First 2011/12 Forecasts Point to Another Big Crop
The first estimates for the 2011/12 crop year point to more olive oil again, with Spain expecting 1.4 million tons and Tunisia forecasting a rise of about half. The numbers come from member countries and are published in the International Olive Council’s August newsletter, with the usual condition attached: if the weather holds. Here is the picture they paint, and what it means for a market that is already carrying too much oil.
The first numbers
Among European producers, Spain expects about 1.4 million tons, some 2 percent above last season, Greece around 310,000 tons, up about 3 percent, and France about 5,700 tons, roughly flat. Outside the European Union, Syria forecasts around 200,000 tons, up about 11 percent, while Tunisia and Turkey both expect about 180,000 tons, rises of roughly 50 percent and 12 percent. Several member countries have yet to report.
Table olives look similar. Lower crops in Spain and Greece should be offset by Syria at about 165,000 tons, Iran at 45,000 and Turkey at 450,000. Egypt, whose olive growing is almost entirely for the table, is heading for a record of around 500,000 tons.
| Country | Olive oil forecast, 2011/12 |
|---|---|
| Spain | About 1.4 million tons, up about 2 percent |
| Greece | About 310,000 tons, up about 3 percent |
| Syria | About 200,000 tons, up about 11 percent |
| Tunisia | About 180,000 tons, up about 50 percent |
| Turkey | About 180,000 tons, up about 12 percent |
Trade is growing, prices are not
Demand is not the problem. In the first eight months of the season, combined imports into Australia, Brazil, Canada, Japan, the United States and the European Union rose by about 123,440 tons, some 13 percent on a year earlier. Between October and June, Brazil was up about 23 percent, the United States about 9 percent and Canada about 7 percent, while Australia slipped about 1 percent and Japan fell about 12 percent.
Producer prices tell the other half of the story. Extra virgin has fallen about 4 percent in Spain to around 1.89 euros a kilo and held steady in Greece at about 2.04 euros, while Italy sits about 35 percent higher than a year ago at roughly 3.57 euros after touching 3.92 euros in the spring. The council notes that the recent dips may be a reaction to these first 2011/12 estimates. That is how this market works: growers are paid today for what the trade thinks it will be able to buy in December.
What it means
A second big crop on top of full tanks is the worst possible news for Spanish growers who have been selling below cost for three seasons. It is fine news for buyers, and it explains why Italian prices have not followed Spanish ones down: Italy is short, and it buys.
- Forecasts made in August are guesses with two months of weather still to come.
- Tunisia rising by half is a reminder that the swing producers outside the European Union set the price at the margin.
- Egypt’s table olive record shows where the growth in olive farming is actually happening.
The same pattern, a big crop pressing on prices, has been running for years: see how Europe’s large crops lower prices, Spain selling a record volume at prices below cost, and an earlier council report that read much the same way.
Early forecasts move money before they move oil. Mills and cooperatives that sell forward in September are pricing against a number that three storms could destroy, and the buyers on the other side of the table know it. If you want to know what a harvest is really worth, wait for the December figures, when the fruit is in the mill and the yield per kilo of olives is known.
Sources
- International Olive Council: Market Newsletter August 2011, first 2011/12 estimates (archived copy)
- Olive Oil Times: Production Edges Higher, Prices Lower in Latest Olive Council Report, 8 September 2011 (archived copy)