What a Difference 45 days makes!

By Don Griego on

Since our last newsletter in late January, the market has turned upside down. Several factors came into play:

  1. The rain that was desperately needed – has come, maybe not in the amounts necessary, but enough to take some of that conversation out of the pricing equation.
  2. OUTPUTS in Spain, which are normally 105/100 thousand tons were below 100 for January and February. The past 18 months or so, OUTPUTS have been averaging closer to 125 k tons per month. So, the discrepancy over normal ranges is even more exaggerated.
  3. Obviously, inventory stocks have now met reality, when looking at carry over. The amount of inventory in bottlers’ hands is pretty high, and overall stocks of over 1 million tons is starting to weigh in on the market prices.
  4. The crop turned out to be a little better than anticipated and discussed; not much of a math issue, more of a psychological one.
  5. Buyers have been content in securing good quality from Tunisia and Turkey. A bigger issue is that both have good amounts of oil to sell, and want to move product as the parameters of the oil will start to break down some as the weather warms in those countries. Look at Tunisia as more of an obstacle to Spanish prices, as their local consumption is rather low, and their available stocks are plentiful vs their internal demand. Stock levels could be close to 100,000 tons. Turkey has available quantities, however their local demand is quite strong especially if prices start to retreat.
  6. Just as buying activity inflates the demand and causes a firming of prices, the lack of buying inquiries does exactly the opposite. Usually with more volatility downward. Buying activity is somewhat predictable and can be tied into several factors; waiting for new crop – waiting on vessel arrival to load to Europe and US. On the other end, as crop is now over and demand slows, and activity / buying activities are quiet when vessels are scheduled – one can see some panic in some producers’ minds. A month ago the price was significantly higher, and that price reduction as of yet, has NOT brought about desired movement.

However, the news is not all that good for buyers. Next year is looming as we start to discuss proper carry over levels. There is still a need for more water in the key reservoirs in Spain and growing area. The blossom is not for another 60 days or so. Turkey and Tunisia will not have as big a harvest as this year. The largest buyer group (Italy exporters) will be more active as the Italian harvest looks to be less than this year as well.

In conclusion, the bottom will come, one has to be very careful not to be too bearish.


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In US, since the Tax Legislation, no significant bills have been passed. Probably the most important development has been the tariffs the White House has put on steel/aluminum. Additionally, the tariff on Chinese goods to the tune of $50 billion. I am not sure I understand the correlation between trade deficits and enacting tariffs as explained by the White House. Our new Federal Reserve Chairman raised interest rates in his first meeting. All in all, the European economy is not reporting any significant bad news. Our economy seems to be revving up. The Tax Legislation is starting to be more clearly understood by the tax payers, as they file their 2017 return, most are getting more familiar with what their 2018 tax situation will be. Stay Tuned.



We wanted to put a caveat to these recommendations. Many factors are very individualized to a company’s long and short terms goals / sales / projections / budgets. These recommendations are our best educated guess on where we see the market over the time frame discussed here.

Last newsletter recommended to go out until end of June. That turned out NOT the ideal spot to be in now, since in the last 10/14 days the market has really softened. Tunisia and Turkey have followed this lower trend, probably leading to Spain following suit if demand does not pick up. The lower priced material will not really be readily available stateside until mid-May in a significant way. If you have not covered until the end of June, it is still our recommendation. Maybe a tad farther.
Refined is following the same trend. The difference will most likely be refined stocks availability in Europe are going to be longer than EV stock levels. Do not anticipate a firm market on refined for a good while. (EURO*) If you are covered at higher than replacement, you want to start selling aggressively to get out from under your position. If you need to purchase, 45 days out – or as long as the lead time to get direct imports into your system. Watch the EURO.
Kind of strange that this market has not moved much. Certainly not anywhere near EV and Refined have moved. Something does not add up, as stated last newsletter, this is when raw material is most abundant. There is no doubt that prices rose over the past 9 months to keep an organized spread versus refined olive oil. What I am having issues understanding is exactly what is going on in this arena. My best guess is that demand outside the US is high enough to keep the refineries working at enough capacity not to lower selling prices. We do not see how pricing will go up, stay close to normal lead/turn cycles.
***** 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. 


The daily/weekly swings have not been as drastic since last newsletter. The EURO has traded in narrower levels since end of January. However, if interest rates are going up in US, the economy is doing well, why isn’t the dollar stronger? Someone with more understanding will have to answer that. All we can comment, the consultants we use are as baffled as we are, and comment that the uncertainty is the new reality of Forex Trading. So, from the chart below, the figures do show the EURO trading in narrow lanes on all three metrics, especially when compared to the last 180 days.
                             Last 60 days                Last 180 days
AVERAGE            1.234                            1.20
HIGH                    1.248                            1.248
LOW                     1.22                              1.158