Olive Council Sees the Second Biggest Crop on Record
The International Olive Council now expects world olive oil production of 3.08 million tons in 2010/11, the second largest crop ever recorded and within reach of the 3.17 million tons of 2003/04, with the increase coming mostly from outside the European Union. The figures are in the Council’s latest market newsletter. Here is who is making the extra oil, what is happening to imports, and why Italian growers are getting paid twice what Spanish ones are.
Who is making it
The European Union still accounts for about 73 percent of world production, and Spain alone for 45 percent of the world total. What is new is the pace outside Europe.
| Country | 2010/11 production |
|---|---|
| Spain | 1.37 million tons |
| Italy | 480,000 tons |
| Greece | 300,000 tons |
| Syria | 180,000 tons, an all time high |
| Turkey | 160,000 tons |
| Morocco | 150,000 tons, roughly double |
| Portugal | 71,800 tons |
| Algeria | 50,000 tons |
| France | 5,600 tons |
Put in a longer frame, world production has risen by 89 percent in twenty years, from 1.45 million tons in 1990/91. That is the number behind every argument in this trade: the price crisis in Spain, the push into China, India and Brazil, the campaigns to persuade Americans to cook with something they did not grow up with. The world learned to grow a great deal more olive oil before it learned to eat it.
Imports are following
Demand is moving too, if not as fast. Across the first three months of the season, combined imports into the European Union, the United States, Brazil, Canada, Japan and Australia were 17 percent higher than a year earlier, with the EU itself up 22 percent. Over five months to February, Brazil was up 21 percent, Canada 16 percent and the United States 9 percent, Australia edged up 2 percent, and Japan fell 6 percent.
Those are healthy figures, and they still do not absorb a crop of this size. Stocks are the quiet number that decides prices, and after two large crops in a row there is a great deal of oil sitting in tanks in Andalusia.
The price split
The most interesting line in the report is about producer prices. Compared with a year ago, extra virgin is about 5 percent cheaper in Greece, at 1.94 euros a kilo, and in Spain, at 2.01 euros. In Italy it is 44 percent dearer, at 3.90 euros. The Council notes recent steep rises in Italy against stability in Spain and a small fall in Greece, and says this confirms a growing distance between what Italian growers are paid and what Spanish and Greek growers are paid.
The reason is not that Italian oil is twice as good. Italy had a poor crop, Italy consumes more oil than it makes, and Italian bottlers buy on their home market first and import the rest. When the Italian crop is short, the domestic price jumps while Spain, which has to export most of what it makes, absorbs the surplus at whatever the world will pay.
For a grower in Jaen, selling at two euros against a cost that the ministry’s own figures put well above that, a record world crop is not good news. It is the third year in a row that a full tank has meant an empty pocket.
A world production figure tells you almost nothing about what you will pay. Retail prices in northern Europe and America barely moved through this glut, because the cost of the oil is a minority of the cost of a bottle on a shelf: packaging, freight, marketing and the retailer’s margin do not fall when Andalusian farm gate prices do. The people who feel a record crop are the growers, and the people who benefit are the large bottlers buying cheap and selling at yesterday’s price.
Sources
- Olive Oil Times, Council Predicts Second Biggest Year Ever for Olive Oil Production
- Olive Oil Times, Council Releases Olive Oil Market Summary