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The U.S. government could ban Brazilian oranges after low levels of fungicide carbendazim detected

WPTV – January 10, 2012

NEW YORK (CNNMoney) — Orange juice futures surged Tuesday amid fears the U.S. government could ban Brazilian oranges after low levels of fungicide were detected by a juice company.

March orange juice futures jumped 9.6%, or 20 cents, to $2.0775 a pound on the ICE Futures Exchange, which traders said was the highest level since 1977.

“My guess is that they will ban Brazilian oranges,” said Tod McElhaney, president of LaSalle Futures Group. “If that happens, you would certainly see a lessening of supplies that could push prices higher.”

The FDA said it learned late last month that an unspecified juice company had found low levels of fungicide in its own products, as well as orange juice and concentrate made by competitors, according to a letter dated Jan. 9.

The letter said “industry reports” suggested that the fungicide was present in orange juice made from the 2011 crop from Brazil, the world’s largest orange producer.

The United States imports about 25% of oranges used in U.S. orange juice, with the majority coming from Brazil, said McElhaney.

The FDA said juice producers reported levels of fungicide in the “low parts per billion range.” At that level, the fungicide does not raise safety concerns, according to a preliminary risk assessment from the Environmental Protection Agency.

The fungicide, called carbendazim, is legal in Brazil and other parts of the world. But it is not approved by the EPA and is considered an “unlawful pesticide chemical residue” in orange juice under U.S. law, the FDA said.

The FDA does not currently intend to remove orange juice containing the fungicide from the domestic market. But the agency is conducting its own testing and will “take the necessary action to ensure that the product is removed from the market” if a public health risk is found.

The agency is also sampling all imports of orange juice “and will deny entry to shipments that test positive for carbendazim.”

Traders said orange juice futures could go even higher if the government moves to block imports from Brazil. But futures could also fall sharply if a Brazilian orange embargo does not materialize.

James Cordier, president of Florida-based Liberty Trading Group, said consumers could see “a little bump” in retail orange juice prices as a result of Tuesday’s surge. But he said the FDA will need at least a few days to determine how widespread the problem is.

“We’ll know in the next 42 to 78 hours whether this is an isolated incident,” said Cordier. “We certainly can’t do without Brazilian juice.”

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