* Juice notches biggest one-day gain since January
* Two tropical storms developing in Atlantic Ocean
* Prolonged high prices could hurt demand further
NEW YORK, Aug 21 Orange juice futures surged
over 8 percent to one-month highs on Tuesday as tropical storms
develop in the Atlantic Ocean that investors fear could hurt
maturing crops in Florida, the United States' major
Prices notched their biggest one-day gains since January,
when fears about crimped supplies from Brazil sent prices to
While it was still early, investors bet on potential damage
to Florida's fruit if the tropical storms strengthen into
hurricanes and hit the mainland United States.
The U.S. National Hurricane Center said on Tuesday that
Tropical Storm Isaac is expected to strengthen into a hurricane
as it moves westward toward the eastern Caribbean.
The agency was also monitoring another system in the eastern
The benchmark November frozen concentrated orange juice
on ICE Futures U.S. jumped 8.34 percent to $1.202 per lb,
its highest level in four weeks.
Prices garnered strength from technical buying after
piercing a key resistance at the 50-day moving average of $1.13,
although low trading volumes exaggerated the move upward,
Just 1,554 lots changed hands on the day, equating to just
under 10,600 tonnes of juice, a fraction of the 2.2 million
tonne global market.
Some said the buying was overdone given how early the
weather warnings are. The last time the state's citrus farms
were hit was in 2005 when Hurricane Wilma struck southern
Florida in October.
On charts, juice's 14 percent rally over two sessions has
lifted its relative strength index (RSI) to 64, close to 70, an
area that often indicates a market is overbought.
"If orange juice rallies one more day, I'd short it," said
James Cordier, founder and president at Liberty Trading Group in
Even so, any sign of tropical weather building and veering
toward Florida, the world's second-largest growing region, is
likely to trigger a fresh rally, traders said.
There may not be much producer hedging to counter the buying
momentum either, as many growers sold a large portion of their
crop forward at higher prices earlier in the year, a U.S.
physical trader said.
The latest jump in prices will likely raise concerns about
damage to demand that has already been eroded by elevated prices
of the past two years.
Prices hit record levels above $2 per lb in January when
U.S. authorities clamped down on imports from Brazil, the
world's largest producer, after discovering traces in juice of a
fungicide that is prohibited in the United States.
To be sure, prices are still well below those levels, but a
sustained rally could hurt demand further as producers, such as
Coca Cola Co, which sells Minute Maid, and PepsiCo Inc
, which has the Tropicana brand, pass on the higher costs
to their customers.
Juice has traditionally been a favorite at U.S. breakfast
tables, but consumers are drinking less due to those price
spikes and after the scare over the fungicide in Brazilian juice
earlier in the year, the U.S. Department of Agriculture said
Global juice production is expected to drop 9 percent to 2.2
million tonnes in the 2011/12 marketing year, according to the
U.S. Department of Agriculture.
But output will still outpace consumption, which is pegged
at about 2 million tonnes.
Any price increases could also stoke concerns about food
inflation as grains prices hit fresh records on an almost daily
basis as the worst U.S. drought in more than half a century
grips the U.S. Corn Belt.