UPDATE 2-Orange juice sinks 31 pct in 2012;2nd weakest commodity
* OJ drops 31 pct in 2012 in second straight loss
* Front-month sinks to 6-week low on last day of year
* Merchants fret about impact of disease on Florida's crops (Updating to add 2012 performance)
NEW YORK, Dec 31 (Reuters) - New York orange juice futures plunged almost a third in value in 2012 as fears about a shortage that sent prices to record highs in January waned with bumper crops and slackening demand.
Falling 31 percent, the OJ market was the second-weakest performer in 2012 among the 19 commodities tracked by the Thomson Reuters-Jefferies CRB index. Arabica coffee was the worst-performing commodity, sinking more than 36 percent.
The last day of trading of the year was dramatic, with frozen concentrated orange juice prices sinking 7.5 percent to six-week lows as speculative investors liquidated longs ahead of the year-end.
Merchants continued to fret about the potential impact of greening disease on crops in citrus-rich Florida, but without any signs of a squeeze in availability amid plentiful supplies from Brazil, the world's No. 1 grower, specs preferred to take some money off the market ahead of the year-end.
Investors were cautious as U.S. lawmakers launched last-ditch talks on Monday to hammer out an agreement to avert the "fiscal cliff" crisis. While a deal to prevent $600 billion in tax hikes and spending cuts coming into effect was within sight, it was not yet complete, President Barack Obama said on Monday.
The most-active March contract on ICE Futures U.S. settled down 7 percent at $1.1735 per lb, its weakest level since Nov. 19. Volumes were heavy though, with 3,376 lots changing hands on the day, some 40 percent above the 250-day average.
The front month plunged 7.5 percent to settle at $1.1605 per lb, its lowest level in six weeks. Technical selling accelerated after the market breached technical support at $1.2167 per lb, its 100-day moving average.
"The buying was well overdone. That's why there's a sell-off today, it's long liquidation from the rally two weeks ago," said James Cordier, founder and president at Liberty Trading Group in Tampa, Florida.
Following Monday's sell-off, the market has retraced the ground gained after the U.S. government warned on Dec. 11 that greening, a bacterial disease that attacks trees, stunts orange growth and is plaguing the Sunshine State's groves, would hurt output in the current season. Prices shot up to close at eight-month highs above $1.44 per lb on Dec. 19.
In its Dec. 11 crop report, the U.S. Department of Agriculture forecast a larger-than-expected drop in this season's crop due to greening, which has spread across groves in Florida, the country's top growing state, and is expected to hurt output in the 2012/13 marketing season.
Fruit droppage in the 2012/13 season will be its highest since 1969-1970, the USDA predicted.
Cordier said prices could return below $1 early in the new year if supplies from Brazil remain plentiful. That would be the first time the market has sunk below the psychologically key level since October 2009.
Current market conditions are in stark contrast to the first month of this year when prices soared to record highs of $2.20 per lb after U.S. authorities restricted imports of Brazilian juice due to the use of a banned fungicide.
Concerns about a squeeze in supplies have receded quickly amid abundant supplies and weak retail demand. By May, prices had lost more than 50 percent of their value from the all-time highs.
Heading into 2013, the trade will be watching for frost because citrus-damaging freezes hit Florida in early January in both 2010 and 2011, causing sizable damage to fruit production.
2012 was OJ's second straight yearly loss after dropping 2 percent in 2011. (Reporting By Josephine Mason; Editing by John Wallace, Maureen Bavdek and Jim Marshall)
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