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.
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.
“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.