With 171,000 tons of olive oil removed from the market with no significant effect on olive oil prices, the European Commission said it expects results in due course.
In response to a claim from the Spanish government, the European Union applied a crisis management mechanism to help rebalance the olive oil market as tumbling prices throughout Europe continues to frustrate growers and producers.
The Commission expects that the complete measure taking into account all four sub-periods will help alleviate the pressure and contribute to a rebalancing of the market.
The global olive oil market was mainly disrupted by exceptionally high initial stocks of olive oil underpinned by last year’s enormous yield in Spain when 1.79 million tons of olive oil were produced.
A scheme for privately storing olive oil came into effect, with the EU providing subsidies to operators in a series of four tenders scheduled to be completed by the end of February.See more: Italian Producers Shortchanged in EU Funding
No specific volume of olive oil had been defined for storing, with the first two tenders achieving the withdrawal from the market of a relatively minor quantity of 21,000 tons of olive oil.
The third tender concluded in January adding another 149,630 tons of olive oil to the total subsidized by the EU at 0.88 euros per day, per ton, regardless of the category of olive oil withdrawn.
From all the three tenders and the 171,000 tons withdrawn, 95.6 percent is lampante olive oil, 3.9 percent virgin and the remaining 0.5 percent corresponds to the extra virgin olive oil category.
Amid protests in Spain to support the olive sector, Luis Planas, the acting Spanish Minister of Agriculture, characterized the third tender as a positive contribution to the recovery of olive oil prices and provide stability to the market.
As relative inertia remains in the field of olive oil prices with only small changes in prices noticed so far, European Commission sources told Olive Oil Times they expect that the completion of all the phases of the private storage process should help the market stabilize.
“The fact that prices have not reacted during recent months is certainly also a result of the low quantities tendered under the first two periods,” they said. “Only following the third tendering procedure that took place on 29 January, a substantial additional volume of olive oil (150,000 tonnes) can now be stored.”
“The Commission expects that the complete measure taking into account all four sub-periods will help alleviate the pressure and contribute to a rebalancing of the market,” the E.C. source said. “The impact on market prices will only be known in the next few weeks.”
With regards to the chance of extending storage aid beyond the current four tenders if no positive effect on prices emerges, the Commission said it would be examined after the whole process is finalized and results are evaluated.
“It is too early to consider any extension of the private storage aid scheme, as the impact of the first three tendering periods is not measurable yet and the fourth and final tendering period has not taken place yet,” they replied. “In any case, the Commission will remain vigilant and continue monitoring closely market developments in the olive oil sector.”
The European Union has repeatedly applied private storage aid to alleviate the glut of olive oil on the market, most recently in 2012 when around 110,000 tons of olive oil were stored, but with no tangible effect on prices.
Meanwhile, the Union of Farmers and Livestock Unions (Unión de Uniones) of Spain proposed to turn 600,000 tons of lampante olive oil to biodiesel to further relieve the olive oil market from excessive quantities, postulating that storing it is not the solution to the problem of low prices.
“Private storage is not a useful measure for the sector to balance supply and demand,” the union said, “since it only has a positive result if the market release of stored oil coincides with a short production campaign in tons of oil. However, this time private storage has not been useful for this case.”
The Association of Renewable Energy Companies of Spain confirmed the feasibility of the plan, provided that the outcome of the process would cover the difference in price between olive oil and other oils like soy and palm oil currently used to produce biodiesel.
Another suggestion made to support the agricultural sector of Spain, including the olive oil business, was to introduce legislation to set minimum prices of agricultural products, which was dismissed by the government as not possible.