The cheap prices are mainly being driven by low current demand and over-supply. “Output in 2011-2012 in Spain, the world’s top producer of the commodity, is forecast at a record 1.56 million tonnes, up 13% year-on-year,” Nick Peksa, director for market analyst Mintec told FoodNavigator.
“This has been met with subdued demand on the domestic market as consumers have switched to the comparatively cheaper sunflower oil in order to cut down spending during this period of global financial uncertainty. Spanish Stocks at the end of February were described as burdensome, totalling an estimated 1.46 million tonnes, also a record high.”
However, Peksa warned the situation was set to change within a year. “Early 2012-2013 forecasts peg Spain’s olive oil output at a four year low of around 1.20-1.25 million tonnes as severe drought conditions witnessed in the country’s key olive growing regions are expected to limit production. Spain experienced its driest winter in 70 years.
Rock bottom
“Prices are at rock bottom. There has been a steady dip for some time, but it’s likely it won’t go much further.”
Peksa affirmed that the message to food manufacturers was to secure and fix prices now before they again started to rise.
Olive oil prices last took a major dip in March/April 2009, peaking later that year and again in April 2011. On the basis of that pattern, prices are likely to begin rising shortly, spiking in April 2013.
According to the intergovernmental organisation IOC, which promotes olive oil production globally, Spain produces 46% of the world’s olive oil. Italy is in second place with 18%, with Greece third, producing 12%.