(Bloomberg) -- As anyone who's seen the 1983 movie "Trading Places" will recall, the film's climax takes place in the frenzied commodities trading pit in New York as the villainous Duke brothers attempt (and fail spectacularly) to corner the market in frozen concentrated orange juice. The film's characters are trading on how the weather has affected the U.S. orange harvest. Three decades later, the NYMEX pit is long gone, but weather still dictates the orange juice market. That was clearly on display Tuesday when prices jumped as Hurricane Irma intensified to become a Category 5 storm, threatening crops in Florida.
MARKET IMPACT
Orange juice futures for November delivery rose 6.2 percent on Tuesday to their highest closing price since May, after Irma received the highest storm classification. They rose again Wednesday, climbing as much as 3.4 percent to $1.499 a pound. Florida orange trees currently have golf-ball-sized fruit hanging from their branches (not to mention the softball-sized fruit on grapefruit trees), which could be easily knocked to the ground in a violent storm, said Joel Widenor, co-founder of Commodity Weather Group LLC in Bethesda, Maryland. The last time major hurricanes hit the state's groves was in 2004 and 2005, and output was curbed in subsequent seasons, said Thomas Spreen, who works as consultant for the Florida Department of Citrus.
LARGEST PRODUCER
Florida's orange crop was 68.7 million boxes in the most recent season, which ended this month, accounting for 58 percent of domestic output, according to the Florida Department of Citrus (a box of oranges weighs 90 pounds, or 41 kilos). The industry generated close to $1.2 billion in cash receipts. The Sunshine State also produces about half of the U.S. grapefruit harvest, with the bulk grown along its eastern coast. In all, citrus contributes $8.6 billion to Florida's economy and supports 45,000 jobs, the agency said in an email. The state is the largest grower of cane sugar, which generated about $561 million of revenue in 2015. It's also a key supplier of tomatoes and strawberries.
GEOGRAPHY MATTERS
If Irma does make landfall along Florida's coast, exactly where that occurs will determine its impact on the citrus industry. If it enters from the southern tip of the peninsula near Miami, the hurricane may not cause much damage to crops, Spreen said in an interview. But if it enters through the middle of the state, then it could have the biggest impact on so-called early crops, including Hamlin oranges, which are harvested from October to December, he said. About two-thirds of Florida's citrus crop is located in the lower two-thirds of the peninsula. The hurricane's current track indicates it could pass directly over major orange groves in the state, according to Speedwell Weather in Charleston, South Carolina.
DISEASE IMPACT
Florida's orange production is already at its lowest since 1964, due largely to citrus greening disease. The scourge, transmitted by a tiny winged bug called the Asian citrus psyllid, has spread over the past decade, helped sometimes by strong winds from hurricanes. The state's plantings have shrunk to the smallest in 50 years, government figures show. However, Spreen says that, prior to Irma, the crop was expected to rebound, in part because of the receding impact of greening.
To contact the reporters on this story: Marvin G. Perez in New York at mperez71@bloomberg.net, Brian K. Sullivan in Boston at bsullivan10@bloomberg.net.
To contact the editors responsible for this story: Millie Munshi at mmunshi@bloomberg.net, Simon Casey, Steve Stroth
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