IOC Sees a Bigger 2009/10 Crop as Prices Edge Up
The International Olive Council’s year-end market report puts world olive oil production for the 2009/10 season at 2,881,500 tonnes, 8 percent more than last season, while consumption is expected to stay almost flat at 2,839,000 tonnes. With stocks still comfortable, the modest price recovery of the autumn looks fragile. Here is what the report says, where the oil is going, and what it means for growers and buyers heading into 2010.
What the IOC published
The figures come from the IOC’s Olive Products Market Report Summary No 34, covering September to December 2009. They were discussed by the Council of Members at its 97th session in Madrid in November, alongside final numbers for 2007/08 and provisional ones for 2008/09.
| World, thousand tonnes | 2007/08 (final) | 2008/09 (provisional) | 2009/10 (estimate) |
|---|---|---|---|
| Production | 2,713.0 | 2,665.5 | 2,881.5 |
| Consumption | 2,754.5 | 2,825.5 | 2,839.0 |
| Exports | 562.5 | 581.0 | 632.0 |
| Ending stocks | 811.5 | 638.5 | 642.0 |
The European Union dominates every line. It produced 73 percent of the world’s oil last season and is expected to hold about 85 percent of the stocks left over at the end of this one, some 544,500 tonnes. The IOC describes last season’s closing stocks as equal to about 82 days of world consumption, slightly more than the trade normally needs to bridge from one harvest to the next.
The price picture
The report traces the slide that made 2009 such a bad year for growers. From the start of the 2008/09 season in October 2008, producer prices fell until May 2009, when extra virgin hit 170 euros per 100 kilos in Jaén, Heraklion and Messinia and 197.50 euros in Bari. That was the moment Brussels moved on the private storage aid we reported on in May, after which prices climbed back.
At the end of November, growers were being paid 2.13 euros a kilo for extra virgin in Spain, 2.22 euros in Greece and 2.53 euros in Italy. That is 3 percent more than a year earlier in Spain and 8 percent more in Greece and Italy. Refined olive oil was 3 percent cheaper in Spain than a year ago and 1 percent dearer in Italy.
Where the oil is going
The IOC also tracks imports into six key markets, and 2008/09 shows how the recession hit trade:
- The United States took 276,583 tonnes of olive and olive-pomace oils, up from 264,471, with pomace oil driving much of the gain.
- Japan rose about 10 percent, Australia about 5 percent and Brazil about 1 percent.
- Canada fell 45 percent and imports into the EU from outside the bloc fell 39 percent.
For 2009/10 the IOC expects trade to pick up again, with world imports estimated at 593,000 tonnes and exports at 632,000 tonnes, both higher than last season. For producers, that makes the United States, more than ever, the market that matters, and it is also the market where shoppers are trading down during the recession.
What it means for 2010
A crop that outruns consumption, on top of stocks that were already ample, is not a recipe for higher prices. The autumn rise in Spain is small and could easily evaporate once the bulk of the new crop has been milled over the winter. Do not be surprised if Spanish grower groups are back in Brussels asking for storage aid before long.
For shoppers, the practical effect is that supermarket olive oil is likely to stay cheap next year. The less comfortable truth is that a lot of it will be sold at prices that do not cover what it costs a traditional grower to produce.
These season estimates are made in November, before most of the fruit has been picked, and revisions to the Spanish crop alone can move the world total by a hundred thousand tonnes or more. The trade watches the monthly Spanish figures through the winter far more closely than the headline IOC number. If you want to know where prices are heading, look at how fast Spanish stocks are being drawn down, not at the forecast.