Thursday, December 4, 2008

Australian Sensory Panel Regains Recognition / Testing Your Olive Oil to International Trade Standard in Australia and New Zealand.

Good news for the Australian Olive Industry. The Australian Olive Oil Sensory Panel based at the Wagga Wagga Agricultural Institute in New South Wales has regained its international recognition by the International Olive Council. The New Zealand panel has retained its recognition.

This means that olive oils can again be fully tested to International Trade Standard at the NSW facility for the next year. It is the only facility in Australia that has IOC recognition for sensory and chemical testing.

However, for New Zealand, the comments below are still relevant, as are observations on the validity of test results published over the past year from Australian and New Zealand testing facilities.

Olive Business 4 December 2008

For further information contact Simon Field on 03 9387 9919 or email

Testing Your Olive Oil to International Trade Standard in Australia and New Zealand.

If you want your olive oil certified as extra virgin in Australia and New Zealand, you will have to send it overseas for testing.

As signatories to the Codex Alimentarius, the standards for olive oil in the Codex apply in Australia and New Zealand (Codex standard 33). The standard for trading across international boundaries is described in the Trade Standard published by the International Olive Council (IOC). These standards are available at and respectively.

To test imported and locally produced olive oils and to take action against those that do not comply, the oil must be tested by competent authorities. Competent authorities are those which are firstly approved by the country in which the testing is taking place, and secondly recognised by the International Olive Council (IOC). This recognition, bestowed annually, requires the laboratories meet a standard of analysis and prove competence through analysing test samples distributed by the IOC.

There are two testing regimes for olive oil, one chemical and the other sensory (taste). Currently Australia has one IOC recognised chemical testing laboratory, the Oil Research Laboratory of NSW Department of Agriculture, and no recognised tasting panel. New Zealand has a recognised tasting panel and no recognised laboratories.

Therefore, olive oils cannot be fully tested and classified to international trade standard in either country. To be valid any full classification would have to be carried out overseas.

This calls into question the validity of all classifications bestowed by laboratories in Australia and New Zealand, including the analyses of olive oils taken from supermarket shelves and tested on behalf of the Australian Olive Association. The chemical testing may be valid, the taste testing almost certainly is not.

In following up on the claims made by the AOA of incorrect labelling and adulteration of olive oils the Australian Consumer and Competition Commission (ACCC) will need to be mindful of this and require overseas testing of all samples, including Australian brands which the AOA claims are fully compliant.

Furthermore, issuing of classification certificates by laboratories not recognised by the IOC that may imply the classification is to international standard for olive oil should be as unacceptable as the incorrect labelling of olive oils on supermarket shelves. There may also be legal implications for producers using these certificates to claim authenticity should there be a dispute over olive oil quality.

A list of IOC recognised laboratories is available at:

Olive Business 25 November 2008

For further information contact Simon Field on 03 9387 9919 or email

Market Outlook for Olive Oil – November 2008

The World

Harvesting is underway in Europe and with favourable rainfall in most regions the production outlook suggests a good or very good harvest, according to the International Olive Council (IOC).

Consumption patterns seem to be normal.

Price movements are downwards or stable with total transactions well below expectation.

The expected rise in virgin olive prices which usually precedes the new harvest in Europe have not materialised and prices have continued to fall or levelled off. Compared to the same time in 2007, the prices for extra virgin olive oils are 1% lower in Spain, down 15% in Greece and down 15% in Italy.

Prices for refined olive oil were 4% lower in Spain, 2% lower in Italy and stable in Greece. (IOC)

These trends suggest an increased carryover of stocks in Europe and with an expected above average harvest, further downward pressure on prices.

The world economic situation, with the USA officially in recession and most of the major olive oil consuming countries in Europe also in recession, will affect retail sales which can be expected to fall, putting further downward pressure on prices.

The spectacular fall in the price of crude oil will ease the pressure to find alternate energy sources such as biofuel from vegetable oils. This should reduce the demand for canola and soya bean oils, making these oils cheaper. International commodity prices for grains and their vegetable oils will therefore follow the downward trend of the world financial markets. The expected lower prices of vegetable oils will flow through to supermarket shelves and foodservice, putting downward pressure on competing oils such as olive oils.

