Summer Break leading into Fall Decisions

By Don Griego on

Market is extremely quiet in Spain. Offers are still limited, and prices are a tad soft – certainly as compared to end June and July prices. We see this trend continue until September. Forecasters are settling in with crop estimates for Spain at 1.5 million tons. Italian producers are optimistic on crop levels. Turkey looks like it will have a good amount of oil with new production and carry over. In Spain, after some panic that carry over would not be 300,000 tons, it looks like it will be right around that figure. Which, we must tell you is confusing, because July’s output numbers (export/consumption- 119 tons) were still way above normal (105 tons).

So barring a frost in the fall, or complete lack of rain between now and the end of year, we should be in for a comfortable year on olive oil. We just spoke to some friends in Jaen (largest growing area) they have some rain – not much – any amount is good for the market.  So far, so good – stay tuned.

Pricing for 2017

Having been selling olive oil since 1982, buyers are always anxious to know their costs for their fiscal year as far out as possible. We understand the need to have a complete picture on your raw material costs as soon as possible. We would like to explore the good, bad and the ugly. We have never had as many customers want to have prices NOW for new crop. Bids with firm numbers, it has been quite a run on these requests. Here are our scenarios to giving pricing this early on olive oil:

1. Any prices given at this time of year are a GUESS – pure and simple. Could be educated or best estimate, however a guess none the less.

2. The EURO has to be understood, without firm orders in hand, importers cannot cover the EURO to FIX the cost even if it is a guess.

3. The buyers win if the GUESS is too low and the seller needs to honor that guess – UNLESS

4. The seller reneges on the offer, or does not deliver, or goes out of business depending on how much volume was involved.

5. The seller wins if market goes his way and they can buy it cheaper when the oil becomes available for sale on the projected shipment period. Buyer is unhappy that he was misled, buyer was not misled, it was only a guess at this time of year.

Our solution to buyers who want 2017 oil contracts.

1. Secure the seller’s best guess on costing.

2. Understand what the EURO is when getting final landed costs.

3. Have consistent communication with seller to get ready for the RIGHT time to move.

4. Around end October – November – have firm game plan to at least cover the first quarter of 2017.

5. Be ready to move on at least till end June or maybe beyond depending on the size of the world’s crop. This could be around end January – early February.

6. If crop is large – there is no rush in making longer range commitments.

7. Understand what is going on with EURO and make sure you have a game plan for that as well. EVEN, if total coverage of your dollar needs to cover the purchase.

Had to get that off my chest. As a “seller” we do not want to make long margins because we GUESSED right, nor do we want to lose large sums if we GUESSED incorrectly. As a trader we have SET margins that we gladly use with our accounts so that each side gets a fair value for their purchases.

MISSION STATEMENT

At AMD Oil Sales LLC, we take pride in being a “buyer’s sanctuary.” From start to finish AMD ensures that the needs of our customer are not just met, but fully recognized and exceeded in a seamless fashion.

AMD provides a stress-free environment for quick and efficient communication – all supported by proven supply chain integrity and the latest relevant market information. With that knowledge, AMD is able to accurately forecast and assist our customers in making prudent and educated purchase decisions. To ensure this reputable experience even further, AMD is also backed by a certification from the Safe Quality Foods Program (SQF).

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

Pretty quiet on the European front, pretty quiet all around. Presidential campaigns are in full swing, or at least one campaign is. Much like the olive oil crop, it is way too early to predict what the outcome will be. Cable news has turned politics into a sport where things are viewed pitch by pitch, inning by inning. Exploring statistics on past elections and correlating them to the current race. There are numerous things that can go wrong for either candidate before Election Day. If nothing else, it will be interesting.

CALIFORNIA OLIVE OIL COMMISSION / AUSTRALIAN OLIVE OIL ASSOCIATION

The assault on imported extra virgin continues by a USA reporter who wrote a book on food fraud. Most of the author’s critic is based on the biased industry funded study by UC Davis and another author who works for a distributor of California oils. Interesting enough, even though the main complaint, on competitive issues, some California producers have had to import oil to keep up with demand. Pretty ironic.

COSTING BY PRODUCT – BUYING RECOMMENDATION

EXTRA VIRGIN:
Possibly the worst time to be buying extra virgin for prompt shipment. Market is void of many offers, holidays in full swing. Come September the development of the market prices will  start to take shape. Not sure if the prices will soften to levels before summer, it does look like they will be softer than today’s prices. Next report we may/should have a clearer picture of what the last quarter costs will be.

REFINED / PURE:
Follows the same pattern as extra virgin. There is some refined volumes coming out of Turkey. That may soften the costs for this item, however, lack of Refined supplies in Spain is an issue heading into new crop.

POMACE:
Supply is ample, and enough to get into new crop. With expectations of a 1.5 million ton crop, we should see a reduction in new crop pricing. However, pomace will follow the pattern of EV and refined keeping a differential between those prices. Following that logic and economic logic, we will see lower prices for pomace in last quarter shipment.

***** 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: 1.112        HIGH: 1.1324        LOW: 1.095