The Death of Orange Juice? 30 Years after Trading Places…

It seems like just yesterday, Eddie Murphy and Dan Aykroyd were in the old Comex pits making millions off of Frozen Orange Juice Concentrate. As we’ve talked about before in our Top 13 movies of all time,  Trading Places is why 90% of people who hear you work in the futures industry come back at you with ‘Pork Bellies’, ‘Frozen Concentrate Orange Juice’, and ‘It was the Dukes, it was the Dukes.’ If you’re confused why the Dukes went bankrupt and Winthrop and Valentine made off like bandits, Business Insider had a nice explanation a few weeks ago here.

Now 30 years later, the hype surrounding frozen concentrate orange juice is that it’s fastly fading.  In fact, The Wall Street Journal just highlighted said hype with the headline, “OJ Market Shrivels as Demand Sours.”

“In the market for orange-juice futures, traders held just $440.8 million as of Monday {August 5th}, down 60% from $1.1 billion in August 2011. So far this year, average daily trading volume is 2,233 contracts, a 15% decline in the past decade.”

The reasoning, according to the Wall Street Journal, anything you can think of… Hurricanes, research from Nielson on pricing, and making trading completely electronic (which afterwards caused annual volume to drop by 23%.) They also say with the growth of beverage choices over the years,  people are drinking something besides orange juice, and that when they are buying OJ, they’re buying non-concentrate juice.

WSJ Chart

Chart Courtesy: WSJ
(Disclaimer: Past Performance is not necessarily indicative to future results.)

Which has an effect on the futures market.

“There were 20,636 outstanding orange-juice futures contracts Monday {August 5th}. During a similar day in 2008, open interest in the orange-juice market was 52% higher at 31,391 contracts. By comparison, open interest for benchmark oil futures on the New York Mercantile Exchange was 1.9 million contracts Monday.”

Just 20,000 contracts outstanding… That’s surely why FCOJ futures are rarely, if ever, seen in a managed futures portfolio. It’s just too il-liquid, too volatile these days.  But back in 1983, maybe John Henry was dabbling in them – sure looked like Winthrop and Valentine sold more than a few thousands contracts in just a few minutes back in 1983:

Trading Places

2 comments

  1. sell Mortimer sell !

  2. […] pointed out in August that the average daily trading volume of 2,233 contracts represented a 15 percent decline in the past decade. Today those numbers continued to […]

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