We are only 45 to 60 days before the new crop will begin in a meaningful way. There will be some early crop olives picked and crushed in September. It normally isn’t significant quantities, but this year will not have a normal finish. Official figures for August have been posted. The export/consumption of August will leave remaining stocks with less than 300,000 tons of inventory heading into September. 300K is the figure for a smooth transition into new crop. We are already well below that figure with October still in front of us. Although we have seen calming signs in discussions about new crop, it still leaves us with 30 to 45 days of uncertainty, and planning to get ready for new crop purchases.
Some random thoughts:
1. Last month we stated that if consumption stayed at 90 thousand tons – we would have an issue
heading into October. September was not over 90 thousand tons; actually less than 80 thousand
tons. So this is somewhat good news.
2. There have been some rains in growing areas which will help – additional are needed in next
30/45 days. It will probably help the 2017 crop more than this crop. Rain is always a good thing
especially in the right amounts at right times. Decent news – wait to see if more comes.
3. This gives a little more time to evaluate what the other European producers will be producing
this season, as well as third countries. It looks like Tunisia will have good quantities to export
and Turkey will have more than their internal consumption. Unfortunately, it is perplexing on
what happened to the excess oil from last crop in Turkey. Good News.
4. Probably the most important information that a US buyer will need is when the demand will pick
up. If some major exporters/importers are short – the market will still be chaotic. Until the crop
starts coming in full supply – we think prices will remain on the firm side. Not at today’s prompt
shipment levels, but certainly not falling to the lowest level we might see this season. That will
not occur until SUPPLY exceeds DEMAND on short term basis.
5. The Spanish crop and overall world crop will be much better than last season (not that difficult to
do) and close to where levels need to be to have a manageable relationship between purchases
and pricing. If consumption picks up where it left off in June, we will have some issues the
second half of the year in terms of pricing.
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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.
WORLD FINANCIAL CRISIS
As China’s currency evaluation enters into the picture and has washed the pending issues still in Europe, the most pressing issue is the exodus of people leaving war torn areas and what/how to provide for them. It is truly heartbreaking to see the images everyday of those fleeing those areas. Eventually, this man-made disaster will truly become an economical issue for the European countries that are taking these unfortunate refugees.
CALIFORNIA OLIVE OIL COMMISSION/AUSTRALIAN OLIVE OIL ASSOCIATION
Not much to report here, although Australia will have some quantities to export to non-traditional buying areas. The opening prices from there, are more expensive than what Spain is currently offering. Although the Australian at similar price level, is a good option due to the freshness of the oil. The returns may not be as great once the new crop Mediterranean oil becomes available.
COSTING BY PRODUCT – BUYING RECOMMENDATION
After several months of escalating costs, new crop is finally in sight. That is good news; now one has to put on the thinking cap (my catholic grammar school education). Factors to consider – rain between now and harvest time, timing on demand from US importers/Italian Exporters, third country early availability.
EXTRA VIRGIN: We are seeing the first signs of softening of the price from August levels. That is not saying much, at least; however it is better than continuing escalating prices. Our previous recommendation was for coverage until the end of October at minimum and really till end of the year (if booked in July). Now, another option would be to negotiate a prompt shipment price and book for December at the same cost basis. That would mean gathering some prompt shipment relief for possible higher price for December. It is not a bad option if you are short in coverage.
REFINED/PURE: Very much like the extra virgin scenario, but finding good price levels for prompt is not that easy.
POMACE: Cost and recommendation are the same as last month, and tied to the Euro Exchange.
***** 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
Euro traded in pretty large ranges this past 30 days, and the LOW this period was almost the HIGH from previous 30 days.
Last 30 days: AVERAGE = 1.1234 HIGH = 1.15 LOW = 1.1054