Spanish Olive Oil Production Down, Prices Up, Consumption Steady

Drought has affected the Spanish olive crop and forecasters estimate a 30-40% reduction in olive oil yield for the coming harvest. However, this drop in production is to some extent counterbalanced by carryover stocks from the previous record harvest.

International Olive Council data shows in 2011/12 production exceeded consumption. The shortfall in the Spanish crop is expected to return the balance between production and consumption.

Olive oil is part of a group of oils used in cooking and salad dressings. According to forecaster Oil World (www.oilworld.biz) production of these oils will fall up to 18% in the next year.

In anticipation of these shortfalls olive oil prices have jumped significantly. According to Oil World, ‘Domestic prices in Spain for extra-virgin olive oil rose 40 percent from June to about 2,400 euros  a ton in September last week, and could surpass the previous March 2008 high of 2,633 euros to climb to at least 2,800 to 3,000 euros a ton’.

Italy’s olive-oil production, the world’s second-largest, is seen climbing to 540,000 tons from 518,000 tons, while output in Greece may advance to 355,000 tons from 335,000 tons’.

World consumption of olive oil is forecast to stagnate in 2012-13 after climbing for six consecutive years.  “It can be expected that consumption of olive oil will be affected by the prospective high prices and the widening of the price premiums relative to sunflower oil and other vegetable oils,” according to Oil World. (Source Bloomberg and Oil World)

Olive Oil Production Exceeds Consumption

The depressed state of the world trade in olive oil can be partially explained by the simple dynamics of supply and demand. According to the statistics published by the International Olive Council, supply of extra virgin olive oil exceeds demand. This has led to low prices and storage of olive oil in Spain in an attempt reverse the supply/demand situation. However, the stored extra virgin olive oil will deteriorate and its release into the market will increase the availability of lower grade olive oil selling at lower prices and competing with extra virgin olive oil.

Olive Oil Imports into Australia Steady

The imports of olive oil into Australia have remained steady over the same periods in 2011 and 2012 according to International Olive Council data. Dips in import volumes prompted some comments in the media that the cause was the inroads made by locally produced oils. However, the comparatively low imports in the last three months of 2011 were balanced by increased levels in the first three months of 2012.  Over this period the level of imports is steady at just under 3,000 tonnes per month.

Small Gains in Local Oil Consumption in Australia

Analysis of International Olive Council data shows that the percentage of locally produced olive oils sold in Australia has risen approximately 4% over the past 5 years. Consumption of local oils remains at a low level of 27%, despite major publicity campaigns encouraging consumers to buy local and persistent unqualified attacks on the quality of all imported olive oils.

Per Capita Consumption of Olive Oil Increases in the USA

Per capita consumption of olive oil in the USA continues to rise (USDA, World Bank and IOC data). Over the five years from 2007 to 2011 consumption has increased from 0.82 litres per person to 0.88 litres. Most of the olive oil is imported making the US the largest importer outside the European Union. Local production, mainly from California, produces approximately 2% of consumer requirements.

Quality Standards and Labelling are Separate Issues

The Australian Competition and Consumer Commission has demurred from using the ‘Australian Standard’ for olive oil in pursuing prosecutions for alleged non-compliance. Perhaps it is time for the proponents of the standards to separate the multiple aims and deal with them sequentially.

The sections of the standards dealing with labelling can be dealt with first, while those that deal with quality can be pursued separately.

Olive Oil Consumption Drop in Greece and Italy

Olive oil is losing ground to cheaper vegetable oils in its heartland, the major producing countries Greece and Italy. Reported by the British Independent newspaper, The International Olive Council reports that olive oil consumption in these two countries is down to 1995 levels while Spain is holding steady. The consumption drop is attributed to consumers switching to cheaper vegetable oils.