The editors of The Olive Oil Gazette have long thought that extensive and detailed interviews with the professionals of the olive oil industry would be of some interest to our readers. So, we are pleased to announce the first edition of Olive Oil Gazette Interviews. Below can be found a summary of our visit with José Vico Lizana - managing director of Potosí 10, S.A. whose Fuenroble extra virgin picual olive oil was the recent recipient of a first prize from the Spanish Ministry of Agriculture. Click to continue at the end.
Interview: José Vico Lizana - Potosí 10, S.A.
Among the winners of the annual Spanish Ministry of Agriculture olive oil awards, outstanding, in this publication's opinion, was the first prize in the taste category of ‘sweet green fruit’ presented to a cold-pressed extra virgin, by the name of Fuenroble, pressed entirely from picual olives in the province of Jaén. Both experience and handed-down wisdom would have it that this varietal, which comprises over 90% of the province's production, would never even be considered 'sweet', let alone make it on to any short list for an award as such. So, given the opportunity, The Olive Oil Gazette made the trip to Orcera in the sublimely beautiful Sierra de Segura to interview the man behind this accomplishment - José Vico Lizana, managing director of the press named Potosi 10, S.A.
Mr. Vico, a native of Úbeda (Jaén) and an agricultural engineer by training, has been the guiding force behind Potosí 10 since its inception in 1998, supervising not only the milling but also the actual olive plantations themselves. Under his mandate, this press has won thirteen national and international awards and it takes no more than a few minutes in his presence to find oneself seduced by his personal quest to produce the highest quality olive oil possible. Hopefully, the following excerpts from the two hours of conversation this writer enjoyed with him will have a similar effect on the reader... continue reading.
The news section of internet portal Terra reported recently that the International Olive Oil Council was initiating a new program to market olive oil in various rapidly developing countries. Between September, 2007 and the end of 2009 it is thought that up to 4.5 million euros will be spent to promote this product's use in India, Russia and China, according to the article. It is not the first time the I.O.O.C. has attempted to promote olive oil use in third countries. The last was in 2002 and ended, presumably, when the European Union refused to contribute money to the project because, supply being less than demand at the time, there was no economic reason to spend community funds. In this regard, the third paragraph of the article states that 'the I.O.O.C. trusts that the European Union will once again start, and increment, its voluntary contributions to the promotion of olive oil...'. Plainly put, the organization is looking for E.U. money. But it remains difficult, given the continued lack of any evidence of oversupply, to justify Brussels' renewed involvement.
Interestingly, this announcement comes hard on the heels of the I.O.O.C.'s recent prediction of a record or near-record crop for 2007-008 mentioned in the last Gazette entry, confirming the assessment publicly made by SOS-Cuétara president, Jesús Salazar.
But as regular readers will be aware, The Olive Oil Gazette (among others) does not subscribe to this prognosis, thinking that those touting the record crop version have a vested interest in that being the accepted belief - for economic reasons. And if the I.O.O.C. has in the past had trouble getting funding from the E.U. for 'lack of need', what better remedy than an unsellably large harvest in the year to come.
Neither this writer nor his sources can find anyone involved in the olive oil industry who believes that the new Spanish crop will be more than a few percent larger than the one recently brought to market. Add a reported rainfall deficit around the Aegean Sea and what was relayed personally by a resident of the Adriatic coast of Italy as being a year of average, or less than average, precipitation as well as individually delivered reports of smaller crops in Umbria, one cannot find 3.4 million metric tons of olive oil in 2007-08.
In a post, dated July 20th, we reported that the I.O.O.C. had predicted a crop of three million tons for 2007-08. That figure was due to a misreading of the news source. Reuters reports that that prediction is in fact of up to 3.4 million tons. We have corrected the previous entry and apologize for any confusion that may have resulted.
At the end of last month, the Spanish Ministry of Agriculture, Fisheries and Food presented its tenth annual olive oil awards. Inaugurated in 1997, the competition gives prizes to two entrants in each of four categories - three for flavour characteristics, and one for organically produced extra virgin olive oils.
