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European Olive Oil Market Report - April 2024
Main Market Figures - Spain
As the Spanish market continued to lead the olive oil industry, March witnessed significant shifts, with a focus on AICA's data. Summarizing the month's developments, prices showed a downward trend, raising concerns about the sustained high levels of consumption volume.
Weather Conditions
During March, Spain experienced massive rainfalls, with reservoirs storing more water. However, even if the levels are significantly improved they remain pretty low. This indicates good irrigation during the summer months, although the forecast for April describes a dry and hot month. As we focus on Andalusia, where most olive groves are located and the primary olive oil production is observed, the reservoir water has reached 42.59%. The increase of 13.18% creates better conditions for a better crop next season in relation to the weather conditions that will prevail during the summer.
The current state of water reservoirs in Spain is showcased in detail in the following graph:
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As we're entering the flowering season of olives there is a general need for mild weather with no high temperatures that might burn the flowers and no heavy rainfalls. However, the forecasts indicate a dry month with a fear of high temperatures that might affect the crop.
Consumption
In Spain, consumption remains robust with this month's levels reaching 67.052 tons a decrease of 12.09% from February's consumption. However, the limitation of average monthly consumption of 68.000 tons must be applied to maintain the viable carryover for the next season. What is more concerning is that even the higher prices didn't discourage consumers in the previous months.
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According to AICA's publication, the minimum viable carryover is 180.000 tons with the Real Market Stocks to the next season have reached 480.000 tons. The average consumption of the past 5 months is about 67.000 tons.
Harvest
With seven months remaining until the next harvest, the total crop stands at approximately 846,178 tonnes, with packers holding 184,870 tonnes and farmers retaining 470,914 tonnes. Surpassing the expected crop by 46,178 tons has injected additional supplies into the market. The recent rainfall has fostered optimism regarding the outlook for the upcoming harvest and its potential impact on crop yields.
Our View
As we transition away from the period when olive groves require water storage and approach the flowering season, favorable weather conditions prevail. Recent days have seen substantial rainfall, which is essential for replenishing reservoirs and indicating a promising yield for the upcoming season.
Moreover, a decrease in purchasing activity from packing houses coupled with farmers needing to sell off their stocks has created an environment conducive to significant price drops. Particularly, the Spanish market is witnessing pressure on the main category of Extra Virgin Olive Oil, potentially leading to shortages. Despite high consumption levels, there are concerns about possible supply constraints, prompting the need for stricter limitations.
The market's uncertainty regarding future price trends persists, as major players have yet to make decisive moves. While some packing transactions were observed last week, they did not sway the downward trajectory of prices. The focus now shifts to how consumption patterns will evolve in the upcoming period. However, the current situation in the Olive Oil Market presents a challenge to forecast the market's future trajectory.
Main Developments in Greece
In our latest monthly review, Greece remains stagnant in the olive oil market, with restricted purchasing and selling activities causing prices to dip slightly. Spain appears to be setting the trend, with prices in the Greek Market ranging between 8.30 and 8.50 euros per kilogram, while Spain's average price stands at 7.50 euros per kilogram. Global market interest in large-volume purchases seems lacking, suggesting that Spain will likely dictate market trends in the coming period.
Furthermore, Greek producers continue to withhold their stocks, anticipating a price increase before engaging in further transactions. Due to limited harvest volumes this year, some cooperatives still strive to amass sufficient quantities for full truck exports to the market.