On the positive side, currency exchange rates have seen the rise in the US dollar which will favour imports into the country which has the highest olive oil imports outside the European Union (EU).

Australia and New Zealand

In the high volume bulk and supermarket olive oil trade, the rapid fall of the Australian dollar will tend to increase the cost of imported olive oils. This may be offset by the prices in the EU falling over the next year.

However, over the last year, with the exception of refined olive oil in bulk, import prices at the wharf have fallen. The average price (customs value) of packaged virgin olive oil imported into Australia in October was $5.26/kg (4.78/litre), down 2.5% on the same period last year. Bulk virgin olive oil averaged $4.66/kg (4.24/litre), down 10.4%, packaged olive oil averaged $5.12/kg (4.66/litre), down 5%. Against the trend, bulk olive oil increased by 16.5% to $4.80/kg (4.37/litre).

Consumption of olive oil may decline, especially if the prices do not fall to compete with the falling prices of other vegetable oils both in supermarkets, manufacturing and foodservice.

Supermarkets have already indicated a rationalisation of olive oil brands offered and the general trend in retail is to reduce inventory as consumer demand declines.

On the positive side, the falling Australian dollar will improve the potential for exports to the US and EU. This will be offset by increased stock in Europe competing for the US and EU markets.

In the current production cycle, shortage of water for irrigation will affect the yields in some of the largest groves in south eastern Australia. In Western Australia the cropping season is expected to be good, after the alternate bearing affected 2007 harvest and adequate rainfall.

A recent report in The Australian indicates that the large Managed Investment Scheme developments in the olive industry are over. Both Timbercorp and Great Southern Plantations, who have substantial investments in olive groves, are trading at less than 5% of their peak values in 2006, with more than $1.7billion stripped from their combined market capitalisation. Both companies are reportedly selling off assets, including olive groves, to reduce debt. The result will be a significant slowing of expansion in all aspects of the olive industry.

These factors lead to the price expectation for large volume Australian extra virgin olive oil being downward to compete with high international stocks of olive oil and low vegetable oil prices. The price for refined olive oil is expected to increase as most of it is imported and affected by the poor Australian dollar to Euro exchange rate.

Exporters should be aware that there have been reports of problems with International Letters of Credit (ILC) not being honoured as importers lack liquidity or believe they have paid too high a price as prices fall.

For the small volume and boutique market the outlook is one of increasing number of brands competing for a declining market with strong downward pressure on prices. While pre-Christmas spending appears to be equal to 2007 in boutique stores, the expectation is that there will be a marked slowing in early 2008 as more households come under financial pressure.

The food service and restaurant trade have reported fewer diners when Christmas festivities would be expected to boost covers. Corporate spending on festive season activities, and entertainment in general, has been severely curtailed. So olive oil consumption in the foodservice sector can also be expected to decline

The general outlook in Australia and New Zealand is for a tightening of the market resulting from declining local consumer demand and higher stocks in the EU. With a harvest which is expected to be higher than 2007, and lower competing vegetable oil prices, there will be downward pressure on prices without the compensating increase in volumes traded.

Production Costs

Producers will get a little relief from contracting margins with some expected decreases in production costs.

Over the next 6 months, all the inputs derived in some way from crude oil will start to cost less. These include fertilisers, pesticides, herbicides and other chemicals.

Fuel costs have already come down substantially so harvesting and transport in general should cost less.

Plastic and other petrochemical based packaging should also be cheaper.

Increased unemployment may lead to less costly labour. However, governments that have allowed seasonal labour migration may curtail this to increase the employment of local labour.

The lower commodity prices for iron ore should lower the cost of steel and other metals used in the manufacture of machinery. Add to this increased the competitiveness in all sectors, the cost of machinery and servicing can be expected to come down.

In Australia, with over 10 years of dry seasons, water will continue to be a major issue and prices will continue to trend upwards.In summary, expect lower prices, price competitively, maximise margins by increasing efficiency and promote, promote, promote.

Simon Field

Olive Business November 2008