How Commodity Market Can Distort Price-to-Quality Scale of Bulk Oil

Posted by Hannah Broaddus

Olive oil in bulk is a commodity. It’s actually only sort of a commodity.

This means that the price of bulk olive oil changes by the day, and that quality with a particular quality is normally standard across many different suppliers (when you’re buying oil in large bulk volumes). However, there are exceptions to this rule (like premium or super premium Extra Virgin Olive Oils that are made in smaller farms or with particular monovarieties).

How Bulk Olive Oil Prices Are Normally Formulated

For the most part, bulk olive oil prices correspond to the quality scale of the grades. This means that you will pay more for Extra Virgin Olive Oil than you would for Olive Pomace Oil. Essentially, the lower the grade is, the less you’re going to pay and vice versa.

This Grade/Quality Scale (below) is a good indicator of the respective prices of the different olive oils and how much the quality varies depending on the grade. Before all of the other factors come into play, this is what the standard quality scale should look like.

Olive Oil Grade/Quality Scale

Prices also are affected by how plentiful the current harvest season is, what country it’s coming from (and the politics in that location), and how much olive oil is available in the world at that moment.

So while prices can vary slightly based on a number of complex factors, for the most part they’re based on the standard adage: you get what you pay for

How Supply, Demand And The Commodity Market Can Affect The Price To Quality Scale

It stands to reason that an Extra Virgin Olive Oil should cost more than a lower grade of oil. Of course! Well, there are some exceptions to this rule.

Olive HarvestFor example, what happens when a lower grade oil is in high demand but in low supply? If everyone is looking for a Pure Olive Oil, for example, but not a lot of it was produced in the harvest that would cause the price of the available Pure Olive Oil to go up. How far up? Sometimes over and above the Extra Virgin Olive Oil! I know this may sound nonsensical, but it all comes down to supply and demand.

You may wonder, why wouldn’t the growers/mills just make more Pure Olive Oil? Well, if they have a limited supply of olives that year and they know that they usually make more money from producing Extra Virgin Olive Oil, they’re going to take extra care of those olives to make sure that they can be pressed into Extra Virgin Olive Oil. That way, they can make the most money from their harvest season possible. Depending on supply, demand and how all the olives turn out, sometimes this system doesn’t always go to plan as you can see.

We Know, The Commodity Market Is Sometimes A Wild Animal

Unfortunately, there isn’t a set formulation to where the commodity market for bulk olive oil is going to go, and what the prices are going to be. It takes skill, a lot of knowledge and good connections to be able to understand what’s going on with the international market and how it’s predicted to change. That’s what your supplier is for.

Across the board, remember that you are going to get what you pay for-- the better oil you want, the more it’s going to cost. But (for better or worse), there’s always going to be exceptions…


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Topics: Harvest/Commodity Market



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