As reported in our June posting, anchovy raw material still remains short. After the fish has been caught, it takes up to 3 months to fully cure, so it can be cleaned and packed into cans. The demand is very strong and for those with a good source of supply, like us, it is very difficult to keep up with the need. Raw material will remain short throughout the rest of this year. Pricing is firm and fillets will trend toward the smaller size since that is all that is being caught recently.
It has now become apparent that olive oil demand is higher than the available supply. Spain usually supplies about 40% of the world wide demand, however this year they could only supply 34% leaving an appreciable gap. Other Mediterranean suppliers, Italy, Greece, Turkey, Morocco, and Tunisia, cannot pick up the big void left by Spain. There is significant concern that there will be very little carryover for the new crop this fall. These factors have firmed up all Olive Oil grades significantly the past couple of months, and the trend will continue until the end of the calendar year for sure.
Here at Schreiber, we import peaches from both Greece and China. The Chinese factories require much more labor than the Greek, whose factories are highly automated. The Chinese crop began in early July and the Greek crop about July 15th. There are many varieties of yellow peaches all over the world each having slightly different characteristics.
The Chinese peaches have been larger than usual, which is good for dices and slices. Pricing is similar to last year and quantities should be adequate.
The Greek peaches have been slow coming out of the field and the size has been smaller than usual. Despite the eagerness of the farmers to sell their crops, they have not been able to supply some of the larger packers with the quantities they need to run 3 shifts. Greece is the world’s largest producer of canned peaches, but they are concerned about their total output this season. Last year, it cost $1.40 to buy one Euro, and this year it costs only about $1.10!
So, yes, it would seem as though the price should be lower than last year, but the raw material has gone up in price, and the world wide market is underserved creating a strong demand. New crop peaches will be arriving in the USA by the end of August, early September. Greek peaches will cost more than then Chinese, but still less than California.
Although not usually a big topic in the news, anchovies are now newsworthy because there aren’t enough raw materials to meet the demand of the anchovy market. The fishing in the North Atlantic Ocean near Morocco has been very short. Fishing in the Pacific Ocean off the coast of Chile and Peru has been very short as well. Over the past 15 years, much of the world wide anchovy production has moved to Northern Chile and Peru. Due to the effects of El Nino, the water off the coast of Peru is warmer than normal making it difficult to attract cold water Anchoas Ringens, anchovies. The fish are migrating further north away from the traditional catching areas of Arica, Chile, and Pisco, Peru, and are headed to Chimbote, Peru, which is about 6 hours north (by truck) from the main factories around Pisco, Peru. There are no official figures for the raw materials, but it is quite short in supply and the cost has almost tripled in the past 3 years. The yield of the fish is only about 25% so the increase has not had an overwhelming impact on the cost of the finished product. Processing anchovies is very labor intensive which is a huge reason as to why anchovies are expensive.
The prices of anchovies should remain firm, but they will continue to be in very short supply for at least the next 6 months.
Not to sound like a broken record, but the oil market is very strong, with special pressure on Extra Virgin. There are two simple components that determine the annual supply: the carryover (leftover) from last crop and the projections from the new crop. The new crop oil estimates are typically confirmed sometime at the beginning of the calendar year. There are also several factors that affect pricing. The main factors are consumption, availability, and exchange rates. So far this year, consumption seems to be unusually strong, especially in Spain, which is the world’s largest consumer of Olive Oil. The total availability for this year’s supply is tight, especially considering that consumption is pacing ahead of historical usage. Although the exchange rate is favorable of the US Dollar vs the Euro, it is no longer offsetting the price because prices continue to increase.
However, the biggest factor in Olive Oil pricing is the ‘speculators’. There are a few companies that have tremendous strength and can turn a market at a moment’s notice. They can do this by buying up a lot of oil in a very short time which in turn moves the market. Or they can do the opposite and can sit back and leave the market alone, leaving it weak. These speculators have the biggest influence on the fate of the olive oil market. The price of Pomace and Extra Virgin should remain strong until late fall as new crop begins to be harvested.