Sum – Sum Summer Time in the Olive Oil Industry
The fundamentals of the market have not changed since the last newsletter in late May. However, price levels have strengthened – which has many perplexed. The best explanation (guess); a small number of buyers had to buy oil at the same time many sellers were about to take their summer holidays. As sales were confirmed the availability of offers dissipated and sellers became emboldened in making new offers at higher price levels. Again, this is my guess only. In the past, sellers just wanted to get through the summer with some return, especially when supply was abundant. Inventory levels are higher than in past seasons for sure, one does have to wait to see what next year brings in production numbers. Many buyers are confused as next season, although still far away, initial forecasts call for a good size worldwide crop with an ample carry over stock.
WHEN will price level react to the realities of supply and demand? One would think as we get closer to the new crop (October 1 is when the official carry over will be put on the record). We do not see where prices would increase based on availability. All signs so far look to a good harvest season. Yet, here we are. This may be a week-by-week development of pricing.
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WORLDWIDE FINANCIAL NEWS
Chaos seems to be the most appropriate term to use on the TRADE WAR we are engaged in. Pretty drastic measure to try and level out trade imbalances. Presently no one knows who will be the “winners” or “losers” on a long term basis to this executive action(s). In short term, the scorecard will be quite evident on the effects. In guessing, the hope is the “losers” will not be effected long term and the “winners” will be creating new opportunities for US companies. Just not sure if anyone really knows what the end game or the desired results should be.
NORTH AMERICAN OLIVE OIL ASSOCIATION / CALIFORNIA OLIVE OIL PARTNERS
Here are some details on the Olive Oil Conference – www.aboutoliveoil.org . It was another opportunity for some members of the import community to sit and informally talk face-to-face with our Californian counterparts. The more we are able to do this and define what we have in common – the more collaboration, the hope it will lead to developing programs together that will increase consumption of olive oil in the US.
COSTING BY PRODUCT – Buying Recommendation
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.
The most affected item in terms of price increase since May. One could speculate that the availability of extra virgin may be difficult to find coming to the end of the crop year. Not sure if we agree with that sentiment. Our recommendation is to cover till end of September. Our last newsletter indicated to cover till End August. In hindsight that recommendation should have been longer.
REFINED / PURE:
Refined is following EV on costing. However, if one thinks that the availability of EV is the cause of the increase in pricing, that is NOT the case with refined. Stay on tight inventory levels as needed to keep in stock. I have been wrong before, however the fundamentals to refined costing indicate at least to me, that there will be a wider spread between EV and refined soon.
Pomace has steadied itself after a fall in pricing since May. There is a healthy distance between refined and pomace costs. Not entirely sure – my feeling is there is some capacity for refineries and it appears that raw material is available. Our feeling is that cover till end September should suffice. Price levels are not at a point where one should take a more aggressive position.
***** 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
Still a very hard forecast to the future on the EURO / US dollar. The Chaos of the Trade Wars has not had a major impact, YET. Will it, no one can say, we are on virgin territory on effects of a Trade War. Even the Federal Reserve which is supposed to be separate and non-political is now drawn into the fray. You can argue that the FED has played in the political arena before, just not called out by the Executive Branch as directly as recently.
Since May 11th Last Newsletter
AVERAGE 1.170 1.217
HIGH 1.196 1.237
LOW 1.156 1.185