Presented by Minister Elena Espinosa, first prize in both the Bitter Green Fruit and the Organic category went to the S.C.A. Virgen del Castillo, from Carcabuey in the province of Córdoba for its Rincón de la Subbética label, carrying the D.P.O., Priego de Córdoba, and consisting mainly of oil extracted from picudo olives. The Bitter Green Fruit runner-up was Torres Morentes, S.A. from Albolote in the province of Granada and its Maeva brand. The second prize for the Organic category was received by Antonio Cano e Hijos, S.A. from Luque, Córdoba. This organic extra virgin is displayed under the name Biocano.
In the category of Sweet Green Fruit, the award went to Potosí 10, S.A., from Orcera in the northeast corner of Jaén province. Marketed under the name Fuenroble and bearing the D.P.O., Sierra de Segura, the winner surprised many because its single varietal, picual, is normally thought to produce a more bitter olive oil. The Olive Oil Gazette had the pleasure of meeting the mill's director, José Vico Lizana, last week and will be returning to interview him for inclusion in a future edition. Second prize was for Manuel Montes Marín, from Priego de Córdoba, and his famous Portico de la Villa brand.
In the Mature Fruit category, the main award went to Rioja vintner Rodau S.L. for its alberquina/hojiblanca/koroneiki blend, Dauro, grown and pressed in Siurana d'Empordà in the province of Girona. Second prize was also awarded to a Catalonian label, La Boella, from La Canonja in Tarragona province. This olive oil proceeds from intensive and superintensive plantations primarily consisting of alberquina olives, but also including some of the rare regional variety, arbosana.
A list with links is visible below.
Last Monday, the July lampante virgin olive contract expired on the Jaén olive oil futures market, the MFAO. Total contracts traded, not including those closed for delivery ascended to nearly 9,800, a 55% increase from the comparable period in 2006. Open interest at close Monday was 3,450 contracts, representing 35% of the total crossed and, once again, far in excess of the perhaps 5% that would be reasonable in a mature agricultural price-hedging market. Clearly, the futures contracts have yet to reflect carrying charges, storage and other expenses incurred when delivering the physical product at a future date. Perhaps an increase in the exchange's delivery commission from its current 16€/ton would go some distance toward remedying this.
Coinciding with the rollover to September, we witnessed a slight uptick in the latter delivery. Otherwise, prices remain in a state of siege with no volume and unappetizing spreads, despite a recent levelling off of the cash market and today's notable four cent jump in spot lampante on the best volume seen in recent weeks - although still far from vigorous.
The International Olive Oil Council has released its estimate for world olive oil production for the 2007-08 crop year. The Madrid-based industry group predicts that total of 3.4 million metric tons will have been milled by the end of the coming year. This figure does confirm the record crop pre-announced by bottler Sos-Cuétara and is comparable to the 2003-04 season . The graph, compiled by The Olive Oil Gazette from data provided by the IOOC, shows production since 1991.
From the graph we can see that production of olive oil has more or less risen by 100% since 1991. Notwithstanding, the worldwide market has had no trouble absorbing every incremental increase without interrupting what is a long-term uptrend in prices. The 2005-06 Spanish drought-induced tumble to what were, in fact, slightly above peak levels of the previous decade caused serious supply shortages and, for a time, a near doubling of the cost per litre at the mill.
It is the opinion of The Olive Oil Gazette that the ever stronger truth-in-labelling movement in Italy will turn out to have revolutionary consequences for the Spanish olive oil industry - good or bad, depending on the individual producers' ability to react to the changes it will bring about in the marketing of this product. In this regard, the Spanish financial daily, El Economista, reports that the Italian fraud police, known as La Guardia de Finanza, has siezed 2,000 kilos of olive oil, and ordered the removal from the national market of 2 million kilograms for false labelling of origin. The specific charges, stemming from a police operation in the Adriatic port and olive oil hub of Bari, are of advertising olive oil as 'Product of Italy' when it in fact contained no nationally produced contents.
