Business

Uncertainty Leads to Higher Prices in Spain

Skewed data and a killer disease have cast a sense of anxiety over the Spanish olive oil market. Production has decreased and olive oil prices are likely to spike.

Nov. 26, 2016
By Reda Atoui

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Spain will likely reduce olive oil pro­duc­tion while increas­ing prices in 2016 mainly because of the Span­ish government’s down­ward pro­duc­tion cor­rec­tions that have brought uncer­tainty upon the Span­ish olive oil mar­ket.

The Span­ish Agri­cul­tural Coun­cil had esti­mated in a recent report that Spain would pro­duce 1.3 mil­lion tons of olive oil in 2016 but it turned out that esti­mate was a bit pre­ma­ture. In fact, it did not fully account for the pro­duc­tion fig­ures of Andalu­sia and Extremadura, which revealed them­selves to be lower than expected; the Span­ish Agri­cul­tural Coun­cil actu­ally based its esti­ma­tions on skewed data and antic­i­pated yield fig­ures that were too opti­mistic.
See more: Com­plete Cov­er­age of the 2016 Olive Har­vest
The gov­ern­ment con­sid­ered more rel­e­vant fig­ures and thus has stated that the actual yield would be closer to 1.311 mil­lion tons, which is still insuf­fi­cient to meet demand. It is impor­tant to note that the Span­ish government’s newly-released 2016 yield fig­ure serves as the offi­cial barom­e­ter for olive oil pric­ing and eco­nomic analy­ses.

The uncer­tain­ties stem­ming from the government’s revised fig­ures cast a sense of anx­i­ety over the Span­ish olive oil mar­ket, but it is not the only fac­tor explain­ing the fall in olive oil pro­duc­tion (as well as the rise in prices).

In fact, a dis­ease that proved to be a seri­ous threat has just arrived on the island of Mal­lorca. The island has taken pro­tec­tive mea­sures as the Xylella fas­tidiosa pathogen is cur­rently wreak­ing havoc on olive oil trees there.

More­over, Span­ish olive grow­ers have started their yield rel­a­tively late and many stores don’t even have olive oil stocks.

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Not being able to meet the domes­tic demand fully is eco­nom­i­cally penal­iz­ing, but the late har­vest in Spain also had other severe con­se­quences: Por­tuguese olive grow­ers have started har­vest­ing much sooner than their Span­ish coun­ter­parts and the mar­ket share for Span­ish olive oil in Por­tu­gal is cur­rently expe­ri­enc­ing a sig­nif­i­cant drop as Por­tuguese shelves have already been stocked with domes­tic olive oils.

All those fac­tors have con­tributed to mak­ing olive oil prices spike in Spain. Accord­ing to Poolred — the indi­ca­tor of prices estab­lished by the Span­ish Olive Foun­da­tion — olive oil prices are cur­rently head­ing towards an ascend­ing path. A kilo­gram of extra-vir­gin olive oil costs €3.46 ($3.67) while a kilo­gram of vir­gin olive oil costs €3.17 ($3.37).

The only Span­ish province that has ben­e­fited from the rise in mar­ket price is Jaén. Indeed, the world-renowned province has had a bet­ter har­vest than the rest of the coun­try. As a result, Jaén will likely be able to earn new mar­ket shares and take advan­tage of the rise in olive oil price by sell­ing its prod­uct at a higher price com­pared with last year while main­tain­ing sat­is­fac­tory yield lev­els.



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