Ever since the release of the Eddie Murphy and Dan Aykroid classic Trading Places, orange juice has been everyone's favorite comic commodity.
But with the kinds of returns speculators have been harvesting this past year, orange juice has become a serious player in the commodities market.
Orange juice isn't just chock full of Vitamin C. It has been one of the biggest gainers in the commodities market over the past year. With a cold snap predicted for Florida, the world's biggest producer of juice oranges after Brazil, orange juice futures are headed for a two-year high.
Orange juice futures surged 90 percent last year. With projections that this year's harvest may be smaller because of drought and disease, prices appear to be headed even higher.
Talk About Getting the Lead Out
Orange juice has not been the only big performer in the commodities over the past year. Commodities from copper to sugar topped last year's highs as investors looked to make a fresh start in 2010 after two recession-plagued years.
Last year, even though gold hit record highs, above $1,200 an ounce, lead was the best performing industrial metal, gaining 143 percent. If the projections hold true, this otherwise dull yet essential metal could average $2,285 a ton this year, 31 percent above its 2009 mean.
In 2009, investors poured about $60 billion into commodities through index-tracking and exchange-traded funds. Worldwide investments in commodities during 2010 could see a repeat of last year's volume. A November poll by the Royal Bank of Scotland showed that commodities continue to be a top choice of fund managers.
Making a Large Leap
Raw materials may return more than financial assets for the first time in three years as the global economy rebounds. According to some forecasts, commodities like oil, corn, gold and palladium could advance as much as 17 percent this year. That would better the projected 11 percent jump in the Standard & Poor's 500 Index and the 2.8 percent return on the benchmark U.S. 10-year note.
Demand for commodities is rising, particularly from emerging markets like China and India. The projected recovery of the U.S. economy should boost the demand for raw material even higher, especially if the dollar continues to slip in value. Historically, commodities like oil and gold have been ready hedges against a weakening greenback.
Over the past two years, commodity returns have ranged from great to “Honey, we’re rich.” Although oil is not likely to revisit its record high of $147 a barrel, several energy market forecasters see crude topping $92 by the end of 2010. Oil futures opened above $81 today, a far cry from their 2009 low near $35 a barrel.
The economic downturn temporarily put an end to the robust commodity returns seen in 2008. Demand fell as producers pulled in their horns.
Now producers have come out of the recession with fewer resources available to quickly ramp up output to meet resurgent growth. This nascent economic revival could drive commodity prices higher as manufacturers scramble to lock down raw materials that may be in short supply because of the recession.
Volatility in the commodities, such as oil and gold, likely will continue to resemble a fairground roller coaster rather than a steady investment. But if you can hack the ride, the potential returns may make it more than worth the price of admission.
For traders in the coming year, a day without orange juice may actually end up being a day without sunshine.
John Cohn is a senior partner in the Globe West Financial Group based in West Los Angeles. He may be contacted at www.globewestfinancial.com
