Summer Over – Balancing Act to Follow
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It has been quite a while since our last update. Some interesting developments that will impact how the market moves forward toward the beginning of new crop have occurred. Although until this week, costs have pretty much been stable. The major influence over prices since last newsletter was the lack of rain and the level of OUTPUTS. OUTPUTS are measured in local consumption and exports minus imports. Over the last two months (July / August) the levels have been much lower than the earlier 2017 movements and, as of August, a tad lower than normal historic levels. This decline has lead us to a stock/inventory of 400,000 tons. Outputs in August were less than 100,000. If we use 100,000 as the sales/exports for September and October, the all-important CARRYOVER will be 200,000 tons (more or less). This gives the current market some stability. IF outputs go higher than 110,000 per month in September – you might see a different market dynamic. Two things may occur that might change the trend. 1. No Rain happens for the next three/four weeks. Current forecast does not call for much precipitation in major growing regions. Could be an issue for sure. 2. Exports pick up as prices soften some. We are not completely sold that major buyers (both individual companies or countries) have enough inventory to last until new crop starts to come in with enough production to out supply demand. One optimistic view would be, that prices are at very high historical levels would be hard to get exports to levels that would affect pricing until probably November, maybe December.
The production in areas outside Spain continues to be encouraging.
Turkey is going to be strong. Hopefully, the new productions will find its way into proper export channels. On the Syrian border in Turkey, there will also be some interesting quantities as well.
In Tunisia, there are some conflicting projections from serious companies. Earlier it was projected that crop could be close to 400,000 tons, a historic high. The historic high is 340,000 in 2014/15. Some are thinking crop will not top 300,000 and be closer to 250,000 tons. Still a very strong crop. Just not the 400,000 that started the conversation in May.
Greece, Portugal and Morocco will be better than last season. Italy is always an important wild card. They are still an important factor for consumption and exports. The collective buying power presents other buyers (individual companies and other importing countries) a unique challenge in staying ahead of them “making” market and market prices, when they collectively purchase.
MISSION STATEMENT
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AMD provides a stress-free environment for quick and efficient communication – all supported by proven supply chain integrity and the latest relevant market information. With that knowledge, AMD is able to accurately forecast and assist our customers in making prudent and educated purchase decisions. To ensure this reputable experience even further, AMD is also backed by a certification from the Safe Quality Foods Program (SQF).
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
Our U.S. economic indicators seem to be positive. The Stock Market is still performing above expectations. Dollar is not following this pattern, as our isolationist trade policies are having an adverse effect on the Dollar versus the Euro. The European economy remains stable with slow yet steady growth. Unemployment and social programs are certainly a strain on their growth. One might say that we have the same issues with/without a socialist form of government. Interesting comparison.
CALIFORNIA OLIVE OIL COMMISSION / AUSTRALIAN OLIVE OIL ASSOCIATION
It will take time and some trust building that can bring along a closer relationship. The NAOOA is committed to trying to build this relationship. We hope to have some success shortly to give us the first step.
COSTING BY PRODUCT – Buying Recommendation
Certainly, a ticklish time of year. Recommendations can change daily on several instances and occurrences. With that being said, here are our thoughts on purchasing.
EXTRA VIRGIN:
At this point, it really makes sense to buy as you need to cover lead times. There is a possibility that prices get stronger until new crop arrives. No rain – continued higher temperatures. Although prices now are close to historic highs. There is a better chance a supplier will soften prices getting closer to new crop (November shipment – December arrival) have come off some, not enough to jump at December pricing. One is sort of stuck at your suppliers’ current inventory position and their cost levels.
REFINED / PURE:
This category is still following Extra Virgin tendencies. Although one can get some raw material from Turkey if you can wait 45 days for delivery. Buy as lead time allows.
POMACE:
Pomace for the first time has shown some indications of softening. This could be for two reasons, the strong demand due to the other varieties being so very expensive in historical terms, is wavering and a shortage of crude oil in marketplace has been reinforced. Either way, there may be something to costs softening as we approach new crop. Puzzling in that new crude usually is not available till the olives have been crushed.
ANUGA is October 7 th through October 11 th. As usual, this year will be very informative time to meet with key suppliers about current and upcoming markets. If you want to be updated daily after my meetings are completed, please let me know and I will add your contact information to my daily email update. It’s possible we will be able to blog from Germany…Let us know if you want to get these updates.
***** 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
As stated, our international policy has not been a friend to the dollar’s strength versus the EURO. Still no indicators to pair the dollar exchange.
Month High Low Average
July 1.166 1.134 1.146
August 1.179 1.183 1.175
September 1.194 1.204 1.186
Not a good trend…no end in sight. Not even talks of rate hikes seem to influence the strength of the dollar. Almost seems that it is being artificially low for some reason.