`More Eyes on Olive Oil Futures Market

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More Eyes on Olive Oil Futures Market

Oct. 15, 2012
Julie Butler

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Vis­its to the olive oil futures mar­ket web page shot up to more than 47,800 in Sep­tem­ber after aver­ag­ing about 8,000 a month ear­lier this year.

The five-fold rise comes amid con­sid­er­able price ten­sion in Spain’s olive oil mar­ket, with bulk prices hav­ing risen nearly €1 since July and the country’s olive har­vest — just get­ting under­way — fore­cast to be just half of last season’s record of 1.6 mil­lion tons.

Pres­i­dent of the Jaén-based mar­ket (MFAO for its ini­tials in Span­ish) Manuel León told Olive Oil Times the mar­ket was in a wait­ing period,‭ ‬to see if it rains more and‭ ‬if the har­vest improves.”

Big increase in‭ futures ‬trade

A burst of trade occurred on the futures mar­ket in July as the whole­sale price for olive oil started its ascent.

After an aver­age of about 4,500 futures con­tracts — each for a ton of bulk olive oil and mainly lam­pante — nego­ti­ated every month between Jan­u­ary and June, the total for July was 10,000, fol­lowed by 18,000 in August.

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Last month, with 7,000 con­tracts, hasn’t been quite as spec­tac­u­lar” said León.

Trade slows but Web vis­its increase

But what was remark­able about Sep­tem­ber is the spike in vis­its to the MFAO web site — which shows both futures mar­ket infor­ma­tion — includ­ing real time trad­ing from 11:00 AM to 1:00 PM week­days Span­ish time — and spot prices from Spain’s olive oil price infor­ma­tion sys­tem POOLred.

With an aver­age rate of about 7,000 – 8,000 vis­its a month the norm, the total rose slightly in June‭ to ‬8,160, then leaped to 10,939 in July, 46,309 in August‭ and ‬47,865 in Sep­tem­ber.


Manuel León

When there’s a period of con­sid­er­able price ten­sion (the ‭gap between the ask­ing price of sell­ers and what buy­ers are will­ing to pay) there are always more vis­i­tors because the futures mar­ket pro­vides a price ref­er­ence” León said.

Who tracks futures trad­ing?

The major­ity of vis­i­tors to the MFAO site are from Spain, fol­lowed by the United States and Italy.

‭Last year Spain accounted for ‬109,977 vis­its; the US 37,496; Italy 20,859;‭ ‬France‭ ‬7,991;‭ ‬Turkey‭ ‬4,881;‭ ‬Tunisia‭ ‬3,495;‭ ‬Greece‭ ‬3,148; and‭ ‬Argentina‭ ‬1,747.

‭ As for those who actu­ally trade on the futures mar­ket, the major­ity are Span­ish but there are also some Ital­ian, Por­tuguese, French and Turk­ish accounts.

‭Given poten­tial deliv­ery costs have to be taken into account, it’s mainly Span­ish bot­tlers and a few Ital­ians who are con­sis­tently active, León said.

There are some ‬Ital­ian clients who reg­u­larly trade on the mar­ket. We have about ten who are bot­tlers, but the vol­umes involved are not very big.”

Ben­e­fits of the futures mar­ket

As at Octo­ber 5, the clos­ing price for con­tracts with a Novem­ber matu­rity was 2,510 €/t on the futures mar­ket, while for the same week the POOLred aver­age price was 2,523 €/t.

Leon said the futures mar­ket involved higher costs but in addi­tion to pro­vid­ing price cov­er­age had other advan­tages in the cur­rent cli­mate.

We pro­vide a mar­ket that is offi­cial and trans­par­ent and we guar­an­tee that con­tracts are com­plied with, ‭some­thing that doesn’t occur in the phys­i­cal mar­ket ‬where there can be a pri­vate deal between two par­ties and later, as has been occur­ring recently, one of the par­ties reneges, for exam­ple the seller says prices have since gone up.”

Here we don’t have those kinds of defaults and you could could say that’s one of the strengths of this mar­ket” he said.

From profit to loss

The only mar­ket in the world where futures con­tracts on olive oil can be traded, the MFAO opened in Feb­ru­ary 2004 and made its first profit, €116,000 ($150,000), in 2010, but last year’s flat­line prices — reduc­ing the need for buy­ers or sell­ers to hedge against price swings — sent it back into the red with a €300,000 ($388,000) loss.



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