Olive Oil Market Update - 2016/17 Harvest In Review

Posted by Hannah Broaddus

Olive Oil Harvest Commodity Market

Everyone’s been feeling the pressure on the olive oil market this year. It’s been a really tough market in 2017, with a delay in the olive harvest that pushed oil production out far later than usual, and was coupled with high and ever-rising prices throughout the spring.

Today, I’d like to do a brief review as we prep for next year’s harvest to begin in the coming months. First, I’m going to cover some numbers and percentages that we saw this last year across the globe. Then we’ll finish up with some personal insight on this market as we look forward towards next year.

 

The 2016/17 Harvest In Review

At the end of this last harvest for the 2016-2017 year, here’s some basic facts that we know:

Olive production was down by a total of 20% globally, as compared to last year.

 

  • Spain’s olive oil production was down by 8% alone.
    • However, Spain maintained their average production ratio, still producing 50% of the world’s olive oil.
  • Olive oil production of all EU countries combined was down by 25%.
  • Italy’s olive oil production was down by 61% (talk about dragging the average down!).  Remember that they are typically the 2nd largest producer in the world.
  • Greece’s olive oil production was down by 30% and they are usually the 3rd largest producer in the world.
  • World consumption overall was higher than supply by about 13%. What does this mean? It means that the already mediocre olive oil reserves were greatly depleted trying to keep up with the steady demand.
  • Prices across the board rose drastically.
    • Pure olive oil prices were similar to EVOO, which often happens when the market is high
    • I personally saw prices most affected in this order: Pomace, Organic EVOO, EVOO, Pure Olive Oil
  • As a result of these price increases and other factors, US consumption dropped by 7%. But not enough to reduce the strain of demand on diminished supply levels.

 

My Opinion On This Last Year’s Harvest

Olive Oil Harvest - SpainThis has been, in my opinion, one of the most volatile years in the last 10 years in terms of olive oil pricing. The pricing market reacted more strongly than the corresponding production drop, than in comparison to years past. 

In 2012/13, global production was also down significantly, but prices weren’t quite as drastically affected (there were greater olive oil reserves at that time, and the market’s pricing baseline was also lower at that point as well). 

It certainly is not an exact science, and there are a lot of factors at play, but harvests from year to year sometimes flip from bad to good. It’s as if the trees have time to “rest” when they aren’t producing as many olives (in a bad harvest year), so the next year when they blossom — if the weather holds and other factors at play turn out well — the harvest is more plentiful because the trees themselves can producing more after resting. 

We are all crossing our fingers for a better harvest next year. However, until we get closer, the reality of the next years harvest is simply unknown. 

 

Predictions For Next Years Crop

There are a number of factors that are going to affect next year’s crop, and everyone wants to know what is going to happen given the tough harvest this last year.

It’s always hard to know anything real, because global demand is always affecting what’s happening, and no one can predict the weather over months yet to come. That said, here’s what we’re hearing and seeing:

 

  • Next year’s harvest is still very unknown
  • Reserves that remain from one harvest year to the next are very low right now. If the harvest is poor this coming season, there is nothing that is remaining to support the current demand, and prices could be disastrously affected. If production is high, however, it will help replenish these reserves.
  • The weather so far this spring has been dry. Rain — at the right times — will be pivotal.
  • Flowers in Spain have been blossoming and coming along as one would hope
  • Tunisia and Turkey are both expecting a better crop this next year, but as a smaller producing countries, they will not have a large effect on the market either way. Spain remains the market driver of prices worldwide.
  • How much oil Italy needs to import to both to get them through this fall into their next harvest and how that harvest pans out will have a large affect on next year’s overall market prices.

 

Contracting Recommendation

Book any remaining needs on contracts (if your ongoing olive oil volumes warrant a contract) until the next harvest or through the end of this year at the least.

Plan to book your contracts at the usual time this fall/winter (signing in late November, December, January, with inventory arriving in the early months of 2018). We will adjust the schedule as the harvest requires. As we get closer, we will all know more about timing and make more accurate recommendations then.

Topics: Harvest/Commodity Market

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