Frost damage prompted the U.S. Department of Agriculture to lower projection of Florida's orange crop, which has dominated talk of the orange juice market.
CPM Group predicts that orange prices will retest the $1.80 level in the near term after receding to about $1.65, then to about a $1.72, from $1.80 in early January.
The supply constraints come as demand weakens over the last several years. "People see it as a fattening thing because of its high sugar content," Christian explained. "So you've actually seen people cycle away from orange juice."Supply concerns from Florida and Brazil should allow prices to drift higher though, Christian said. Oak Brook, Ill.-based fast-food restaurant franchise McDonald's (MCD) said it anticipates needing to raise prices on some of its offerings this year in order to offset rising ingredient costs, Chief Financial Officer Peter Bensen said on a conference call with analysts following its recent earnings release. McDonald's anticipated that costs will rise between 2% and 2.5% this year in the U.S. and between 3.5% and 4.5% in Europe. Meanwhile, the CFO of Purchase, N.Y.-based packaged foods and beverages behemoth PepsiCo, (PEP) Hugh Johnston, said he expects PepsiCo's commodity costs to rise between 8% and 9.5% in 2011. Pepsi owns the Tropicana juice label.
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