A recent New Yorker article, entitled 'Slippery Business', has attracted a tremendous amount of attention on the internet over the last two weeks and heaps yet more misery on an Italian industry already operating under serious duress due to its generalized misleading labelling practices. Penned by an Italy-based writer by the name of Tom Mueller, the item details a series of frauds involving the dilution of what was labelled as Italian extra virgin with other, mostly edible but much cheaper, oils - and in the process calls into doubt the purity of the product itself, regardless of its provenance.
In the interests of fairness, The Olive Oil Gazette would like to point out that Mr. Mueller made no reference, implied or otherwise, to olive oils produced in Spain, France, Tunisia, Portugal, Greece, Turkey, Jordan, Palestine, Syria, Australia, Argentina, Chile, the U.S.A., or any of the other producing countries that we might have left out (with the possible exception of Antarctica). The country of origin can be found on the labels, by the way.
Oh. And one last point. We would think it at least interesting if some enterprising investigative reporter would go out and inform us of the widespread practice of selling olive pomace/soya oil mixes, blended right at home in the United States, as extra virgin olive oil in the American bulk commercial market. We can assure you that the FDA is not going to do it.
Olive oil, being the mass consumption product that it is in Spain, is very often sold as a 'loss leader' in the large supermarket chains of this country. Apparently, one bottler's attempted to put an end to this practice in 2003. At the end of last July, the Spanish Boletín Oficial del Estado made official the judgement handed down by the Tribunal de Comeptencia against industry-leading oil bottler SOS-Cuétara and a group a large retailers for fixing the minimum retail price of Koipe and Carbonell brands of extra virgin olive oil during the summer of 2003. More than half the total fine levied of 3.7 million euros was assigned to the bottler which, in the estimation of the court, was the organizer of this assault on the consuming public.
An idea of the lengths to which this company will go to protect profit margins comes from a July 27th news report from Europa Press. The article states that the court had taken note of the fact that SOS-Cuétara had reacted to an attempt by Carrefour stores to break the pact by immediately raising the wholesale price to this chain by 25%, resulting in the withdrawal of a planned promotion on Carbonell olive oil. Considering that that chain is the world's second largest retailer, we have some idea of the market power of this food conglomerate - something possibly to be taken into account by farmers thinking of entering into olive-growing partnerships with them.
To give some perspective on the market situation at the time that this was perpetrated, a glance at the portion of the chart of producer prices between the two vertical lines will show that this was instigated in a period of very rapid ascent, during which attempts to maintain margins on the part of SOS might be seriously jeopardized by retailer mark-downs of previously purchased stock.
The store chain also fined, apart from Carrefour, were: Caprabo, Alcampo, Erosmer (Eroski), Mercadona, Dia, El Arbol y El Corte Inglés - all household names throughout most of Spain.
Action on the olive oil futures market, MFAO, this summer has been characterized by the occasional day of serious negotiation with absolutely no follow through. That situation appears to be changing. Today, contracts for all delivery dates through July 2008 changed hands - and all between 2 and 6 eurocents to the upside, picking up on Tuesday's sudden awakening. Coincidentally, the January, March and May 2008 contracts are in contango. That is to say that the more distant deliveries are trading at higher levels than the near, reflecting the storage and opportunity costs of the passage of time. This may seem natural to the casual observer, but users of this market have managed to ignore these facts of financial life for almost all of its three-plus years of existence. Simultaneously, the cash basis - the difference between spot and nearby futures - is rapidly disappearing.
But is olive oil starting, finally, to move? Stats from PoolRed do not yet reflect it. Generally, however, their reports suffer from a few days of lag owing to the not immediate logging of transactions and the fact that they report a five-day average price as 'cash'. On a more anecdotal level, however, one of the Gazette's contacts found it impossible to find an empty 25,000 kilo tanker-trailer earlier this week.
Perhaps next week's proposed chat with the people at the MFAO will shed some light on this matter. Stay tuned.
For the first time in a very long while, we are witnessing some activity in the far dated lampante olive oil futures contract on the MFAO. Yesterday, both March and May 2008 deliveries traded and, miraculously given the general disinterest in doing business this year, to the upside. Each traded at 40€ per kilo above previous levels as people begin to position themselves for the next crop. And, interestingly, this morning's just posted early market bid for January is at one cent above the previous trade, stimying the market maker's attempt to place it at three cents under.
