No Where to Turn

By Don Griego on

The situation for the supply of olive oil continues to be a struggle and we will be experiencing unprecedented shortages in oil availability. There is no dispute that the crop in Spain this season was not sufficient to help supply the estimated 3 million tons of consumption worldwide. As we know, Spain’s production needs to be at least 40 % of the world’s consumption for a balanced market. This year it fell woefully short of that. Tunisia was an important source while they still had oil. Greece has oil – as you can imagine – getting shipments out and paid for is not going to be an easy task. Although I think the olive oil suppliers in Greece are in better financial position than other business sectors in Greece. Where else can a buyer turn to cover their oil requirements? Turkey seems like a sensible alternative. They had a good crop (more than their local consumption of 130 K tons). Unfortunately a sort of BLACK HOLE has occurred in Turkey – with the amount of the exports. Turkish suppliers either do not have the stocks available or do not want to sell to traditional export markets. Either way, nothing of significance is coming out of Turkey. That pretty much leaves South American shippers for extra virgin. The availability is a pretty decent supply, although making a firm contract is not the easiest thing to accomplish. Bottom line, it does not appear to AMD that the current supply will be sufficient to last until new crop comes. Of course there will be oil available; one will have to pay a very expensive price to get it, with the prices escalating (certainly not declining) as we get into September. The unknown, is what will prices do come new crop harvesting.

So let’s talk new crop for a moment. We will discuss Consumption versus Production below, but Spain is certainly the KEY factor in determining the path of worldwide supply. It looks like the trees have recovered well from the previous harvest, which was predictable as not many of the trees were stressed in the poor crop year of 2014/15. The blossom in the spring/early summer seems to have gone well. The BIG wild card is the rainfall, or more to the point, the lack of rain. Although the olive tree is very resilient, it stills needs a minimum amount of water to reach its potential. More important than the quantity of water, is the timing of the rain fall. Smaller amounts at critical times are much better for the tree than large quantities at one time. Although at this point, that would also be welcomed. Currently, the olive growing regions are experiencing higher than normal temperatures. One has to look at Jaen and Cordoba (Spain) regions to see what rainfall might be occurring.

Best thing we can do at this point is PRAY FOR RAIN in Spain.

Mathematics of the Olive Oil Supply and Demand

Please look at the two charts attached. We are going to keep this simple as possible.

1>     Worldwide Production was 2,393 million Tons. This number really needs to be close to 3 Million Tons for the market to operate in a consistent pattern. You will notice that Spain is only 34 % of the production. That number really needs to be closer to or over 40 %.  A normal crop in Spain should be 1.1 to 1.3 million tons. PLEASE NOTE, the crop may very well be near those levels this year.  One has to factor in that we will enter new crop in with NO APPRECIABLE carry over if exports and consumption continue even on a slightly reduced basis. This is a vital piece of information.

Olive Oil Production

2>   Worldwide Consumption was 2.824 Million Tons. Easy math tells the crop was 431 thousand tons short. We had a better than average carry into new crop, which as stated will NOT be the case heading into 2016 crop.

Olive Oil Consumption


Well the Greek mess came to a head. It appears that Greece will stay in the EURO ZONE. That should bring some stability to the EURO ZONE. They still however, have deep issues in other countries before the positive increases in economic activity.


Domestic Industry is still wheeling out the same tired Davis Study that they have never been able to duplicate. The Californian Commission came out with their own standards, which peculiarly did not include any parameters to detect adulteration of the product. Here is an explanation of their standards.

California Olive Oil Commission Final Report

Additionally, a study just concluded that examined a number of California Brands.

Survey of California Brands

Where 67% of the brands tested failed their new standards.

You can draw your own conclusions.


This is by far the most critical time for a buyer, especially for those that do NOT have coverage until new crop. There is no realistic way to calculate what prices will be in October … or predict a decline for when new crop will be readily available to start shipping. There are a lot of factors that go into this market dynamic. They could fall like dominos and everything could be back to normal come October/November. Nothing about this season was normal, and we are not convinced that it will be normal in October. Meaning that prices will not automatically go down with new crop early in season – they could, but we are not convinced that is a certainty. So please call us to discuss your requirements needed before the end of January. Every situation is different, but this is as confused as I have ever seen the market in my 33 years in the olive oil industry.


Prices have exploded. Even without large quantities being traded. Small sales are made, and that automatically triggers a higher price thereafter. We expect this trading process to continue for the foreseeable future. IF you are not covered at least to end October… you have issues, if you do not have at least some coverage till end January, you will be facing some difficult decisions – mostly as they pertain to timing of shipments – along with possible escalating prices.


The graph for refined looks exactly like Extra Virgin. As with extra virgin, there is possibility of oil being available outside Spain. Look at the graphs; Turkey had a good carry over into 2015 and they produced more than their internal consumption. Unfortunately – offers are hard to get, while available oil to exporters is scarce at this point. We are assuming that if the market continues firm, that we will get some refined from Turkey. Turkey has been a major trading partner with AMD for a long time; we are confused at the lack of offers, specifically on Refined. We were counting on Turkey being a major source of supply for AMD this season. (Based on the math)


Ironically, due to the high price pomace was already up to, and weak demand, the price on pomace has not gone significantly up. One can easily expect for pomace prices to rise and follow the trend of extra virgin and refined.

***** 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. 


Even with the Greek crisis, the EURO did not really go into the tank as many people predicted. The one certainty with the EURO is there is nothing certain about its path – just when it appears to be headed in one direction – the FX community changes their positions and changes the flow of the market.

Last 30 days:    AVERAGE = 1.116     HIGH = 1.1374      LOW = 1.0989

Euro is trading below the low of the last 30 days.