Third Tender for Storage Aid Concludes, EU Calls for Patience

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.

Feb. 12, 2020
By Costas Vasilopoulos

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.- European Commission spokesperson

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 Also: 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oil to the total sub­si­dized by the EU at 0.88 euros per day, per ton, regard­less of the cat­e­gory of olive oil withdrawn.

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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.

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