Yet prices remain up. According to AC Nielsen, “Retail sales of orange juice… fell 12.3% from the comparable year-earlier period, while retail prices were up 13.5% from last year.” So what gives?
The traders sure aren’t giving anything. Citing potential risks to oranges like fatal citrus greening disease (is this just a fancy term for ripening???) and worried that the smaller size of the oranges this season might call for more needed to fill the standard box, producers aren’t lowering the raised prices.
I don’t really understand how the markets work sometimes but I guess that’s where an education on commodities earned through watching “Trading Places” leaves you. All I know is that on entry level salary, I won’t be able to purchase much orange juice this year. On the bright side, Sunny D contains less than 2% concentrate - stock up.
Inspired by “Juice Prices Defy Crop Recovery.” By Tom Sellen.
The Wall Street Journal. Wednesday, January 2, 2008.
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