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SCOTT JAGOW: Orange juice is a commodity just like sugar or coffee. It’s traded on a futures exchange. Yesterday orange juice futures closed at their highest level in 15 years. Ashley Milne-Tyte explains why.
ASHLEY MILNE-TYTE: An orange juice futures contract is an agreement to buy or sell frozen OJ at a predetermined price in the future.
The idea is to minimize risk that comes with a volatile natural product.
Janette Young works on the floor at the New York Board of Trade.
She says supply is already tight due to the damage caused by last year’s hurricanes. So news of a tropical storm brewing in the Caribbean has spread some panic.
JANETTE YOUNG:“People are really afraid of what could happen because they were burned last year. They’re very cautious. The appearance of a storm just sends fear down a trader’s back.”
Also contributing to the price spike? Worries of a possible drought in Brazil, the world’s biggest producer of frozen orange juice.
I’m Ashley Milne-Tyte for Marketplace.
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