Italian olive oil is “suffering real pain.” Against all odds, the main loser is going to be Spain

Five months ago, the Italian Ministry of Agriculture dropped a bombshell: the transalpine country was running out of oil. As of April 30, wineries had 23.8% less oil than the previous year and accounts were not paying: the country was heading straight for a shortage. It didn’t take long for the global olive sector to be shaken.

Well, that bomb is about to explode.

A slow pain. As of July 31, total Italian reserves stood at 137,446 tonnes, “of which 118,931 were in bulk and 18,516 were packaged.” That is, there were very few. According to Olimerca, Italy consumes about 60,000 tonnes per month and, at least, two and a half months remain before new oils reach the market.

This becomes even more serious if we look at the specific situation of extra virgin oil (which is the most consumed oil in the country).

What does this really mean? To reach October 31 in good conditions, Italian operators will have to import 100,000 tonnes of extra virgin olive oil and around 15 or 20,000 tonnes of refined oil.

Why does this particularly affect Spain? Because, by pure arithmetic, 70% of those 120,000 tons of oil should be Spanish and this would add more tension to an already very complicated market.

Let’s remember that, although the forecasts for the next campaign are good, oil reserves across the Mediterranean are at a low level and these reserves are the fundamental mechanism that controls prices and prevents indiscriminate increases (even more). If we are left without that “link between campaigns”, the chaos in the markets could be enormous.

Most of all, to the rest of the world. Internationally, the doubts are not abating. Everything indicates that Spanish production is going to increase by 50% (from 853,000 to 1,300,000 this year); but in the rest of the countries the estimates are unreliable. The best example is Tunisia where it seems clear that the harvest will increase, but the range is between 270,000 tons and 325,000 tons.

We believe that production in Turkey, Greece and Portugal will increase; while production in Italy, Syria and Morocco will decrease. Spanish pressure may compensate for all these declines, but it is not clear whether it will manage to balance the situation or, despite the improvements, it will still take some time for the oil industry to return to normal.

Image | Jean Menjoulet

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