`An Increase in the Trading of Olive Oil Futures

Europe

An Increase in the Trading of Olive Oil Futures

Jul. 26, 2010
Daniel Williams

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By Daniel Williams
Olive Oil Times Con­trib­u­tor | Report­ing from Barcelona

MFAO, the offi­cial exchange mar­ket reg­u­lated by the Span­ish finan­cial author­i­ties, was the first mar­ket in the world to trade futures con­tracts on olive oil. The MFAO in Jaén dealt in 107.3 mil­lion kilos of olive oil in the first 6 months of this year alone, a whop­ping 54% increase from last year’s fig­ures, and for the first time since 2009, the MFAO’s fig­ures show sur­pluses and con­sid­er­able gains. In these short six months, the MFAO has sur­passed 75% of the entire fig­ures for 2009.

Accord­ing to Manuel León, pres­i­dent of the MFAO, these promis­ing fig­ures are the result of, the impor­tant com­mer­cial work being brought to fruition which allows for a greater pen­e­tra­tion of the mar­ket mech­a­nism, prin­ci­pally in our deal­ings with the coop­er­a­tive and olive oil mill sec­tors.” Fur­ther­more, Léon points to the cur­rent sit­u­a­tion of olive oil prices which is mak­ing pro­duc­ers search for alter­na­tives to tra­di­tional meth­ods of commercialization.”[1]

The MFAO fig­ures also show an increase in the aver­age vol­ume of daily nego­ti­ated con­tracts with a total 242 clients, a 5% increase in fig­ures from Decem­ber 2009. On aver­age this year there have been 873 con­tracts nego­ti­ated daily, a 53% increase from last year’s aver­age of 571. Per­haps a more notable improve­ment is that for the first time ever, 50% of the MFAO clients have been pro­duc­ers, coop­er­a­tives and olive oil mills. Pre­vi­ously the major­ity of clients have been play­ers in the finan­cial and indus­trial sec­tor or olive oil bot­tlers.

an-increase-in-the-trading-of-olive-oil-futures-olive-oil-times-manuel-leon
Manuel León

Addi­tion­ally, there has been a marked improve­ment in the num­ber of trans­ac­tions made with for­eign mar­kets after the solid­i­fi­ca­tion of a num­ber of agree­ments with Por­tuguese and Ital­ian banks. Span­ish olive oil sales to the United States alone have increased some 17.3% in the first trimester as com­pared to last year’s aver­ages. Despite the world eco­nomic cri­sis, the Amer­i­can mar­ket still presents great oppor­tu­ni­ties for fur­ther growth and inter­na­tional expan­sion for Span­ish olive oil.

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On the other hand, how­ever, pric­ing woes con­tinue to plague pro­duc­ers as the aver­age price of olive oil nego­ti­ated in 2010 sits at a wor­ry­ing 1.764 euros per kilo of olive oil, ten cents below the aver­age of 1.867 dur­ing 2009 and a far cry from 3.278 euros/kilo nego­ti­ated dur­ing Spain’s golden year of 2005.

MFAO, based in Spain, is the only mar­ket in the world where futures con­tracts on olive oil can be traded.

The mar­ket, which was cre­ated four years ago, has been mainly used by olive grow­ers to pro­tect them­selves against price swings. Olive oil prices are excep­tion­ally volatile, so both grow­ers and pro­duc­ers have an incen­tive to use futures in order to hedge against price fluc­tu­a­tions. How­ever, MFAO wants to go fur­ther, and it is now plan­ning to attract spec­u­la­tive invest­ment by major finan­cial insti­tu­tions.

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[1] http://www.noticiasdjaen.es El Mer­cado de Futuros del Aceite de Oliva de Jaen ha Nego­ci­ado 107 Mil­lones de Kilos en el Primer Semes­tre”

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