`Stagnant Prices, Uncertainty Take Toll on Olive Oil Futures

Europe

Stagnant Prices, Uncertainty Take Toll on Olive Oil Futures

May. 24, 2011
By Julie Butler

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Flat prices and eco­nomic uncer­tainty are damp­en­ing Spain’s fledg­ling olive oil futures exchange, which last year got into the black for the first time.

The only mar­ket in the world where futures con­tracts on olive oil can be traded, its hedg­ing poten­tial has made it one of the avenues being explored for longer-term solu­tions to Spain’s pric­ing cri­sis.

The Mer­cado de Futuros del Aceite de Oliva (MFAO) opened in Jaén in Feb­ru­ary 2004 and by the end of 2010 had achieved an aver­age daily con­tract vol­ume of 760. Last year the exchange nego­ti­ated 190,085 con­tracts, up from 143,335 in 2009, clos­ing 2010 with 230 client accounts and a profit – its first – of 116,000€ ($165,000). The cash value of pro­duc­tion traded in 2010 was around 330 mil­lion euros ($468.7 mil­lion).

But MFAO pres­i­dent, Manuel León told the EFE news agency last week that stag­nant prices and uncer­tainty were tak­ing their toll, mak­ing it likely that the sce­nario won’t be as pos­i­tive this year.”

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Back in March, when hopes were high in Spain that the Euro­pean Com­mis­sion would soon pro­vide pri­vate stor­age aid until farm-gate prices improved – a mea­sure still being sought – the MFAO saw a marked slow­down.

Its weekly bul­letins show that in the week end­ing March 2, just 325 futures con­tracts were traded, each relat­ing to a ton of olive oil and with prices rang­ing from 1,720€ ($2,443) to 1,810€ ($2,571) per ton. In com­par­i­son, for the week end­ing May 18, 5,850 futures con­tracts were traded, with prices from 1,600€ ($2,272) to 1,760€ ($2,500) per ton.

León said that the MFAO’s direc­torate was con­scious of the fact that the exchange was still matur­ing and had a long way to go in terms of cap­tur­ing new clients. Nev­er­the­less, it was a use­ful and nec­es­sary tool for the sec­tor”.

In line with its goal of inter­na­tional expan­sion, par­tic­u­larly in Por­tu­gal and Italy, the exchange was close to sign­ing an agree­ment with the finan­cial insti­tu­tion Caixa de Crédito Agri­cola de Por­tu­gal, he said. The addi­tion of a Por­tuguese clear­ing mem­ber is intended to facil­i­tate the entry of Por­tuguese traders.

The MFAO also hopes to attract more small share­hold­ers. After the MFAO board meet­ing on April 18, Oleo Dig­i­tal quoted León say­ing that It’s the big com­pa­nies – be they mills, coop­er­a­tives or bot­tlers and pack­ers – that have so far placed their con­fi­dence in the MFAO. Now it’s time to reach out to the small and medium-sized ones.”

Olive oil pro­ducer and sales coop­er­a­tive Interóleo Picual Jaén – which han­dles about a tenth of Jaén’s pro­duc­tion – announced last month that it had started trad­ing on the MFAO. In a press release, Juan Gadeo, pres­i­dent of the board of direc­tors, said the coop had done so because it was a way to try to have some influ­ence in the strug­gle for fairer prices, and to pro­tect the inter­ests of its mem­bers. He called for more coops to join, because the MFAO needs more traders.”

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