A Little Premature – The Never Ending Crop

By Don Griego on

Last newsletter, I reported that the crop in Spain was going to be 1.35 million tons.  That was a typo, it should have been 1.45 million tons.  However, that does not matter any longer as at the end of February that level, typo or not, was surpassed. Currently I am in Europe after a long week of speaking, seeing, and listening to many suppliers.  The crop is still coming in although not intense, none the less, still coming.  Depending on whom you speak with, this Spanish crop will surpass the historic high of 2012 season of 1.6 million tons.  So, this is the QUIETEST world record of all time.  No parades, no ticker tape news reports, just a noticeable silence.

There are a few factors that separate this world record from our last record crop: 1. The harvest in other producing countries is not significant, so Spain is the MECCA for buying olive oil.  The Italian producers and traders have a steady flow of product leaving Spain since Tunisia and Greece, their normal trading partners, are very short on raw material. 2. The crop will produce a higher percentage of lampante, which is not to say, there is not a good volume of extra virgin, just it is not a bonanza crop for extra virgin. 3. The consumption in Spain will and is going back up.  Lower prices are the cause for the increase.  But obviously, the EXPORTS are running for last two months, and March might surpass the first two months, to over 100 thousand tons creeping towards 110 thousand tons.  It is expected, but the numbers are a cause for concern for future pricing.

WHAT TO DO.  We will detail that in the Buying Recommendation section of this newsletter.  But for now, try to get your arms and minds around the quietest record crop in Spanish history.  There are several KEY factors for each item; some may take longer to develop on certain varieties.



As we have been reported the Farm Bill passed, but that does not end our vigilance on protecting against an 8e provision.  We have to, and will, continue to watch/listen for any attempts for an 8e provision to be attached to a piece of legislation.  We are not going to let our guard down.  We have many friends on the Hill for this cause, but we can always use more.  So if you want to get involved, we will guide you to contact your Senator and House members in order for them to completely understand what the implications of an 8e provision would mean. 

California has approved an Olive Oil Commission of California (OOCC).  Once again, you have to be impressed with these producers in pushing forward with reforms and public relations to try and push their agenda.  If they could only stop the surging crop planting around the world, as I think next season we will see a record HIGH production on WORLD wide basis.  We are in a unique period of time in the olive oil industry. 

On the import side, the North American Olive Oil Association continues to push for a mandatory standard on olive oil.  The same standards the California industry pushed USDA so hard for just a few short years ago.  This standard will insure that the world’s producers who want to ship to the US will have to adhere to.  I had the good fortune of meeting President Barjol of the IOC; I came away impressed at his vision and the pragmatic/ focused path of forging ahead in this tumultuous time.  Having been in the Olive Oil business since 1982, I have never spent so much time focused on what is going on in Washington DC, hiring a law firm to protect 99 percent of the world’s producers, attending meetings and hearings to explain and defend what our business is all about.  You can be sure that we will continue this crusade so that we can eventually get back to buying and selling authentic, tested, consistent olive oil of ALL varieties in the US market. 



The Russian invasion dominated the headlines.  This will undoubtedly influence what goes on financially in Europe.  Europe depends so much on their energy needs, I am not sure Europe has the capacity or fortitude to create sanctions that might hurt their ability to source that energy.  On the US side, are our energy/ gas companies willing to help create proper sanctions that might put in jeopardy their BILLIONS in dollars they have invested in Russia?  It will be a very difficult balancing act to get Russia’s full attention. 

On a note closer to home, I was twice in the middle of protests in Madrid this week.  On Thursday night while walking through the city, I came across over 20,000 protesters marching through some plazas and streets of Madrid.  They were protesting the severe austerity cuts that are now taking shape in Spain.  Additionally, I read in Spanish newspaper that some banks are looking for help on approximately 55 billion in possible real estate debt.  Spain has a long way to go to get the country financial equilibrium back into focus. 



EXTRA VIRGIN :You will earn your money trying to get this category purchased and inventoried correctly. As stated there is lot of oil, but much demand. So far the supply has kept pace with the sharp demand. How long will that continue is the MOST important question we have to answer? Price levels are somewhat attractive but I can see them going lower depending on whether demand continues at record pace. So, my recommendation is, you need to have coverage now until the end of November. The percentage of coverage depends on your risk appetite and your budgetary constraints. We can help deciding this percentage with you. My trip to Spain was precisely for that reason. Although the EV situation is not super clear, AMD can help reduce the risk of the market moving in either direction.   

ORGANIC EXTRA VIRGINOur thoughts continue to be as last month’s recommendation. You need to be covered at a very high percentage of your needs as far out as your supplier will do for you. An important tidbit is to insure the product will be within parameters for the entire year. I do not like to pinpoint one country, but Tunisian Organic EV is already close to the limits. These parameters will not get better with time. Two parameters are already are OUT on AMD’s specification although within IOC parameters. Here is why this is important, if you contract now for summer deliveries (which we recommend you do) and the oil comes in over IOC specifications you will be faced with the unenviable task of buying at market prices and possibly bring out of stock for a while due to rejection. It is prudent that you warn your supplier to make sure they have oil within IOC parameters for your later deliveries.                                                            

REFINEDIf you are past 60 days on this item, you have some issues. There is little chance refined will strengthen as per my last newsletter and after this trip it is almost a certainty that it will remain soft throughout the year. Order as much as you need only for comfortable lead times.  

POMACEThis is an interesting case study. There is plenty of demand; most of the refiners are busy at or close to capacity.  Of course there are enough raw materials in stock and also in pipeline.  But I do not see a major softening of the raw material.  The singular reason pomace will remain on the softer side, is primarily the overabundance now of pomace refiners worldwide.  A percentage of coverage till end of the year, probably less of % than EV. 

*****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. 



The Euro has come off its high in March and retreated to the high of February.  We will see what austerity measures and the Russian military takeover of Crimea will do to the Euro. 

For March 2014 

Average          1.3827

High                 1.3966

Low                 1.3694