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European Olive Oil Market Report - June 2024
Main Market Figures - Spain
Aica report just released this week, has come up with a surprising uprise of the outputs of olive oil from Spain and the total stocks available seem to be critical at this part of the year. More tension and challenges are impacting the market in the Mediterranean area.
Weather Conditions
May saw limited rainfall and moderate temperatures. Reservoir levels have significantly improved due to the rainfalls in March, which is expected to benefit summer irrigation. However, the previous two years of drought have stressed olive groves, raising concerns that this may impact yields. June's weather forecast is positive, predicting moderate temperatures and some rainfall, which could aid irrigation efforts.
The current state of water reservoirs in Spain is showcased in detail in the following graph:
Consumption
In the previous monthly Focus on Oils, there was a noted significant rise in olive oil consumption, sparking concerns about a potential scarcity. It was anticipated that the historically high prices would lead to a decline in domestic use and exports. However, this month reveals a different trend, with outputs reaching 84,143 tons, indicating that consumption levels have remained steady.
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According to AICA's report, and considering a “minimum viable” carryover of 180,000 tons, total stocks for effective raw material market are lowest in decades. This month's surge in outputs has contributed to an upward trend in the average outputs over the past five months, now approximately 79,180 tons. The average output for 2024 has increased by 15.34% from last year's average consumption, standing at 79,157 tons.
Harvest
With five months until the next harvest, the total crop stands at around 851,015 tons. Packers hold 170,716 tons, and farmers retain 319,912 tons. The absence of high temperatures during crucial stages of fruit development and of heavy rainfalls during the flowering season have fostered optimism for a better crop next year. Normal temperatures and potential rain could further support olive fruit development and overall olive oil production.
Our View
The availability of olive oil remains limited until November, and the positive expectations for the next crop will not alleviate the current shortage in the short term. Both packers and producers face the challenge of balancing stock sales before the new crop arrives while trying to secure the best possible prices amidst the scarcity. The extra virgin olive oil (EVOO) category is particularly strained due to low availability, making it difficult to find oils that can pass a panel test.
Packers' stock levels remain similar to previous months, suggesting they are only replenishing what they sell. The high financial costs and the sense of having minimal stock before the next harvest have led them to avoid overstocking.
Despite expectations, overall domestic consumption and export volumes have not decreased, exacerbating the situation. Buyers remain undeterred by higher prices, and Mediterranean olive oil supplies are insufficient to meet demand. The market is at a critical juncture, with the next crop offering the potential for higher production levels. However, the reality of an olive oil shortage is becoming increasingly serious.
Our experts emphasize that olive oil blends could become a significant category in the sector. This shift may help address the supply challenges, highlighting the importance of finding alternative solutions to meet the growing demand for olive oil.
Main Developments in Greece
The Greek olive oil market is mirroring the trend in Spain, characterized by high prices and limited transactions. Despite restricted stocks, demand remains strong, pushing prices upward. Notably, EVOO prices in Lakonia have surged to 8.70€/kg, while similar quality olive oil from Messinia and Crete remains more affordable.
Producers are keen to sell at the highest possible prices due to the overall scarcity of olive oil, with Italian buyers favoring Spanish olive oil for their transactions. However, attention and optimism are now focused on the upcoming harvest, which is expected to yield double the volume in Greece following the significantly low quantities produced in the 2023/2024 season.
