ALMOST THERE – Start of 2016 Season
Very interesting start to the olive oil crop year. A delay due to much needed rain, which will be helpful to the current crop, more so to the 2016/2017 harvest. So far, it has been a tale of two different markets. The need for prompt shipment – and the expectations for lower prices from new crop. The SPOT market has been somewhat unpredictable, mainly due to the buyers having more options than previously thought. The good crop in Italy will enable the Italian exporters to cover on a week by week basis until the Italian crop starts to come in. Also, Greece, who had so much financial difficulties in the summer, still has carryover stocks of good quality. Although, the trend would indicate higher levels for prompt shipment in Spain. The upward trend is having a hard time as buyers explore their options and, in best case, are reducing what quantities they are buying. The timetable seems to be in the favor of the buyers at this state. Other crops will be starting in earnest soon. It is probably getting here sooner than producers would like. December price indications seem to be weakening as we read this.
It is important to understand – this weakening for new crop may not last. It certainly can be categorized as a DIP. Sellers are definitely reacting to the many supply options that will come into play. Tunisia, Morocco, and Italy will have more oil than previous years. IF Turkey gets into the game, the Spanish will be looking at several questions that need to be answered:
1> How much oil to sell before the other countries’ supply will be exhausted (Remember, the worldwide crop will be LESS than 3 Million Tons).
2> Keep an eye on consumption in the EU and US, as new price levels or more to the point; more promotional activities are made in the retail sector.
3> Industrial buyers will be looking to cover for extended periods this season as price levels get to more reasonable levels. How does a seller determine what to HOLD and what to release into distribution?
4> The KEY time frame for second half of the year pricing could be much different than last season. It came upon us very quickly, and one had to make important decisions in June/July which has affected sales even as we speak.
5> We are getting a little ahead of ourselves – the BLOSSOM will be as usual important on pricing for the June forward shipments.
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Worldwide Financial Crisis
It seems the most important financial crisis is the plight of the Refugees fleeing war torn areas. Germany has generously accepted a great number of the people – it could however mean some very difficult political ramifications for the German government – specifically Angela Merkel. All throughout Europe the heart wrenching journey of the people is expanding.
California Olive Oil Commission / Australian Olive Oil Association
This could be a very good year for serious California producers to make inroads into the retail market. They will have a chance due to their large crop, may be able to reduce price levels or at minimum be able to promote their brand more. Producers having twice the crop as last year should help in their campaign in gaining distribution. Good Luck to them.
Costing by Product – Buying Recommendation
So the main question is whether this DIP is the low point of the market. How long will it last? Buyers have to seriously look at January requirements and probably even a portion of the first quarter needs.
EXTRA VIRGIN: December shipment pricing is softening. Much quicker than most anticipated. Even this week, pricing for PROMPT shipment from Spain has gone down some, which was expected, just not this soon. The question for buyers; is what period to cover? My sense is at most, coverage for a portion of your first quarter needs. I do believe there will be another DIP coming as we get closer to New Year – sometime in December. That does not leave much time to get product for January or for some of February.
REFINED / PURE: Refined is following the trend with Extra Virgin. The smaller price differential between Refined and Extra Virgin has not materialized yet. There is still a normal difference between Extra Virgin and Refined.
POMACE: Pomace will follow, or should follow, the market downward. Price has been stuck in a small range for some time. We expect a break soon. Getting product here to US in winter months is challenging without capabilities of bulk shipments. All raw material available now will be from last season raw material. Unless price is really competitive, it is best to buy what is required and wait for the new crop Pomace crude.
**** 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
Dollar finally broke through 1.1- this month, breaking some narrow lanes of trading. Some are talking about it going to parity and even possibly breaking parity. We have heard that before. The downward trend is helpful for landed costs. Let’s hope it continues.
For PAST 30 DAYS
AVERAGE: 1.1081 HIGH: 1.1437 LOW: 1.073