Ricardo Migueláñez. @rmiguelanez
Will olive oil exports for the current 2018/19 campaign set a new record? This possibility is on the table, as the conditions are there in view of the expected decline in production from the other top producer countries which, in the case of Italy, are also major consumers and exporters of this healthy vegetable fat.
The recent study The Oil Sector: Spanish and International Production and Consumption. Data from the 2018/19 Campaign, from EAE Business School, expects international sales of Spanish olive oil to reach 1.2 million tons as part of the current campaign. If that occurs, it would beat the previous record, from 2013/14, which was 1.1 million—a figure that the producer sector expects to surpass.
The key is the second part of the campaign, if not a bit earlier, when the market begins to note the decline in supply due to smaller harvests in Greece and Italy and other Mediterranean countries, with the exception of Morocco.
For the 2018/19 campaign, the global forecast is more than 3.1 million tons, approximately 5.5% less than in the previous campaign, which was 3.313 million. "That reduction is not a problem for international trade as it's offset with stock from the previous year," said the authors of the EAE Business School report, Mariano Íñigo, Lisardo de Pedro y Ana García-Arranz.
Of the total expected global volume of olive oil, more than half (51.1%) and practically 1.6 million tons will come from Spain, while declines of around 35% or more are expected in Italy (265,000 tons), Greece (225,000 tons) and Portugal (115,000 tons). The situation is similar outside the EU, in Tunisia (120,000 tons), and a decline of over 30% is expected in Turkey (183,000 tons). Morocco escapes this fate, and could produce 200,000 tons, i.e. 60,000 more than one year ago, and Syria may produce 100,000 tons again, according to the latest data from the International Oil Council (IOC).
Olive oil production will decline considerably in those countries due to adverse weather conditions in 2018. "Olives are a delicate crop which requires enough water in spring and fall, sufficient but not excessive heat before May (otherwise the flower falls off and the olives don't emerge or they're very small), and cold weather without frost in the winter," says Mariano Íñigo, one of the report's authors. He added, "Spain is the perfect country for olives given its clay-like soil and cold winters but without frost, especially in Andalucía where 80% of the oil is produced, and its use of the best irrigation techniques that ensure a water supply and help limit the harvest alternation of the olive tree."
As the EAE report shows, over the last three decades, global production increased by 50%, from 2 million tons of olive oil in the 1990s to 3 million in recent decades. The increase is caused by the "considerable development of the planted olive grove area and the ongoing improvement in olive growing techniques."
A total of 90% of global production comes from the Mediterranean Basin. EU production accounts for 70% of the world total, with Spain playing a major role accounting for around 45% of the total and more than 50% in some campaigns, such as in 2018/19. Italy ranks second, accounting for around 14% but with a downward trend in recent years, and Greece is third with 10% and a slight increase, slightly surpassing Italy in some campaigns (it might surpass it in the current campaign as well), and Portugal coming in third with 3%.
Global olive oil production estimates
Outside of the European Union, the main producing countries are Turkey, Tunisia, Morocco and Syria, each of them representing around 5% of global production, with varying harvests that allow them to produce 100,000 to 200,000 tons of olive oil on average; however, during the previous campaign, Tunisia produced 280,000 tons and Turkey 263,000 tons.
As with production, global consumption of olive oil has increased since the 1990s; however, as the study suggests, this has not occurred in producer and traditionally consumer countries but, rather, in countries that are small producers or which barely produce any oil at all.
Italy and Spain remain the main consumers of olive oil in the world, despite declines of 20% and 10%, respectively, with around half a million tons per year (according to data from the IOC, Spain is expected to consume 525,000 tons and Italy 500,000 tons in 2018/19, figures which may be optimistic), followed by the US in third place, with 300,000 tons per year (the IOC expects 315,000 tons in 2018/19), which is triple the figure from 25 years ago.
As for exponential growth in olive oil consumption from non-producer countries like Germany and the UK, whose figures have increased fivefold in the last five years, the IOC expects consumption of 60,500 tons and 62,400 tons, respectively, trailing France, which is a producer in the Mediterranean area, with 81,000 tons.
In contrast, Greece is one of the traditional producers, and its domestic demand for olive oil has declined notably in recent years, by 40%. In 2006/07, consumption was around 270,000 tons, but in 2018/19, the IOC expects it to barely reach 130,000 tons.
Outside of the European Union, Japan, Brazil, Australia and Canada also experienced notable growth in olive oil consumption in recent years, with expected figures of 78,000 tons, 55,000 tons, 47,000 tons and 43,000 tons, respectively, in 2018/19, according to the IOC, and with significant potential in the coming years.
For the authors of the study, olive oil consumption in non-producer countries is due to efforts to "raise awareness internationally about olive oil and the Mediterranean Diet, which was discovered and created by US physiologists."
Another factor to consider is the price increase in olive oil due to higher demand. According to the study, the increase has led to "lower consumption from producer countries who are reluctant to pay a higher price for something they consider to be a basic product and not a luxury, while in non-producer countries which much higher incomes, (this factor) is not an issue."
The case of Spain
Despite being the world's leading producer by far, Spain also imports olive oil to weather the increase in its exports. Until now, it only imported from Tunisia (the main EU supplier, which applies an Inward Processing System which allows for imports of certain volumes in bulk to be processed and packaged in Europe and to be exported to non-EU countries), Turkey and, to a lesser extent, Greece. According to the study, the entry in production of new olive plantations in Morocco and Portugal has led Spanish operators to buy from them as well.
As occurs in other traditional producer countries, olive oil consumption by Spanish households has declined in the last 10 years. In 2008, families consumed 425,000 tons, whereas in 2017, consumption barely amounted to 342,000 tons. In 2018/19, the IOC expects 525,000 tons in total (domestic + international consumption), in line with the figure from 2013/14, due to a greater supply available and a decline of prices at origin and, as a result, in retail prices, which would once again break the half a million ton barrier, which hasn't occurred in the last four campaigns.
In terms of value, household consumption performed inversely compared with volume, increasing from 1.256 billion euros in 2008 to 1.373 billion in 2017, due to the increase in unit prices of olive oil.
In terms of exports, Spain could set a new record, with Italy as the main destination for its olive oil, accounting for one-third of the total sold internationally (i.e. around 400,000 tons).
Italy's production is expected to fall short of 200,000 tons in 2018/19, so now more than ever it must buy oil to meet not only its domestic demand, which would double its current production, but also its notable export commitments. According to the study, Italy is Spain's main competitor in international markets and it sells a large portion of the oil it acquires, mainly in bulk, from Spanish producers after packaging it as Italian brand oil.