Pssst! Orange juice hasn't been this cheap since 1977

The market made famous by 'Trading Places' is at a 27 year low, but don't tell the shoppers. Tim Webb reports
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The Independent Online

The little-known activity of buying and selling frozen orange juice futures had its moment of fame in the 1983 film Trading Places, starring Eddie Murphy and Dan Aykroyd. But the prices they paid, even as the duo manipulated the market, are higher than today. The cost of frozen orange juice has just hit a 27-year low. But consumers are unlikely to see a fall in the price they pay at the shops for a carton of the stuff.

The little-known activity of buying and selling frozen orange juice futures had its moment of fame in the 1983 film Trading Places, starring Eddie Murphy and Dan Aykroyd. But the prices they paid, even as the duo manipulated the market, are higher than today. The cost of frozen orange juice has just hit a 27-year low. But consumers are unlikely to see a fall in the price they pay at the shops for a carton of the stuff.

The futures, which are a contract to deliver the frozen juice at a fixed point in the future, are traded on the New York Cotton Exchange, along with other agricultural and food commodities such as sugar and cocoa.

Over the past year, the price for a pound of frozen orange juice has dropped by almost a third to the lowest level since January 1977, when Jim Callaghan was Prime Minister and a pint of beer cost 50p, because of bumper crops and falling consumer demand.

Last week, the US Department of Agriculture forecast a record harvest in Florida, the second- biggest orange-producing region after Brazil. It forecast a record 246 million boxes of oranges, or more than 22 billion pounds in weight - 21 per cent higher than last year's crop, because of good weather conditions.

The Florida crop is harvested between October and June. Almost all of the state's crop is turned into orange juice. Expectations for the orange harvest in Brazil, which takes place between June and July, are also good.

On Friday, a pound of frozen orange juice to be delivered in May was trading at 62.2 cents, but volatile trading has seen prices dip below 60 cents. While some of the traders are speculators, most of the activity is carried out by the orange producers themselves in order to hedge against - or reduce their exposure to - high prices.

Also, demand for frozen orange juice has been falling as take-up of the low-carbohydrate Atkins diet rises. It is estimated that, in the US, as many as 24 million people - or 11 per cent of adults - could now be followers of Atkins.

The British Soft Drinks Association said that annual consumption of frozen orange juice in the UK fell for the first time in over five years in 2002, the latest year for which it has records. This still works out at 752 million litres, or 12.5 litres per person. Figures for consumption in 2003 are expected to show an even larger decrease.

Judy Ganes, president of J Ganes Consulting in New York, a food and agricultural commodities research company, said: "You have a record crop this season in the US, and expectations for similar success in Brazil. Coupled with falling demand as more people switch to low fruit and vegetable diets such as Atkins, it all adds up to a rock-bottom price." She added that the proliferation of other soft drinks on the market had also hit sales.

However, things might be looking up as the new US eating fad - Superfoods - recommends that people eat oranges at least four times a week. Orange juice is seen as a good substitute. But industry experts said it was still unlikely that retailers would drop orange juice prices, despite prices for frozen orange juice being almost half those of two years ago.

Sainsbury's sells one litre of orange juice for 33p, but a litre of Tropicana, made by Pepisco, can cost more than £2.50. A spokesman for Pepisco declined to comment on whether it would cut prices of Tropicana.

Philip Ashurst, from the British Fruit Juice Association, explained that low prices on the spot market did not necessarily mean that retailers' costs were lower. "Most companies buy frozen concentrated orange juice through fixed contracts in advance." Defending the prices he added: "The price of the orange juice itself is a small component of the overall price, which includes VAT, retailers' overheads and packaging."

The Consumers' Association said the 15 per cent import tariffs that the European Union has imposed on orange imports also contributed to high prices. A spokesman said: "The EU should just get rid of them."

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