The charges came two days after a protest, organized by farmers' union Coldiretti, brought out up to 150,000 people to the streets of Bologna to insist that the Italian government enforce recent legislation requiring that food products be labelled clearly with their country of origin - in this case, specifically with regards to tomatoes imported from China.
News reports from periodicals in Texas, such as this, report that industry behemoth Sos-Cuétara is buying land in southern Texas with the intention of installing super-intensive olive plantations to feed its proposed olive oil bottling plant at the American Rice facility in Brazoria County.
Super-intensive can produce up to 20,000 kilos of olives per hectare, as opposed to the more typical three or four thousand in a traditional Spanish grove. The economics of this method are likely to reduce the actual oil production per kilo of fruit by up to one-half, but the cost savings through mechanization make this far and away a more profitable enterprise. We imagine that in first place among the risks in that part of the world would be damage from hurricanes and tornadoes.
A rumour recently overheard by the Gazette has Spanish food industry heavyweight Sos-Cuétara on the prowl for yet another Italian olive oil bottler in its continued bet on the future of this product. Already the owner of Carapelli, with approximately 11% of the Italian market and a huge international presence, and Sasso (with 2%) there remain very few candidates in the highly fragmented Italian market. The premium target for this company's reported 600 million euro war chest would be, of course, the olive oil divisions of Dutch food giant, Unilever, owned by its Van Den Bergh subsidiary. Currently holding around 13% of the Italian market, VDB also has an enormous international presence through its Bertolli brand - often accused of being the most flagrant mis-labeler of the origin of its products.
Remaining prospects would be restricted to Monini (7% market share), Salov (4%), with its flagship Fillipo Berio label and Farchioni (3%). Beyond that point, we are entering in the fifty percent of the Italian market that is shared by bottlers with less than two percent of the pie.
One wonders how much this is related to Sos' recent announcement that it would delay the IPO of its Italian business for up to two years, choosing to forego the benefits of selling into a very friendly public stock market now for those of introducing a much larger company in the future.
The Córdoba chapter of agricultural lobby group, ASAJA, has taken note of the incomprehensibly low mill prices for olive oil in Spain. According to a website article in national daily, ABC, the organization questions - as has this publication on various occasions - the viability of extra virgin olive oil at under 2.40€/kilogram, estimating that, given this year's crop size and that forecast for the coming harvest, the kilo of EVOO should be trading at least ten eurocents higher. This writer suspects that figure is a little low, also, thinking that somewhere in the 2.50's would be reasonable to expect.* ASAJA's bewilderment then extends to current retail prices, which have not reacted downward despite the bargains to be had at the mill, a situation that seems unfair to everyone except the bottlers.
Yesterday, EVOO was reported as changing hands at 2.38€, a two and a half year low. The nearby (July 08) lampante contract on the MFAO, currently 2.16€, is at levels not seen since December of 2004 and the start of that year's record harvest. The unsustainable ten cent-plus difference between cash and futures has begun to resolve itself with a drop in the former, rather than an increment in the latter. With the spot currently at 2.23€ (albeit on continued record low volumes that call into question the reliability of the figures), the spread now begins to approach an amount reflecting costs to be incurred in delivering the physicals next week.
*Disclaimer: The writer is long the January 08 contract.
Since 2005, the Junta de Andalucía has tied the receipt of European Union olive subsidies to the compliance with legislated environmental standards on the part of recipients - all falling under the general category of 'sustainable agriculture'. Included in the guidelines, under the heading of 'conditionality', are practices related to the prevention of soil erosion, the proper use of chemical products in the olives and the strict control of water usage in the case of irrigated plantations. In this regard, provincial daily newspaper, Diario Jaén* today reports that, of a total of 1029 groves recently inspected, fines, in the form of the retention of a percentage of E.U. subsidies due, were levied on eighty-eight.
