Fundamental Analysis
With hurricane season in full bloom and a few storms brewing in the past week the bulls are coming out of the wood works. Tropical storm Fay sure put the groves underwater this past week, with 30 inches of rain in certain spots and the Indian River area getting drenched also. The total damage from the excess water will probably take weeks to examine. Not only the rain but the wind-blown canker is another issue the farmers are dealing with.
Citrus greening, also called huanglongbing or yellow dragon disease sure has an impact on the citrus market.Citrus greening carried by the Asian Citrus Psyllid scared the citrus farmers in California in July. They found the Asian citrus psyllid in and around the San Diego area. The reports also state the little pests that were caught did not show them carrying the disease. So far so good for the California growers.
Farmers are stating that the Asian Citrus Psyllid has hurt China, Brazil, and Florida. They also report that the little bug may do more damage than the Mediterranean Fruit Fly due to the fact that it hurts the whole grove and not just the fruits.
The increase in operating costs are affecting the farmers just as well as the over supply. The increase in fuel, fertilizer, pesticide and the weaker US dollar are all factors in whether the groves are going to be profitable or not. Immigration issue is another factor especially with only a few handfuls of farms use mechanical ways of harvesting the fruit.
The 2007 - 2008 season saw a 32% increase in production form the 2006- 2007 season. Dreyfus estimates a 8% drop in production this year to 156 million compared to the 169.7 million for 2007 -2008 season. An independent analyst expects a 12% fall to 150 million boxes for the harvest that starts in October. October is also the month of the next major Orange juice report.
Technical Analysis
The monthly has tested the breakout from October of 2005 at 1.00, should see a bounce back to the 50% retracement which would put OJ at 152.00 and also the highs from January 2008. The daily chart is starting to show an uptrend into the 120 - 140.00 level. 120-140.00 level is the range since March. Volume and Open Interests are both on the rise since late July. 10 day RSI is above 50 mark after reaching extreme lows last month.
Trade recommendation for OJ is buying the straight call option on the March 2009 contract. By doing this you not only including the high volatility for hurricane season but also the freeze season for Florida. March 2009 options expire on 02/20/09 and have 177 days left. Buy the March 09 150.00 calls for 6.50 or $975.00. This strategy has unlimited profit potential and a maximum loss of the price paid for the option plus commissions and fees.
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To contact Jimmy Tintle email is jimmy@transworldfutures.com or reach him by phone at 1-877-843-4519. Transworld Futures offers a wide variety of trading tools, webinars, and simulated trading. We also various types of accounts from deep discount online trading to managed futures, and FOREX accounts.
