Chinese tariffs on American farmers have tanked prices of the two agricultural commodities. Olive oil appears to be weathering the storm, unaffected by these latest developments.
Oilseed and vegetable oil prices fell last month as soybeans came into the crosshairs of a steadily increasing U.S.-China trade conflict.
Oilseed prices fell by eight percent to reach a 17-month low and vegetable oil prices suffered a fifth consecutive fall, decreasing by three percent, according to the Food and Agricultural Organization of the United Nations (FAO).
“The Chinese government’s announcement of an additional 25 percent import tariff on U.S. soybeans […] has weighed heavily on the soybean market, with strong spillover effects on soymeal as well as on the oilseed complex as a whole,” last month’s FAO commodity report stated.
“With respect to vegetable oils, the drop in FAO’s price index mainly reflects lower quotations for palm, soybean and sunflower oil.”
China is the world’s largest importer of soybeans, accounting for 60 percent of global trade in the commodity. As a result of these counter tariffs, global markets were rattled and soybean futures have slumped to a level at which U.S. farmers will begin to lose money without federal subsidies.
“There is a close connection between soybeans and soy oil and therefore other [vegetable] oils that compete very closely with soybeans too,” Dan Sumner, the director of the UC Agricultural Issues Center at the University of California, Davis, told Olive Oil Times.
He said that retaliatory tariffs imposed by China on U.S. soybeans will have a larger effect on oilseed prices in the short run, but depending on where else U.S. farmers sell their soybeans, may have longer lasting effects too.
“China is a huge importer of U.S. and Brazilian soy. The effect on the price of American soy is larger in the short run, but may be long-lasting as the U.S. finds new buyers,” Sumner said. “The U.S. also has a big soybean crop coming this year.”
As a result of all this extra soy and slumping prices, many U.S. farmers have decided they will not sell. Marcel Smits, the chief financial officer of the world’s largest agricultural trader — Cargill, told the Financial Times that it now makes more sense for farmers to “optimize their flows” relative to tariffs and prices.
“Sales of the remaining 2017 volume has significantly slowed as U.S. farmers hold back,” he said.
Meanwhile, global olive oil prices have remained steady, overall, according to the most recent data from both the St Louis Federal Reserve and European Commission. According to the research of the UC Agricultural Issues Center, olive oil prices are not usually affected by vegetable oil or oilseed prices.
“Our data and detailed statistical analysis has shown little linkage between the broader vegetable oil market and that of olive oil based on U.S. olive oil import price data,” Sumner said. “Olive oil prices are very high compared to soy oil or canola oil, for example. Our data show that the other oil prices tend to move together and olive oil follows its own path.”
Olive oil consumption also appears to be unaffected by oilseed and vegetable oil price changes. Studies in the U.S. have found that even when the prices of these competitors decrease, olive oil demand does not change.
“We found that in the U.S., the quantity of olive oil consumed fell when olive oil prices rose and quantity of olive oil used rose when olive oil prices fell,” Sumner said. “But, there was no response of olive oil consumption to the prices of other vegetable oil.”
“That is, there is the expected demand relationship between olive oil consumption and its own price and no relationship between the other oil prices and olive oil consumption,” he added.
More articles on: import/export, prices
Jul. 12, 2023
Quality Places Cambodian Importer on World Stage
Tiger Power imports Tunisian extra virgin olive oil produced on the company farm in Nabeul and sourced from other local growers.
Mar. 6, 2024
US Surpasses Spain as Second-Largest Olive Oil Consumer
Experts predict the U.S. will overtake Italy to become the world’s largest consumer of olive oil.
Aug. 18, 2023
Citing Rising Prices and Low Margins, Turkey Bans Bulk Olive Oil Exports
The trade ministry wants to promote the country's packaged olive oil exports while limiting further price rises for domestic consumers.
Sep. 14, 2023
Syria Restricts Olive Oil Exports as Harvest Outlook Worsens
Olive oil production in Syria is expected to fall by 50 percent in the 2023/24 crop year. Authorities have banned exports to prevent price rises.
Jul. 26, 2023
Tunisia Plans to Expand Olive Oil Exports to South Korea
Agriculture officials and diplomatic staff touted the country's rising profile as a high-quality producer of olive oil at a local event in South Korea.
Apr. 10, 2024
Farmers Protest European Agricultural Policies in Madrid
The protestors demand exceptions for European environmental regulations that they argue make their products less competitive on the global market.
Aug. 10, 2023
Andalusian Producers Seek Deeper Trade Ties with Japan
Olive oil consumption has risen steadily in the world’s third-largest economy over the past 30 years, and Andalusian producers are seeking to grow their market share.
May. 19, 2023
Climate Disasters Drive Prices Higher
Drought on the Iberian Peninsula and floods in Croatia have resulted in a rocky start to olive development, spurring more price rises.