Spend Matters welcomes this guest post from James Hutchings of Mintec.
Ever widening knowledge of the health benefits of Mediterranean-based diets, with its focus on fruit and vegetables, wholemeal grains, beans and pulses, fish and most specifically olive oil, has led the US to become the third largest consumer of olive oil in the world, despite only producing 2% of the world’s crop. Olive oil consumption in the US has more than tripled since 1990, and while this year consumption will be slightly down year-on-year, it will still reach 0.29m tonnes in 2014/15.
However, all is not rosy in the olive oil market, as the widespread weather problems we discussed in July have now been added to by a couple of sustained pest infestations that have combined to produce very challenging conditions in the main producers.
As we talked about in July, the prolonged drought seen over the summer in top global producer Spain has damaged a large number of olive trees and severely reduced this year’s crop. Over the summer, Italy, the second largest producer, had warm, humid weather conditions that have been perfect for the spread of infestations of both the Xylella fastidiosa pathogen, which blights trees, causing them to wilt and shed their leaves, and also the olive fruit fly, Bactrocera oleae, which lays its eggs in the olive and feeds on the fruit. Both have severely damaged crops in many areas, and recent autumn hail storms have added to the problems facing Italy's olive oil producers.
Forecasts for the 2014/15-crop year are showing the combined effects of these factors – global production is expected to drop by 27% to 2.39m tonnes. This is very similar to the level reached in 2012/13, which led to the price spikes seen in that year. EU production will drop by 38% to 1.53m tonnes with Spanish production down by a huge 54% to 0.83m tonnes and Italian production down by 34% to 0.30m tonnes.
However, it is not all bad news, with a number of producers expecting an increase. Greek production will more than double to 0.30m tonnes, Tunisian production will recover from last year’s very poor crop and will more than triple to 0.26m tonnes, with increases also expected in Turkey, Jordan, Egypt and Israel.
Global olive oil consumption will reach 2.82m tonnes in 2014/15, significantly above the expected output. The current high prices may lead to a downward reduction in this forecast, but olive oil stocks, which grew significantly as a result of last year’s bumper crop, will still need to be eaten into severely in order to make up this shortfall. Prices should fall back from the current spike situation, especially in Italy, but are expected to remain up year-on-year.