Cash prices for the same grade of olive oil, however, remain stuck in the same rut at 2.25€/kilo that has characterized the market for what seems forever. Volumes negotiated remain extremely low, a situation that has industry brokers lamenting their worst summer in history. On the plus side, at least for producers, is that the market is firm - at least according to one professional with whom we recently spoke.
In spite of all this, we have yet to understand the persistent ten or twelve cent basis - the discount that the futures are trading to cash.
The inauguration of the 2007 masters program in Olive Growing and Technology will take place on September 24th at the University of Córdoba. The course, taught under the auspices of the university and the Junta de Andalucía, as well as various other governmental and private institutions, intends to educate industry professionals in modern farming and olive oil extraction techniques. It can be taken either as a one-year postgraduate specialized course, or as a two-year master of science degree - this latter involving the presentation of a thesis.
The course is taught in Spanish, but also requires the ability to read English and accepts a maximum of thirty students a year. Language instruction is provided during the months prior to and during the course. Those interested in the 2008 session can find full information at www.masterolivicultura.org.
In an article recompiled from the the Turkish press, Olives 101 informs us that Turkish producers still have on hand, unsold, between 50,000 and 70,000 metric tons of olive oil, this contrary to what we had thought to be the case earlier in the season. Now, The Olive Oil Gazette relies to a great extent on private sources within the olive oil industry for its information - and these people have shown themselves to be fairly reliable in the past. So it surprises us to read that millers in that country have so far failed to sell up to 50% of this year's production.
Would it be possible for any of our several regular Turkish readers to clarify this situation via the 'comments' section or with an e-mail message to olive.gazette@gmail.com? We thank you in advance and look forward to hearing from you.
The Spanish Ministry of Agriculture, through the Agencia del Aceite de Oliva - the people who maintain PoolRed among other services - has released its June olive oil statistical bulletin. The report, which itemizes production and imports as well as national and international sales of olive oil, confirms what has been remarked on a number of occasions in this publication - that sales at the producer level are slow. As can be seen below in the spreadsheet we have prepared, imports remain essentially unchanged at a low level and exports appear to be at normal levels when adjusted for production. The surprise is to be found in the quantities sold domestically which are at far and away their lowest figure of the last five years, not counting the 2005-06 drought period in which retail prices became prohibitive. The result of this is that calculated stocks are at 610,000 metric tons, greater than every year except for the record harvest of 2003-04.
Does this mean that domestic sales have failed to recuperate following last year's price shock and Spaniards have definitively substituted other products in the kitchen? The Gazette has not heard or read any reports to that effect and, in fact, were it true that would place them all alone in the world in this regard. So, as a working premise, we will disregard it. The second possibility is that large domestic bottlers have begun buying on a just-in-time basis, attempting to estimate their needs with enough accuracy to be able to avoid any kind of panic buying. This seems within the realm of possibility and is perhaps confirmed by the steadily low volume of sales. A quick calculation on the basis of 20 weeks to the end of November, 610,000 tons in stock minus a desireable end-of-season carryover of 200,000 tons gives us a weekly average of about 2,000 tons - vey close to the volume of sales reported on PoolRed for the last few months. A third possibility lies in the flexibility of reporting rules. Sales are apt to be declared at any time up to the billing date, typically as much as sixty days after delivery, and it may be in the interest of certain parties to give the appearance of oversupply in the market.
The full MAPA report, in Spanish, can be read here.
The Andalucian government-sponsored internet science magazine, Andalucia Investiga, reports that the Pablo de Olavide University in Sevilla, with private financial assistance, has embarked upon a project to develop an all electronic olfactory system to be dedicated to the 'tasting' and classification of olive oils. The reasoning behind the development of this technology stems from the shortage of approved tasters and the consequent high cost of contracting them at the level of individual mills. Fundamental is the problem that a given taster should not, according to the I.O.O.C., inspect more than three oils per day and it is hoped that the successful completion of this initiative would improve the quality of olive oil produced throughout the region by making a reliable and relatively low cost taster available on demand at any press.
A recent New Yorker article, entitled 'Slippery Business', has attracted a tremendous amount of attention on the internet over the last two weeks and heaps yet more misery on an Italian industry already operating under serious duress due to its generalized misleading labelling practices. Penned by an Italy-based writer by the name of Tom Mueller, the item details a series of frauds involving the dilution of what was labelled as Italian extra virgin with other, mostly edible but much cheaper, oils - and in the process calls into doubt the purity of the product itself, regardless of its provenance.
Links to this entry
Categories:
Italy,
News,
Retail
