Hot Summer – Still in Limbo
Well, the summer is well upon us. In both Tunisia and Europe, the heat has been considerable. Not much different than past years, however the late spring was much warmer than normal. How much the difference in temperature will affect the crop, we will not know until September.
There are some reports that in Spain the average water levels are much lower than normal. Which, if in the wrong place, can severely affect the stress level of the tree. The only thing we can do is sit and wait for the “September rains”. On our last visit to Spain in May, the experts were confident of a crop of 1.4 million tons in Spain. Tunisia was looking at over 350,000 and Turkey over 300,000. Without rain in the late summer, early fall we could be looking at lower levels than predicted. Again, the rain and to a lesser degree the temperatures in September will tell the story.
In Greece, the crop estimate for this upcoming season was for more than last season, same with Portugal and Morocco. So, if this was a math equation, the supply next crop will be more than last season. Did I mention that rain will be the key? However, two other factors that will determine certainly the starting/opening prices are the carry over figures based on OUTPUTS (in Spain) and the inventory levels of buyers come October. Currently OUTPUTS in Spain are about at normal levels; lower than the trend was for the early part of 2017. Using normal OUTPUTS of 110,000 tons, the equation leaves a 150,000 ton carryover. Certainly, not horrific, yet far from comfortable levels. Inventory levels of buyers come end September/October can easily make for a HOT market for the pre-2018 shipments. A third factor is the consumption. At these historic price levels, is the consumer going to buy – or more to the point, buy as much as they normally do. In the retail sector, the number and frequency of promotions have fallen. A complex set of factors of price and supply coupled with the unknown of the future weather patterns. Will NOT make for easy August decision.
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Worldwide Financial Crisis
The US economy continues to be mired in uncertainty. European economy seems to be on a stable path. Since the last newsletter, no legislation has passed Congress – Health Care – Tax Reform – Infrastructure. Yet, the stock market seems to be very active and climbing. However, that growth does not always reach the middle class. The TOP DOWN view of this administration should start making some progress that gets to the middle class as we approach the 2018 mid-terms. Hard to comprehend that only six months after a Presidential election, discussions have moved to the midterms. This, in my opinion, is the new reality in reporting politics as if it was a sporting event. Every day there seems to be coverage on who won the day’s new cycle.
California Olive Oil Commission / Australian Olive Oil Association
Preliminary discussions with Californian producers and Association are slowly moving forward, trying to find common ground to develop a more positive, cohesive general message to consumers. The NAOOA is most certainly interested in discussing these opportunities, we will see how the California industry responds.
Costing by Product – Buying Recommendation
In keeping with our track record for 2017, if one waited into June, EV buyers would have found some small quantity at lower prices than May. Mostly for prompt shipment and again in small unit sizes. It is just now, that offers are coming for September shipment / October arrival. Again, at lower levels since our last recommendation. However, the EURO (more on that later) is so much higher – landed costs are not lower even with better raw material cost.
Some exporters are offering prices for end December / January shipments. These are at decent discount from today’s offers. The levels are much higher than the beginning of the last crop, and average price levels in the beginning of most of the crop. We have not seen any offers for October/ November shipments at any discounted levels.
So, to discuss a recommendation, there are several important factors to know before we could be of any assistance. How much inventory do you have in stock, how much unshipped PO’s and more importantly – what is sold position vs your bought position. Contact us if you want to discuss options.
REFINED / PURE:
Refined is following same trends as EV. Offers are sparse and in small quantities. Turkey seems to trying to stay ahead of Spanish refined price declines.
Pomace continues to sell at high levels. In discussions with producers, there is an organized effort to keep raw material prices at higher than historic levels. Of course, this type of action does not work effectively without a steady and/or growing demand. Right now, conditions are ripe for this to continue. 1. Price differential between EV/ Refined is still very large and gives pomace a much lower price level than other categories. 2. With the high retail price levels, consumers are apt to switch to pomace which continues a strong demand trend. We do not expect to see any decline in pomace prices until EV / REFINED are readily available and prices are in decline. New Crop raw material will not be available until February 2018. Please know, a crop of 1.28 Million tons in Spain was a good size supply for a normal market demand. However, in 2017 the demand was much higher for pomace. Many of our customers are looking at this carefully and looking for alternatives.
Currency Facts – Euro Update
Well our economic policy of American First and Isolationist concepts on trade has made for a rather weak US dollar. Not sure how much longer the EURO will be stronger. In past 90 days, the exchange rate has not been pegged to any economic or commodity index. Hard to tell what exactly is behind a weaker dollar.
Month High Low Average
May 1.122 1.086 1.105
June 1.142 1.114 1.122
July 1.166 1.134 1.146
All three categories are trending upward by two points and in some cases more. Although no expert, until certainty returns and some legislation is passed, we can expect this trend to continue.