# Simple Math – or New Math

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As normal this time of year, the oil has settled in Spain in the hands of a few traders/producers/players. This time of year always brings out market conditions that are complex yet predictable. US buyers have to make decisions way before this time frame in order to have an orderly summer selling season. This year, as most seasons, quantity being offered is lower than during the season. If the market forces are short or in need of prompt shipment; this short offer in quantity allow sellers to sell some quantity and then raise prices for the next short quantity being offered. When the buyers are short, this brings about WEEKLY market increases. Precisely what is happening currently in the market!  Prices have jumped for the last three weeks. Let’s drill down on the facts as we know them right now.

1. Consumption and Exports in Spain continue to run higher than the traditional outputs in Spain. For 2016 the average is running 110k tons per month. Normal output is 105 k tons. Not a big difference – so for the 10 months in 2016 before the November 1 carry over stock, this means 50 k tons less than normal output would place carry over inventory.  If the outputs continue on this pace, the carry-over will be less than the 300k preferred as we move into new crop.
2. Blossom – We traveled through Spain.  It was the last week of May, the trees were not in full bloom.  For this time of year, it was later than normal.  Fortunately, the temperature has been mild and with sufficient rain.  It appears this stage of crop development went well.
3.  Next Crop = obviously we are too early in the process to formulate a FIRM quantity to be produced. Spanish authorities are thinking 1.5 million tons for the 2016/2017 campaign. A better than average number for Spain, and more than the 1.38 million tons this crop season.
4. Worldwide production is estimated NOT to reach the 3 million ton worldwide production number. Average years in Italy, Greece and Turkey – with Tunisia having less than normal rebound crop due to the lack of rain, would mean the majority of the oil will be in the hands of the Spanish crop traders.
5. Our dilemma is not easily defined in trying to make the math work. At some point in time the Spanish crop will be extraordinary. 1.5 million tons is a good crop if it happens, just not extraordinarily large. My theory has always been that Spain is a three crop cycle – (bad year – good year – great year). So in my world a large crop is coming, now with all the planting going on in Spain, has it shifted to a good year/bad year – two year cycle? That will impact prices as summer comes to a close and we head into Fall.

## MISSION STATEMENT

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Ultimately, customer satisfaction is paramount. The entire AMD group is fully committed to elevating the distribution of bulk oils across the entire process.

## WORLDWIDE FINANCIAL CRISIS

Well, we finally have some real important news on the European front.  Great Britain exiting the European Community is big news.  In politics, CHANGE is in the air on both continents.  Personally speaking, the CHANGE appears to be a more isolationist frame of mind that longs for the “old days”.  Here and in the UK, it appears the mantra is, 1. Stop immigration / it is ruining our society – taking our jobs., 2. Become more isolated (opposite of globalization) on trade – it is shifting jobs outside our communities.  In the US it is very different than the normal Republican/Democratic/Conservative principles vs. Progressive Principles.  During the time leading up to the Brexit vote, the passions for LEAVE ran deep and loud.  Here in the US, on the opposite end of the spectrum; passions and turn out at rallies, have been historic.

The referendum has been a distraction to the slowness of the economies in Europe.  There will be a transition while GB exits.  Eventually this will either be good or bad for each side and the business of the countries will have to be back focused on growing their economies.

## CALIFORNIA OLIVE OIL COMMISSION / AUSTRALIAN OLIVE OIL ASSOCIATION

We have learned that Californian producers are back in Washington preparing to again attach an 8e provision to the upcoming Farm Bill or the like. They asked lawmakers to require FDA to pursue testing for olive oil imports. As a community we support this pursuit of authentic olive oil in all areas of distribution. We pushed FDA to look on shelves for ALL olive oils to be tested, regardless of where they are from and test against fully accredited international standards which represent 98 % or more of the olive oil produced.  We all can agree we want the olive oil on the shelf to be chemically what the label says the olive oil is.

The import community stands ready to pursue together a Research and Promotion on all olive oil varieties, and a Standard of Identity based on the principles of the International Olive Council.  Now that some Californian producers are importing olive oil to supplement their distribution where their supply cannot keep up with their sales.

## COSTING BY PRODUCT – BUYING RECOMMENDATION

EXTRA VIRGIN:
This report was a bit delayed, May into June was pretty calm, unfortunately not the past three weeks. IF you are covered till mid-September – it might be long enough not to get caught in price increases that we see occurring. We think that end of October seems to be a good place to have coverage to. The gamble is that price might fall from today’s level sometime in late August when producers/exporters will be back from holidays and will have a somewhat clearer picture heading into new crop. If not, there may be pockets of product being sold that will fit your cost needs. If not, you will have to bite the bullet and buy contracts now to last you, as  long as consumption (output) numbers remain more than 105k tons, we do not expect prices to fall.

REFINED / PURE:
Again due to the late newsletter, the market has changed dramatically on refined. More so then Extra Virgin. The market is quite hot on this item. It has even pushed prices upward on EV as they try to keep a differential between the two categories. Again, as buyers continue to confirm small quantities, the price continues to escalate. Coverage till end of October seems like the right amount of inventory. (like EV)

POMACE:
Prices remain the same as previous newsletter. The return on pomace is very good at these levels. Prices will try to inch up to keep the space between refined and pomace. Do not really see the need for prices to increase. If anything, prices will decline, just not while the other categories are firm.

***** All these suggestions are based on a stable Euro**** we have instruments in place to keep the currency stable with the flexibility to take advantage of a stronger dollar.

## CURRENCY FACTS – EURO UPDATE

Last 30 days:

AVERAGE  1.125     HIGH  1.1377     LOW  1.1021