Lull in the Action

By Don Griego on

Market has slowed to a crawl. Crop is all but finished in Spain. The final figure for total production looks like 1.385 Million Tons, with yields being very good as compared to previous years. We can state that the quality on EV this year is much better than last year’s campaign.

Prices are flat and steady, not too much being offered and/or confirmed. There is a pensiveness to the market. Rumors are that new crop will not be as good as this season. There is some science to it, I think however a bit premature to make decisions based on next crop. It is leading to the doubt hanging over the market. The other subject which is always Omni-present is RAIN, or the lack of it. Currently they are getting a decent amount in important growing areas. Of course, it will be either not enough or too much.

At some point, market will take its final shape. Simple economics will take over, hard supply vs. demand. Tunisia has oil, however is content in selling into Italy with their large quota for Duty free entry into the EU. This without a doubt (Tunisian) represents the largest one year drop of exports to the US from one year to the next; at least in my memory. (Which is not as good as it used to be). The rain will or will not be enough to support proper hydration of the new blossom/crop. This will be an ongoing discussion as Spain does not usually get much if any rain over the late spring and through summer. The wild card at least for refined oil will be Turkey. Oil is slowly making its way out of Syria which usually finds its way into Turkish and Tunisia producers. Add that onto the crop from 2014/2015 which was significant and this year’s crop which was more than their declining domestic production, leads me to believe that some oil will come out of Turkey – refined of course. That alone may keep Spain prices on refined at levels we see today. Will it lead to a decline in prices?  Not sure or willing to commit to lower prices at this time.

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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.

Worldwide Financial Crisis

The biggest concern we have with Europe right now selfishly is the EURO.  It moves indiscriminately upwards without real warning and slides lower without a connection to any economic indicator (gold – crude oil – Dow Jones). This fact alone makes forecasting landed costs for imported goods very difficult.
 
In other news, the fear of terrorism is main headline in the news, any day not talking about the stalled European economy is a plus for the EU.
 
In US, the primary season is in full swing, many sub plots; brokered convention(s), super delegates, enough delegates to get nomination outright.  Candidates getting exhausted at the scrutiny and turning conversations into food fights.  Let’s hope for an early resolution on the nominee in both parties so hopefully they can start discussing ISSUES that the people really care about and need resolved.

California Olive Oil Commission / Australian Olive Oil Association

You have to give them credit, they continue to push the 60 Minutes report on mislabeling and equating the situation in Italy as a persistent issue here in the US.  Besides the fact 60 Minutes was talking about the mislabeling of Extra Virgin as from solely Italy, when in fact it was a blend of other extra virgins from different countries of origin from the Mediterranean!  Which is taking place in Italy and Europe- there is nothing significant happening here in the US with mislabeling of EV. The major brands all have country of origin declarations, specifically detailing the country the extra virgin was crushed from.
 
Tom Mueller throws number and percentages around like they are fact, and the viewers take it as gospel. Well, things have a way of leveling off when people spread known misrepresentations of the facts.  Not sure when it will be addressed, it will however be addressed.

Costing by Product – Buying Recommendation

EXTRA VIRGIN:
Same recommendation as last newsletter.  Keep your eyes and ears open for moves in the pricing on a EURO basis. What you do with the dollar/Euro is a whole other conversation.

REFINED / PURE:
Same conversation on refined as last month, although we think that refined may be more available than known last month. This has a better chance of remaining flat or declining than EV.  60 day coverage is what we would recommend.

POMACE:                                                                                                                                      Pricing continues to rise which is counter to my belief in supply and demand. The only explanation was that the previous levels were too far away from refined costs and demand picked up.  60 day coverage seems appropriate.

***** 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  1.12967         HIGH  1.14069         LOW  1.11052

The low for the past 30 days were almost higher than previous 30 day HIGH.  Perplexing to say the least.