Stalemate – Gridlock
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We have been accustomed to hearing this about the U.S. political process for the past 5 plus years. It actually applies to the pricing in the extra virgin market. Over the past month, prices have been soft, with little activity. Even with mild activity, prices have not firmed. Below, I will outline the math of the Spanish crop numbers. But just looking at the Spanish crop/usage/availability would lead you to believe that the market would be increasing soon, if not now. BUT, that is not happening. There has to be other factors as to WHY the market is not reacting to the lower than normal levels still available in Spain. Here are some facts and estimates:
1. World Wide Production this crop was 2.7 million tons, vs. the last 10 year average of 2.9 million tons, only 200 thousand tons less.
2. World Wide Consumption is estimated at 3.1 million tons, or 264 thousand tons MORE than the 10 year average of 2.8 million tons.
So the simple math is: production is 2.7 million tons, consumption is 3.1 million tons.A 400,000 shortfall, but when you factor in the 690,000 ton carryover in Spain it does not set into motion a panic mode. Of course, for good order’s sake, a carryover is needed to make the transition into new crop orderly. The math supports a managed carryover into 2014. A word of caution, is that consumption is overestimated in my view, Spain’s consumption/exports normally consists of 1,400,000 tons annually, and right now they are on course for 1,056,000 tons annually. So I am little befuddled at the consumption number being estimated so high. Which I think explains the malaise in the pricing. However, be cautious, the situation can change in the extra virgin category. As the available inventory may not be in proportion of how much extra virgin will be needed until new crop gets here.
Olive Pomace Oil and Refined Olive Oil are certainly stuck at these levels until demand picks up with supply available.
Marketing Order – ITC Investigation/UPDATE
The ITC Investigation Report was due on Monday, August 12th. It is my opinion and my thought alone, that lack of clarity on subsidies on the olive oil sector in Europe will be an issue the domestic industry will now latch onto as the centerpiece of their argument for relief. After the nonsensical effort of putting a Marketing Order in front of the USDA, first publishing a poorly crafted first draft, than denying the existence of a marketing order at the ITC investigation in February, then hiring a lawyer/lobbyist to help to attach an 8e provision to olive oil, while still denying the existence of a marketing order.It is clear there is not a consensus even in the California olive oil industry that they clearly want/need a marketing order. So, we are expecting their full attention to latch onto anything that shows imports/European industry in a negative light.
Worldwide Financial Crisis
As our elected officials continue to do NOTHING about jobs, infrastructure, education, immigration, balanced budgets, our economy flounders with small growth just keeping our heads above water. Just left on summer recess, but can anyone tell us IF there is any significant difference when they are in session.
Costing by Product – Buying Recommendation
EXTRA VIRGIN – Still one of the harder items to forecast. The strong recommendation is that you have a percentage of your needs covered until new crop. As stated in last newsletter, is defining the critical moment BEFORE the market moves, will determine your positive or negative position. Again, one should have a game plan in place now, should the market indeed move.
PURE/REFINED – Market remains stable.
POMACE – This item may move upward if consumption picks up. The price of pomace is tagged to EV, in a small way, as well as sunflower. As these items rise, pomace will normally follow. 60 day coverage is recommended.
Currency Facts – Euro vs. U.S. Dollar
The EURO is hanging in there against the dollar. Hard to believe is can sustain over 1.32 for such a long time (21 days and counting).
July August to Date
AVERAGE 1.30762 1.328 HIGH 1.33 1.34 LOW 1.27254 1.3166
Look for the ITC Investigation Report to be published…