Orange Juice Prices Spike (KO, PEP)

Cold weather in Florida and the discovery of an unapproved fungicide in imports from Brazil have sent the price of orange juice up more than 25% in the past few days. The Coca-Cola Co. (NYSE: KO), makers of Minute Maid products, and Pepsico Inc. (NYSE: PEP), makers of Tropicana products, control about two-thirds of the US orange juice market. Neither company has commented on the recent price spike.

The US Food and Drug Administration has found trace amounts of the fungicide in Brazilian juice and expects to complete testing of the latest shipments by mid-month. Any juice tainted with the fungicide will be rejected.

Brazil is the second-largest provider of orange juice in the US, trailing only Florida, which normally supplies about three quarters of US demand. Recent cold weather in Florida puts that production in jeopardy. Combined with the problems with the Brazilian juice, the outlook for retail prices of orange juice calls for a sharp rise.