Orange juice ends near record on Brazil import ban speculation

NEW YORK (Reuters) - Orange juice prices ended limit-up and near a record high Friday, boosted by speculation that the United States may ban imports of Brazilian juice which had used an illegal fungicide.

Juice subsequently gained a further 7 percent in the options market, which traders said indicated another rise at Monday's opening.

Options pointed to a price of nearly $2.14 per lb, which would be a record high, they said.

The U.S. Food and Drug Administration cleared more orange juice imports after testing for the fungicide carbendazim, but it made no mention of top grower Brazil, which accounts for about half of all U.S. imports.

The citrus market rallied on the possibility that the FDA would order a ban of Brazilian juice products.

Speculation of a resulting shortage sent frozen concentrated orange juice futures on ICE Futures U.S. shooting up their daily limit Friday for the second time in two weeks.

The FDA said Friday that samples of imported juice from five countries were deemed safe. However, the U.S. regulator said 26 of the 45 samples of juice, juice concentrate and juice powder it had taken since testing began on January 4 were "awaiting analysis or under compliance review."

The amount of carbendazim that was discovered in 19 samples from Canada, Mexico, Honduras, Costa Rica and Belize was at acceptable levels, the FDA said. It said 12 of these have already been released for import.

"It's quite possible that they are from Brazil, and investors are concerned about the idea that the samples will continued to be looked at and not released," said Sterling Smith, senior market analyst at Country Hedging Inc in St. Paul, Minnesota.

Smith said that citrus greening, a crop-destroying disease, and colder weather in California also fueled supply worries.

Benchmark March FCOJ rose for the fifth straight session, climbing its 10-cent daily limit to $2.1065 a lb.

Smith said the citrus options market was indicating the contract should trade between $2.135 and $2.14 come Monday, which would be a record high.

He added that the electronic trade book was showing bids, to buy, outnumbered asks, to sell, by a huge margin.

The front-month continuous FCOJ contract hit a record $2.1275 on January 10 when the fungicide news first broke in the market, but subsequently sold off on speculation the FDA would not ban Brazilian imports.

After a last week's rollercoaster ride, OJ rose 14 percent this week for its biggest gain in two years.

Volume traded Friday in the tiny market was in line with its 30-day norm, preliminary Reuters data showed.

EASY COME, EASY GO?

The price premium built into the market could collapse just as quickly as it increased should the FDA declare the Brazilian juice safe and allow its import, traders said.

"We're in uncharted waters with what the FDA is going to do," said James Cordier, a senior analyst with brokerage Optionsellers.com in Florida.

Still, Cordier said prices could stay high while the FDA runs its tests. "You're not going to get the all-clear for months. That's why we have such a nervous market," he said.

The fungicide scare flared last week after the FDA announced that a company -- later identified as Coca-Cola Co (KO.N) -- had reported finding carbendazim in juice samples from the South American country.

Any disruption of imports from Brazil would affect brands such as Tropicana, from PepsiCo Inc (PEP.N), and Coke's Minute Maid may contain a mix of juices sourced from Brazil and the United States. Tropicana says the company decided some months ago to use exclusively Florida juice in its Pure Premium brand.

So far, big juice companies as well as smaller brands promoting that their juice is made exclusively from Florida oranges have reported few signs of consumer concerns about the fungicide.

Growers in Brazil say their juice, which accounts for more than a 10th of total U.S. consumption, is almost certain to test positive since carbendazim is widely used to combat blossom blight and black spot, a mold that grows on orange trees.

The threat of a total halt in Brazilian juice imports fuelled a frenzy of buying in the tiny frozen concentrated orange juice futures last week, with traders saying companies will be hard-pressed to quickly find alternate supplies since Brazil accounts for about two-thirds of the world's output.

(Additional reporting by David Morgan in Washington, Lisa Baertlein in Los Angeles; Editing by Bob Burgdorfer)