European Olive Oil Exports Expected to Recover as Costs Rise

The latest short-term projections show limited growth in exports and steady production. While olive oil prices rose last year, so did production costs.

New York
Oct. 20, 2021
By Paolo DeAndreis
New York

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Olive oil pro­duc­ers in the European Union should pre­pare for some ups and downs in the newly-minted 2020/21 crop year, accord­ing to the E.U. Short Term Outlook for agri­cul­tural mar­kets.

Production in the bloc is expected to reach 2.1 mil­lion tons in the cur­rent crop year, com­pa­ra­ble to the yields of the pre­vi­ous sea­son. Exports are also likely to be sim­i­lar to last crop year’s vol­umes.

However, the report warned that farm­ers should be pre­pared for ris­ing oper­at­ing costs. Growing infla­tion­ary pres­sures in the E.U. have resulted in a sharp increase in energy, raw mate­r­ial and ship­ping costs. One stark exam­ple is that of fer­til­izer, prices of which increased by 77 per­cent in the past year.

See Also: Olive Oil Trade News

In terms of exports, the E.U. expects to see mod­est but above aver­age” growth from the cur­rent crop year, largely fueled by increas­ing trade with China and the United States.

From October 2020 to June 2021, exports increased three per­cent com­pared to the same period in the pre­vi­ous year. Exports to the U.S. rose by four per­cent, which is lower than orig­i­nally expected, with traded vol­umes slow­ing down in the last three months.

This could be due to higher freight costs, some uncer­tainty on when retal­ia­tory tar­iffs would be lifted, as well as the mar­ket oppor­tu­ni­ties lost by some exporters due to those tar­iffs,” said the report, refer­ring to the long dis­agree­ment between the U.S. and E.U. over sub­si­dies pro­vided to their respec­tive air­craft man­u­fac­tur­ers, Boeing and Airbus.

However, there is opti­mism that exports to the world’s third-largest olive oil con­sumer will rebound, and over­all exports will con­tinue to grow.

Restocking in some export des­ti­na­tion and reopen­ing of food­ser­vice should con­tribute to higher exports, while E.U. con­sump­tion could decline due to lower avail­abil­i­ties and above-aver­age prices,” the report said.

Other export des­ti­na­tions have seen rel­e­vant decreases due to large olive oil stocks, the food­ser­vice sector’s slow recov­ery, and increas­ing olive oil prices.

Therefore, 2020/21 E.U. olive oil exports could remain the same as in the pre­vi­ous cam­paign [820,000 tons],” the report stated.

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E.U Short-Term Outlook

Should trade rela­tions improve, 2021/22 exports could reach 860,000 tons and European pro­duc­ers could regain some mar­ket share. Reaching those lev­els, though, will also depend on the abil­ity of olive oil pro­duc­ers to make inroads in Asia, where the olive oil mar­ket is grow­ing.

The E.U. Short Term Outlook pro­jec­tions also showed that extra vir­gin olive oil prices in the bloc grew by four per­cent in the past year. This could affect con­sump­tion within the main E.U. pro­duc­ing coun­tries.

Imports are strongly decreas­ing with lower avail­abil­i­ties in non‑E.U. coun­tries toward the end of the cam­paign,” the report said. Imports could reach 160,000 tons,” which would be 40 per­cent less than in the pre­vi­ous sea­son.

Still, given a pos­i­tive price envi­ron­ment and a bumper crop expected in Tunisia – up to 240,000 tons – E.U. experts hint that olive oil imports in 2021/22 could rise to 200,000 tons.

Given the data on exports and the three per­cent growth in E.U. olive oil con­sump­tion esti­mated by the report, end­ing stocks could be slightly above the expected total of 470,000 tons, still 13 per­cent below the rolling five-year aver­age.

The report also focused on the dam­age caused to pro­duc­tion by the unpre­dictable weather, which affected the largest olive oil-pro­duc­ing coun­tries in the bloc, and high­lighted the increas­ing impor­tance of irri­ga­tion,

An ini­tially expected on-year har­vest in Italy and Greece was ham­pered by a hot and dry sum­mer,” the report said. Many grow­ers suf­fered from water stress, which proved to be crit­i­cal espe­cially in non-irri­gated pro­duc­tion sys­tems. This could result in lower yields.”

In Spain, aver­age pro­duc­tion is expected, while in Portugal pro­duc­tion could increase by 50 per­cent,” the report added. E.U. ini­tial avail­abil­i­ties would then be four per­cent below last cam­paign.”

While pre­sent­ing the report, Tassos Haniotis, the European Commission’s direc­tor of agri­cul­tural strat­egy, sim­pli­fi­ca­tion and pol­icy analy­sis, warned that we enter another phase of mar­ket tur­bu­lence, includ­ing fac­tors linked to increased weather volatil­ity [and] to cli­mate change.”


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