- [Narrator] Orange juice made from Florida oranges
might be disappearing from store shelves.
This has sent frozen concentrate orange juice futures
to record highs and led to thousands of job cuts,
billions of dollars lost for the state,
and bigger risks that have scared away some futures traders.
(crowd shouting)
The impact is so far reaching
because orange juice isn't just a breakfast drink,
it relies on a real world commodity
that has propped up an entire industry for decades.
Here's what Florida's dying oranges can tell us
about how the commodity market works
and how it impacts the price you pay for orange juice.
A commodity is a basic good used in commerce
that usually refers to a raw material used
to manufacture finished goods.
So think lumber, gold, oil,
and frozen concentrate orange juice,
which became a commodity following World War II.
- Researchers were trying to find ways
to give soldiers in the United States military ways
to drink tasty juice that also had the added benefit
of giving them vitamins.
- [Narrator] By evaporating some of the water
from orange juice then freezing and packaging that,
frozen concentrate orange juice, the commodity,
was invented.
- [Announcer] Shipment is in refrigerated trucks
and trains only to keep the product frozen
until the can is opened in the kitchen
and the water is put back in.
- Because it's something that is widely processed,
widely available, and is generally of equal value
or quality depending on where you are,
that's something that could be traded.
- [Narrator] Following this invention,
Florida's orange industry really boomed.
Throughout the late 1990s,
dozens of orange juice processing plants were built
across the state.
Depending on the season,
more than 90% of the country's orange juice was made
from Florida-grown oranges.
- [David] You had Florida oranges
on the state's license plates.
You have the Florida Orange Bowl,
which is the one of the most famous college football games
played outside of Miami each year.
- [TV Announcer] Miami Florida plays host
to a half million spectators
on the eve of the Orange Bowl game.
- In addition, to this actual hard commodity
that we have oranges at the end of the day,
you really see, in the case of Florida,
them growing into this large cultural phenomenon.
- [Narrator] Commodity trading often revolves
around futures contracts,
an agreement between two parties
for a delivery of a commodity at a future date.
These tend to run on a monthly basis.
- [David] When prices go up,
that tends to mean either there's a huge shocked supply
or it means there's surging demand.
- [Narrator] In Florida's case,
a bacterial disease called citrus greening
has been killing orange trees since the early 2000s.
That, plus a freeze and two hurricanes last year,
had led to the state's worst harvest in nearly 90 years.
Demand for orange juice has actually gone down
over the years,
but because Florida's orange production
has plummeted so much,
prices have actually gone up.
Orange juice manufacturers
are also increasingly using oranges from Mexico and Brazil
because Florida's supply has gotten so low.
- Over the last couple of years,
the U.S. dollar has been particularly strong,
which basically means
that we can have our dollars go further abroad.
So imports from places like Brazil and Mexico
have become effectively cheaper,
which adds more pressure on Florida oranges.
- [Narrator] So why trade a commodity
like frozen concentrate orange juice?
Well, for the farmer and the manufacturer,
buying futures contracts protects them
from price fluctuations in the market.
- So if the price does in fact fall,
you've locked in some of your output at a certain level
so you're not going to bear the full brunt of those losses.
Commodity markets are dependent
on a lot of natural factors that are unforeseen
and out of people's control.
And one of the ways that traders try
to limit some of the volatility that comes with that,
is by exchanging futures contracts.
- [Narrator] Financial traders aim
to profit off that volatility by placing bets
on which way they think the market will swing.
That was the premise of the 1983 movie trading places
where the main characters made a fortune betting
on the frozen concentrate orange juice market.
- The cold winter has apparently
not affected the orange harvest.
(crowd shouting)
- [Narrator] But what happens in commodity markets
doesn't just affect these three groups.
When futures prices are high,
manufacturers pay more for contracts,
which means they charge retailers more
who then charge consumers more.
- Given the trends that we're seeing from Florida,
it seems that the prices will only continue to go upward.