Olive Oil Glut: IOC Says America Keeps the Trade Afloat
The world is heading into an olive oil glut, and the head of the International Olive Council says the only thing keeping the trade afloat is the American shopper. Speaking in Madrid, executive director Jean-Louis Barjol raised the Council’s estimate of this season’s world production to 3.31 million tons. Here is what he said, what it means for prices, and why he thinks some Spanish groves will simply stop producing.
What happened
Mr Barjol presented the Council’s revised figures for the 2011/12 season at the World Bulk Oil Exhibition in Madrid last Thursday, and the details were reported this week. Production is now put at 3.31 million tons, up from the 3.09 million forecast in November, mostly because of Spain’s record crop. The season opened with about 0.8 million tons already in stock, and world consumption is expected to reach 3.08 million tons, up from just under 3 million last season.
Put those together and the world will end the season with more than a million tons of oil in tanks, about a third of a year’s consumption. “Thanks to the U.S., the sector has been able to grow without drowning in a sea of olives,” he said, calling the United States the driver of the olive oil sector for many years.
| World olive oil, 2011/12 | IOC figure |
|---|---|
| Opening stocks | About 0.8 million tons |
| Production (revised April) | 3.31 million tons |
| Production (November forecast) | 3.09 million tons |
| Consumption | 3.08 million tons |
| Spanish extra virgin at origin, February | €1.75 a kilo, down 13 percent on a year earlier |
The rest of the speech
- Spain is winning in America through bulk. Bottled Italian oil still dominates U.S. imports, but Spain is gaining share by shipping virgin oil in bulk for others to bottle.
- Quality checks help confidence. He said the Council would watch the new USDA quality monitoring program for olive oil closely, as one of the things helping keep consumers confident.
- China is changing. Market research suggests Chinese buyers are starting to use olive oil themselves rather than treating it only as an exotic gift.
- More promotion. Campaigns are running in the U.S. and China, one is about to start in Brazil, and Japan is proposed for late this year.
- Fraud is overstated, in his view. Asked about mislabeling, he said he was not denying it happens but wanted evidence tested in court, adding that some people make claims to sell their own oil.
He also admitted to a puzzle. When the prices of soy, palm and other edible oils rise, olive oil does not follow them up, yet when they fall it falls with them.
What it means for growers and buyers
The hardest line in the speech was for growers. Mr Barjol cited studies by Spain’s Olive Oil Agency showing that the average cost of production is higher than the price farmers are being paid, and said an adjustment is inevitable. Old groves on steep slopes cannot be mechanized, so in his view they will have to add value through their heritage or distinctive local varieties to compete, and some traditional groves will stop producing. The Council’s March newsletter had Spanish extra virgin at €1.75 a kilo at origin, 13 percent below a year earlier.
For shoppers, a glut usually means promotions and cheap bottles through the rest of the year. The one change on the horizon is the dry winter in Spain, which he said should cut next season’s crop and eat into the surplus.
A surplus is not spread evenly. The oil that piles up in a glut year is mostly the ordinary grade, and some of it will sit in tanks until next year and be blended in. When supermarket extra virgin is suddenly very cheap, it is worth checking the best-before date and looking for a harvest year before you stock up.
The quality program he praised is covered in USDA Starts Olive Oil Quality Monitoring, Pompeian Signs Up First. For the long rise in American demand, see America’s appetite for olive oil ripens, and for the last time a big crop sank prices, Europe: Large Olive oil crop lowers prices.