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European Olive Oil Market Report - July 2024
Main Market Figures - Spain
In June, the olive oil market in Spain was quiet, with minimal purchasing activity from packers. Prices dropped significantly as producers aimed to empty their tanks in preparation for the upcoming crop season, which is expected to be favorable. The market was eagerly anticipating the AICA report for June, given that output levels had exceeded 80,000 tonnes in the previous two months.
Weather Conditions
Summer has arrived, and therefore, the dry season has started as well, with no significant rains in June. Since the warm weather started, the reservoir water levels have decreased as expected with levels in Andalusia falling 8.79%. The absence of rainfall until September/October pushes the irrigation again during the months of summer. As it is expected temperatures will be above 40ºC during July which can be concerning since the olive groves have been stressed over the draught of the past year.
The current state of water reservoirs in Spain is showcased in detail in the following graph:
Consumption
Over the past two months, output levels have exceeded 80,000 tons despite the high market prices. In June, consumption volume, including both domestic and export markets, decreased to 76,502 tons, marking a 9.08% decline from the previous two months. The availability of high-quality Extra Virgin Olive Oil is very limited, with current stocks totaling 415,023 tons. To efficiently manage the available stock, it is advised to cap monthly outputs at around 58,755 tons.
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According to AICA's report, and considering the minimum viable carryover is set around 180,000 tons, real market stocks for the next season would have decreased to 235,000 tons. The increased outputs this month have helped sustain the upward trend in average outputs for this season, reaching approximately 78,676 tons. The average output for 2024 stands at 78,676 tons, which is 14.64% higher than last year's levels.
Harvest
With three months remaining until the next harvest, the total 2023/2024 crop amounts to approximately 851,430 tons, with packers holding today 162,179 tonnes and farmers retaining 251,521 tons. As summer unfolds, the reservoirs accumulated in the preceding period will significantly influence the yield of the upcoming crop. The high temperatures and absence of rainfall during this period are crucial factors for the continued development of the olive fruit.
Our View
In June, olive oil outputs remained robust, although it experienced a slight decline, settling below 80,000 tons. Despite elevated prices, the market's demand for olive oil remains resilient, demonstrating consumer’s strong appetite for this essential commodity. Over the past several months, olive oil has retained its status as "liquid gold" within the agri-food sector, maintaining a vigorous demand.
Looking ahead, the availability of olive oil will be notably constrained until November. However, it is possible that supply channels may have accumulated more buffer stocks than anticipated, likely in response to a potential shortage of raw materials.
This situation has led to a cautious approach among packers, who are delaying their operations in an attempt to drive down prices and manage their inventory levels more conservatively while waiting for the next harvest. They are adopting a just-in-time purchasing strategy, only buying enough to replenish what they have sold, without engaging in future hedges.
Farmers, on the other hand, are generally looking to offload lower-quality categories of olive oil. In contrast, high-quality Extra Virgin Olive Oil (EVOO) remains in strong demand and is expected to regain the 8 EUR per liter mark during the summer months.
Main Developments in Greece
In Greece, the availability of high-quality extra virgin olive oil is slightly better than in Spain, though prices remain higher. The Greek market is experiencing two divergent trends: some producers are holding onto their stocks in anticipation of selling at higher prices, while others are eager to sell off their inventory. Looking ahead, there is significant concern about the next harvest due to the current heatwave stressing olive groves. However, potential rainfall in August and September could lead to a promising crop.
Farmers are striving to maintain prices at the highest possible level. There is a noticeable activity in the market overall, and the Wikifarmer Marketplace corroborates this trend. Despite the demand not being particularly strong, sellers are not reducing prices. The Greek market is primarily focused on the upcoming crop and is particularly interested in high-quality olive oil.
