What does orange juice have in common with oil?

Not a whole lot, really, except that both commodities owe their existence to the amazing properties of solar power. One product, oranges, manifests after a short growing season and the other, oil, takes several hundred thousand years longer…

But it’s also interesting that the prices for both staples swing higher on the news of extreme cold across the country. I live in Chicago. This winter has arrived with a fierceness that I don’t recall seeing for years. The orchard farmers of Florida are seeing the same thing (albeit at temperatures 40 degrees warmer than Chicago’s). New England and the West, same thing. So the price of oil has jumped to more than $83 this week as people’s furnaces burn more natural gas and heating oil from Dallas to Maine.

And the price of orange juice futures, on fears some of the crop could be lost to frost, jumped to $1.50 per pound today, the highest level in two years. Today’s oil price, incidentally, is the highest since October 2008.

So high oil — in the winter — means high orange juice? Perhaps it does. But what does this mean? Not a whole lot, I suppose, unless you’re an inflation hedger.

More interestingly — is there a way to play statistical arbitrage between these markets? I can’t imagine the orange juice market is as efficient as the oil market. Or perhaps I have that reversed? Clearly, I’m no quant.

If I were, I’d be working on my orange juice-oil algorithm right now and preparing to print money. My shingle: OJ-Petrol Traders.

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