Decision Time 2016
The picture has become clearer since our last newsletter. Not without some fog of the future, clear enough however to formulate some forecasts and suggestions until at least the blossom and beyond. The last correspondences focused in on the lack of rain. Well there has been some decent rain, not as much as hoped – good levels though. In one sense, a lot of rain at one time is not beneficial to the re-hydrating of the trees. Some good rains during the spring as the weather starts to warm up will be very helpful to the trees’ health. A word about the unusual warm weather in January. It seems the trees for the most part got enough of the cooler temperature to go into a winter slumber state. It is fairly obvious that weather will be a KEY factor in pricing philosophy and psychology. What I am trying to figure out is the cycle that Spanish crop has become. It has always been my experience that Spain’s crop was a three year cycle, which would mean Spain is due for a very good year. With all the intensive harvesting and new plantations, the issue is, has that expanded production changed the cycle to a two year cycle, which would be mean that next crop will be a poor year. The BLOSSOM could tell us a lot.
We will get into pricing trends and strategies in the specific buying categories later. Suffice to say, the costs are OFF their high. The need to turn some production into cash without having to inventory that oil has contributed to the DIP in the pricing since last newsletter. How long this stable market remains is the main question on most buyers minds. Consumption and exports are at normal monthly averages. Production is all but over, maybe 20/30 thousand tons to be harvested, which would put the total production just under 1.4 Million; more than the 1.35 expected. Refined prices have finally separated from extra virgin/virgin prices some. Pomace has been increasing which, to me, is quite odd.
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WORLDWIDE FINANCIAL CRISIS
The European Community continues to muddle along. Easing on interest rates is still the order of the day. As in previous communications, people / companies with monies in a savings account are actually paying the bank to hold their monies. I am certainly having a hard time getting my head around that.
In the US, the political process stumbles forward with their perspective nominees. This week will go a long way to determine who wins the nomination for both parties. It is a very long way to November presidential elections. ????
CALIFORNIA OLIVE OIL COMMISSION / AUSTRALIAN OLIVE OIL ASSOCIATION
The Californian Producers continue their media onslaught on imports. They certainly are getting yardage out of the mislabeling of some Italian brands that are labeled PRODUCT OF ITALY. In the US market, this type of mislabeling rarely ever happens. ?????
COSTING BY PRODUCT – BUYING RECOMMENDATION
EXTRA VIRGIN: If you followed my advice and bought out till end of June, you probably got caught with higher priced contracts then those that waited till the rains came and market calmed down from those levels. For those that were able to hold off, congratulations to you. At this time, one still needs to be bought out till end of June and seriously consider coverage till the end of August. You need to have conversations on whether you want to cover till new crop. Planning for after August is always tricky. Waiting for the blossom commentary may be too late to get a relatively good position. We were wrong last month in our suggestions; we still feel you need coverage at least till end August, we are going to suggest at least some coverage till the end of year.
REFINED / PURE: Finally the cost of refined has lengthened from extra virgin/virgin. You should be seeing about a .10 cents a pound price differential. Although we think that the available inventory on refined is MORE than Extra Virgin. We still feel strongly that if EV starts to rise, that refined prices will follow. Also, if EV dips further, so will refined.
POMACE: Pretty interesting category. Pomace costs are firm and slightly rising. The raw material availability will peak soon as production comes to an end. Yet price offers are higher than they were last month. Urge caution as raw material will be plentiful. The issue is IF the EV/refined categories move – pomace will probably try and follow suit. Coverage out 60 days is still the recommendation.
***** 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
AVERAGE 1.1036 HIGH 1.1196 LOW 1.0858
Euro is trading at the HIGH of the last 30 day rates. This to be expected until Central Bank meets this way.
Euro has exploded to over 1.13.