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Tropicana Raising OJ Prices (PEP)

orangejuice
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The NYT’s reported that PepsiCo’s “Tropicana announced they were effectively raising orange juice prices due to some freezing weather in January. This year’s orange crop is expected to be 19 percent smaller than last year’s, according to a report from the Agriculture Department on Wednesday,” that was quoted in the NYT article.

A Tropicana spokeswoman, Jamie Stein, said the company spent a while examining the impact of the freeze and wanted to make changes without affecting people’s grocery bills too much.

Brilliant, less goods (and service) for the same price. Sounds like a banking operation. Of course, OJ consumers can balk at any price hikes.

You can see a lot of volatility in the red circle in the May ICE OJ futures contract chart above. The big bar down was 12/31/09 and the large one up was on January 8 and those prices set the range for the rest of the season. The very next trading session after the spike on January 8, was a 18.95 point drop in the May contract which closed only 5 ticks off the low for that day, at 13545. Coincidentally, the breakout price back on 12/14/09 was 13500 – ish.

Tropicana would be a buyer/hedge of OJ since they need the physical. If they didn’t have a hedge on before the price collapsed, do you think they took advantage of the 18.95 price sale and offset some of their exposure since the damage to the crop was unknown?

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