The Porcher point: Where did our sex on the beach go?

2024-07-23 13:54:32

New twist in the “fruit rebels” affair. For several months, the Brazilian oranges are pouting. Will we soon be forced to mix our rutabaga-based cocktails?

All old beauties like me know that the orange is a financial product. Not because they have a master’s degree in finance from a business school, but because they saw the hit film in the 1980s. An armchair for two with Eddie Murphy. In this film, two brothers who own a commodities brokerage company, the Duke brothers, have disagreements on the question of success. Is it innate or does it depend on a specific environment? They therefore bet that by putting a homeless man played by Eddie Murphy (Billy Ray) in the place of the current boss of their company (Louis Winthorpe), the homeless man could manage the company just as well as the former boss after a period of adaptation. Indeed, Billy will turn out to be a good boss when Louis sinks into delinquency. But Billy and Louis will realize the deception and decide to join forces to derail a financial speculation deal around the price of orange juice and thus ruin the Duke brothers. All this to tell you that I discovered at the age of 8, in 1985, that orange juice was a financial product.

VULGAR PRODUCT

The history of the orange follows that of globalization with its good and bad sides. Once a precious commodity consumed mainly locally, the orange became in the 20th century, thanks to increased productivity, progress in conservation, freezing and transport, a product of everyday life. Even if today, orange juice is decried by nutritionists on Instagram, it was for many years the reference drink for so-called continental breakfasts. With globalization, the orange has transformed into a vulgar financial product that is traded up or down on the financial markets. Basically, the price of the orange will depend on supply – production conditions, bad weather, the weather – and demand – growth in consumption, particularly in emerging countries. Added to this is speculation, which has significantly increased the volatility of commodity prices, particularly since the 2000s. Indeed, from that date onwards, pension funds, sovereign wealth funds and insurers have become interested in commodity markets. Investment banks, for their part, have designed financial products composed of baskets of commodity derivative contracts, the two largest of which are the Goldman Sachs Commodity Index and the UBS Dow Jones. These financial products will encourage herd investment cycles, both upward and downward, by linking them, for example, to American monetary policy decisions. If we add to this the development of algorithmic trading, which represents 50 to 60% of transactions and which allows transactions to be carried out extremely quickly – sometimes up to 2,000 per second – we can understand why price volatility has significantly increased on commodity markets, making it more difficult to read prices.

“TASTE OF ORANGE”

So why are oranges worth gold these days? Is it because of evil speculators? A priori no, it would rather be global warming. That is to say the long-term forecasts, the wall that we are going to hit and which, by the way, does not seem to interest traders, given how they value oil companies. Anyway, that’s another story, let’s get back to our oranges. In 2024, weather hazards affected the Brazilian harvests (the orange heavyweight). In 2023, there were droughts in Spain (the European orange heavyweight) and Mexico. In 2022, it was a cold snap that hit the Florida crops (the North American heavyweight). Year after year, harvests are down due to bad weather conditions. Apart from the fact that all this should be taken as warnings of the end times, it also increases the price of oranges. So will orange juice become a luxury product reserved for a small elite or will manufacturers use subterfuges to make us drink a drink that “tastes like orange” but without orange? I think that, like me, it is useless to ask you the question.

By Thomas Porcher

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