Investors sold off orange juice futures Thursday after a federal government forecast a decline in Florida's orange crop won't be as severe as some predicted.
As much as 70 percent of Florida's citrus crop was devastated due to Hurricane Irma, the Florida Fruit & Vegetable Association announced last month. That led other industry groups and some analysts to reduce their own estimates for citrus production in the state.
"Some had put out such low figures that it built into the market unreasonable expectations that were clearly off the mark," said soft commodities analyst Judith Ganes-Chase, founder and president of J. Ganes-Chase Consulting.
Florida's orange crop is used mostly for orange juice but also some gets sold to the fresh produce market.
Orange juice futures for November delivery fell 2.9 percent to $1.5795 a pound on the ICE Futures in New York. The price still is up about 16 percent in the past two months.
On Thursday, the U.S. Department of Agriculture's crop production report forecast that Florida's orange crop for the 2017-2018 season would total about 54 million boxes — down about 20 percent from last season and the smallest crop seen since the 1940s. Still, that's well ahead of the 31 million boxes forecast Tuesday by the the Florida Citrus Mutual.
The USDA report represented the agency's first initial estimate of Florida's orange crop for the 2017-2018 season, so it could be revised later.
Florida Citrus Mutual, the state's largest citrus grower organization, based its estimate on grower damage surveys. The organization said it believes the USDA's initial estimate "could not accurately account for the full extent of the catastrophic damage from Hurricane Irma."
The citrus grower group added, "Historically, the USDA has a high margin of error in crop years with a natural disaster."
Florida Citrus Mutual CEO Michael W. Sparks said in a statement, "I'm disappointed the USDA did not delay the traditional October crop estimate until more data could be collected to fully assess the damage wrought by Irma. Irma hit us just a month ago and although we respect the skill and professionalism of the USDA, there is no way they can put out a reliable number in that short time period."
Before Hurricane Irma, Florida was expecting to harvest more than 75 million boxes worth of oranges, according to the Florida Department of Citrus.