The Andalusian regional government sees soil erosion as the most serious problem threatening the sustainability of this activity in the region and now insists that operations located on sloping terrain - this describing much of the Iberian peninsula - leave vegetation between the rows of olives to restrict runoff, this in direct contrast to the traditional plowing under of all weeds and the subsequent exposure of the soil to the elements. The photo at the top (click to enlarge), taken on the edges of the Sierra de Cazorla in mid-winter of this year, shows one plantation, in the foreground, actually complying with the directive. The Department of Agriculture promises to inspect one percent of the 108,000 olive operations in the province every year.
*Diario Jaén is an excellent Spanish-language source of news about the olive industry, particularly to the extent that it serves to publicize not only events, per se, but also acts as publicist for both official and unofficial government policy announcements. Today's article would be one such combination of news and implicit warning. Incomprehensibly however, the periodical does not archive its articles and has no search facilities for past issues - something we would see as fundamental and in need of rapid remedy.
It was six years ago now that an urgent meeting was convoked between government officials and olive oil industry representatives to face, head on, the worst crisis to hit the country's flagship agricultural crop in modern times - benzopyrene. In late May of 2001, Czech inspectors found unacceptably high levels of this carcinogen in Spanish aceite de orujo, the inexpensive oil extracted chemically from the milling pulp and now known in English as olive husk oil. The result was, in a word, chaos, as olive oil products were indiscriminately withdrawn from public sale by anxious governments and Spanish producers saw sales of all grades plummet despite the fact that the problem was restricted to the lowest...
The crisis caused a series of side effects, some bad but mostly good, within the industry. First, of course, would be the lost sales from a suddenly banned product - aceite de orujo. Nor could the olive presses, condemned to be low margin businesses anyway as they charge their few cents per kilo milled, could no longer sell their solid waste and, in the likely event that they had no facilities to deal with it, were forced to actually pay to have it hauled off. In eastern Jaén province, the biomass electricity generator at Villanueva del Arzobispo quickly found itself the only bidder for this product and rewrote the terms of its existing contracts.
On the positive side, Spanish producers became instantly aware of the internationalization of the olive oil market, something which may have escaped the attention of an, at times, myopic collective. The knee-jerk reaction against all olive oils, not understood at first, was correctly attributed to a lack of education amongst the buying public that had to be remedied. A quick Google blog search for the term 'olive oil' will show, if only through the sheer number of results, that that is no longer the case. Lastly, agricultural authorities became acutely aware of the damage health scares can do to entire agricultural economies and set out to enact and enforce very strong legislation over the use of the whole range of chemical treatments in the agriculture and food processing industries - a big win for the consumer and an insurance policy for the industry.
Following the normalization of standards for benzopyrene content throughout the E.U., aceite de orujo found its way back to the market, but occupying the lowest rung on the ladder, as it deserves. And in vindication, yesterday's online version of subway newspaper 20 Minutos announced that Valentina Ruiz, an investigator at the Instituto de la Grasa in Sevilla, has won the Exxentia National Prize for Applied Investigation in Phytotherapy and Nutrition for her study of the beneficial effects of this oil on persons suffering from hardening of the arteries.
Jesús Salazar, the president of Sos Cuétara, the world's largest olive oil bottler, has again gone on record stating that the harvest now on the trees will be the largest in history. This is in direct contrast to the prediction from farmers' union COAG, mentioned in an earlier Gazette post. This prognosis, however, does coincide with the current extremely low bid on the olive oil futures market, MFAO, the buy on March 2008 sitting at 2.10€. The two market makers for the MFAO are, by the way, the same Sos Cuétara and growers' macro-cooperative, Hojiblanca - the latter creating the offer.
The same interview with Sos Cuétara president, Jesús Salazar, reveals that the company will be funding the entirety of its very big foray into super-intensive olive cultivation with money garnered from various unnamed investment funds on a split-the-profit basis, astutely taking advantage of the present global glut of liquidity.
*Thanks to Olives 101 for tipping us off to these items.
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