OJ ends at record peak on Brazil import ban talk

(Reuters) - Orange juice futures barreled to a record high close on Monday due to speculation the United States might ban Brazilian juice imports for using a fungicide that U.S. regulations prohibit.

The benchmark March FCOJ futures contract climbed 9.30 cents or by 4.4 percent to finish at $2.1995 per lb, a new record settlement close according to Thomson Reuters data.

The contract jumped nearly 8 percent to scale a record intrasession peak at $2.2695 before profit-taking sharply pruned the rally. Volume was light though orange juice surged almost 27.5 percent in 10 days to its session top of $2.2695 on Monday. Speculation about a ban on Brazil juice imports fueled the rise.

"The effect of an import ban has immediate implications," said Country Hedging Inc senior analyst Sterling Smith.

"We have the potential to take this market to $2.45 to $2.60 without too much difficulty," Smith added.

Technically, the market may be bound for record levels if volatile momentum keeps up. Or the market could sink with the same sudden velocity in a tumultuous crash.

"It appears that a few folks decided to get on the long side of it and away it went," added Bill Raffety, an analyst for commodities brokerage Penson Futures in New York.

The ICE Futures U.S. exchange said on Friday the daily trading limit in the juice market has been expanded to 20 cents after the front month ended on Friday up the 10-cent daily limit.

The exchange has not made any move on FCOJ margins, as traders speculated that some market players may have to come up with millions of dollars to maintain their positions in the tiny market.

"We know somebody got hit on the margin calls," one dealer said, estimating that a large chunk of the juice market's open interest of 26,402 lots as of January 20 was in short positions that had to be covered and margin fees paid up.

The juice market is relatively small, the level of investor exposure dwarfed, for example, by the over 620,000 lots in the raw sugar market.

The citrus market has been rallying on worries that the U.S. Food and Drug Administration (FDA) would order a ban of Brazilian juice products, which would take a big bite out of U.S. supplies. FCOJ futures rose by their limit on Friday for the second time in as many weeks.

The FDA has been testing juice imports for the fungicide carbendazim, but the agency made no mention of imports last Friday on juice from Brazil, which accounts for 10 percent of all U.S. juice supplies.

On Friday, the U.S. regulator said that 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 price premium built into the market could evaporate should the FDA declare the Brazilian juice safe and allow its import, traders said.

Any disruption of juice imports from Brazil would affect brands such as Pepsico's (PEP.N) Tropicana, and Coca Cola's (KO.N) Minute Maid, which normally are made using a blend of juice products from both the United States and Brazil.

Tropicana says the company decided some months ago to use exclusively Florida juice in its Pure Premium brand.

In a separate development, Texas agriculture inspectors have detected citrus greening disease in an orange tree. Texas is the No. 3 U.S. state in terms of orange production but still lags far behind Florida and California in citrus output.

Judy Ganes of commodity J. Ganes Consulting said the share of Texas in U.S. supplies will not be enough for the market to be affected by the news.

(Additional reporting by Josephine Mason and Carole Vaporean; Editing by John Picinich, Lisa Shumaker and David Gregorio)