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What Are Frozen Concentrated Orange Juice Futures?

Frozen Concentrated Orange Juice (FCOJ) futures – like futures for other commodities – are agreements, or contracts, to either sell and deliver or buy and receive FCOJ at a future date for an agreed price. The FCOJ futures market gives the FCOJ industry a way to manage the risks associated with fluctuating price movements.

The FCOJ futures market is a contract market regulated by the Commodity Futures Trading Commission, an agency of the federal government. FCOJ futures contracts, as well as options on FCOJ futures, are traded under the auspices of the Citrus Associates of the New York Board of Trades.

Like other exchanges, the Citrus Associates is a not-for-profit organization and does not itself trade FCOJ futures. The Exchange’s primary purpose is to provide the facilities for trading, to regulate trading and to publish the prices at which futures contracts are traded.

The Exchange also serves as a self-regulatory body to assure that members’ trading activities are performed in accordance with the Exchange’s rules. It also sets standards for the terms of the FCOJ contract.

Click Here for Current OJ Futures Prices from Barchart.com

How Does the Futures Market Work?

There are two categories of traders active in the FCOJ futures market:

Hedgers

These traders have direct FCOJ commercial interests. Hedgers include growers, FCOJ processors, retailers, wholesalers and foreign processors who export FCOJ into the United States. They use the futures market as a way to offset and manage the risks of unpredictable price changes.

Speculators

This group of traders has no commercial interest in FCOJ – they do not generally make or take delivery of FCOJ. Speculators assume the price risks against which hedgers seek protection, in the expectation of making a profit.

The buying and selling of FCOJ futures contracts among hedgers and speculators is conducted on the floor of the Exchange by brokers who are members of the Exchange. All bids and offers for futures contracts are made by open outcry in the style of an auction. As soon as a trade is made, the price is recorded and entered into the Exchange’s price reporting system for retrieval by all interested parties. By giving all brokers on the Exchange floor the opportunity to participate in each trade, the open outcry system ensures that the contract price agreed to for each transaction represents as fair a market price as possible at that moment.

Trading of FCOJ futures contracts is governed by the by-laws and rules of the Citrus Associates. The Exchange publishes the trading hours, trading months, daily limits on price movement, price fluctuations and mechanisms for delivery.

Every FCOJ futures contract is cleared through the Commodity Clearing Corporation, which ensures the smooth flow and transfer of funds from buyers and sellers of futures. It is the Commodity Clearing Corporation which stands behind the buyer’s obligation to the seller and the seller’s obligation to the buyer under the terms of the contract.

The FCOJ futures contract calls for delivery of Grade-A FCOJ that meets a minimum score of 94 under official U.S. standards.

Delivery of an FCOJ futures contract may be made at Exchange-licensed warehouses located in:
- sixteen counties in Florida.
- Wilmington, DE, Port Elizabeth, NJ and Newark, NJ including all areas within a 15 mile radius from their respective city limits.
- eleven counties in California.

Other primary markets may become additional delivery points upon approval by the Citrus Associates Board and the CFTC. Locational differences are in effect and are subject to change.

Few contracts result in physical delivery of FCOJ. Nearly all the futures positions are liquidated with opposite and offsetting trades before delivery of the FCOJ is required. However, if appropriate, please check with the CANYCE for detailed information regarding making and taking delivery on the FCOJ futures contract.

Should a trader find it advantageous to make or take delivery on terms different from the Exchange’s, he might be able to arrange an Exchange for Physicals (EFP or ex-pit). This is an agreement reached between a buyer and a seller whereby they settle their futures contract obligations with each other and close out their positions without a trade occurring on the floor of the Exchange.

What Affects FCOJ Futures Prices?

The prices of FCOJ futures fluctuate as buying and sellers react to the forces of supply and demand.

For example, should traders perceive that the current or projected supply of FCOJ may be insufficient to meet demand, they may buy FCOJ futures contracts, thereby driving the contract price up. On the other hand, should they perceive that there is a supply surplus, they may sell FCOJ futures and thereby force contract prices down. In this way, perceptions of any imbalance between supply and demand in the cash (current) market can directly affect or “echo in”, the futures market.

The FCOJ futures market does not dictate FCOJ cash market prices. The futures market reflects the cash market. The difference between futures prices and cash prices at any moment is called the basis.

Participants in the FCOJ futures market can obtain information about supply and demand factors from news stories about orange-growing areas and from government reports about production levels, consumption demand and FCOJ inventories.

Weather conditions – particularly freezes or freeze scares – have an important impact on the futures market. When a freeze threatens the orange growing areas of Florida, FCOJ traders will keep close tabs on the weather forecasts.

Other factors which can influence FCOJ futures prices are reports of potential disease damage to trees and fruit and the level of production of foreign FCOJ and its import costs. In years when there is not enough U.S. production to supply domestic demand, the price of imports – primarily from Brazil – can have a strong influence on the price of FCOJ futures.

General FCOJ Futures Information

Futures contract equivalents

NYBOT FCOJ futures contract trades in pounds of solids. One contract is equal to 15,000 pounds of solids.

Boxes of oranges

Approximately 6 to 6.5 pounds of solids per 90 pound box of oranges. One contract is approximately equal 2,300 to 2,500 boxes.

42 degree brix concentrate

4.156 pounds of solids per 42 degree brix gallon. One contract is approximately equal to 3,600 gallons 42 degree brix.

Brazilian bulk

7.135 pounds of solids per 65 degree brix gallon. One contract is approximately equal to 2,100 gallons 65 degree brix.