Those who follow the price charts on the right hand side of the page might have noticed that, in mid-December, the January lampante contract had been trading as much as 10 cents above cash for the same grade of olive oil. That situation of disconnect seemed to have been resolved with spot rising to the mid-2.40's over Christmas, and the basis shrinking to approximately flat. Today, however, with a little over three weeks remaining until delivery, the nearby futures traded at 2.52€/kg with all deliveries opening with a several cent jump in the bid, once again leaving behind the cash market. At one point during today's session, it seems the sell side market maker got a little nervous after seeing 25 January's picked off at 2.52 and removed all offers from May forward, to replace them at 1 or 2 cents higher a few minutes later.
The end result? All five traded contracts registered increases of between 4 and 9 cents - and this in the midst of the holiday hibernation.
Web portal, Terra, reported on December 20th that, following its recent approval by the Spanish competition tribunal, the Comisión Nacional de Competencia, details of the olive oil marketing joint venture between macro-producers' co-op Hojiblanca and Cargill were now being finalized. The company, dedicated to providing in-store label extra virgin olive oils in the world market, will be named Mercaóleo and will begin with an investment of 18 million euros, shared equally by the two partners. The managing director will be Cargill employee, Álvaro de Díaz de Lope, and its headquarters in Antequera (Málaga).
The Olive Oil Gazette wonders, considering that the primary responsibility of a co-operative is to sell its members' olive oil at the highest price possible and the main goal of the large-scale bottler and marketer is to buy it for the lowest cost available to ensure margins, what exactly will be the final outcome of this incongruous arrangement. Second on the list of Hojiblanca's possible conflicts would also be its role as sell side market maker on the MFAO. One imagines that it will not be long before the American food giant begins to include this market in its multi-billion dollar hedging operations. We doubt that its own partner will be permitted to take the other side of the trade.
In keeping with the time of year, The Olive Oil Gazette would like to extend our best holiday wishes to all of its readers - by our calculations, about 80 regular visitors from 19 countries in all continents.
We thank each and every one of you and wish you all the best.
A friend of the Gazette recently wondered in a comment when producer prices would start to reflect the large Spanish olive crop now making its way to the mills. And yes, at face value it may seem that the currently negotiable 2.55€ per kilo of average quality extra virgin is a touch pricey considering that we are possibly facing 1.3 million tons of olive oil in the pipeline.
In some regards, it appears similar to last year when, in the week ending December 15th, PoolRed was still quoting 2.60€ for EVOO. In fact, as the (at that point) second largest crop in Spanish history added itself to a good harvest throughout the Mediterranean, spot EVOO was to fall a full 20 cents by the end of the month before recuperating by early February. Is that what we can expect this year?
As our regular readers will already know, we here are of the opinion that producer prices will be, on average, considerably higher than last year. Our reasoning rests on our belief that world wide demand will continue to increase, but will have to deal with a several hundred thousand metric ton shortfall in world production. We already know Italian production is down by 17 percent and that the 100,000 tons available in Turkey includes oil from the previous crop that millers refused to sell at current prices. We categorically do not know what the situation is in Greece. But between very hot weather, scant rainfall and runaway forest fires, we have a hard time convincing ourselves that there might be more than in 2006.
The jury is still out, though. Volumes traded this December are, to say the least, fairly low. Correct that. That would be: volumes traded this December are the lowest they have been in this century. A glance at the chart below (click to expand) compares the three weeks leading up to Christmas for the last seven years, the very late crop in much of Spain making prediction even more difficult.
Our friend may yet get his chance.
In a late June entry, we had remarked on the less than outstanding olive crop that had set from this spring's very exuberant bloom. Now, with our personal harvest over, we have real confirmation of this. Our crop, and this goes for most of the area around the Sierra de Cazorla, failed to meet even our limited expectations. The final tally was 34,000 kilos of olives from the 1,400 trees picked, a bit over 24 kilos per tree and only 64% of last year's total.
Factors behind this include the very heavy pruning that was done in March, both on our account and courtesy of February's immense snowfall, the three- or four-week late blooming of the flowers because of the uncharacteristically cold weather in early April and, also weather-related, the four days of constant high winds the area underwent in September. This last item left at least one hundred trees with no fruit and we have no trouble imagining having lost 6,000 kilos of olives to the desert breeze.
On the bright side, the yields are, quite simply, astoundingly high around here this season - this in contrast to many areas of Córdoba province, where the harvest is apparently being delayed by many growers for the low figures. All of the trailer loads registered over 25%, and the next-to-last came in at 26.93%. That is the highest we have seen from these properties. It may not seem like much, but we'll take the 900 euros that might turn out be worth.
Also in the plus column, we had the chance to test out a pet theory this year - that the leader of a two-person team should be the one holding the stick, not the shaker operator. This grower has been going on about this for a few years now, and to no avail. But once a work method gets ingrained, it is really hard to change.
Behind the problem, we are sure lies the fundamental notion that a person working a machine has more status than another wielding a pole, just as cars, and not donkeys, rule the road. However, the fact of the matter is that the stick person should be pointing out to the shaker person which branch to go for next, not the reverse which always turns out to be the case. Not only can he or she see better from his or her vantage point, but it ensures that the stick and machine are both working on the same branch at the same time. It's that simple. So, I took advantage of the fact that several members of the crew were complete novices and assigned them to the Stihls and the experienced ones to the poles. It worked wonders. Me Tarzan, you machine.
The previous entry, based on an item in the English-language online Forbes, had bottling giant, SOS-Cuétara, predicting a record (Spanish, we presume) crop of 1.6 million metric tonnes of olive oil during the present campaign. The Spanish-language news services, however, present us with a different take on the subject.
The December 12th edition of El Economista has company president, Jesús Salazar, claiming that the 1.6 million ton figure is, in fact, the total amount of olive oil that will be available for sale in Spain over 2007-2008. Comprising this figure are 1.275 million tons corresponding to the domestic crop, 90,000 tons of imports and 225,000 tons of carryover from 2006-2007. On the basis of this, he contemplates stable prices for the period. There is no mention of his expected, in the English version, world overproduction and consequent 345,000 tons of carryover at the end of this period.
A quick analysis of all this reveals a number of discrepancies. First, the predicted 175,000 ton increase in Spanish production for the year goes little more than half way towards relieving what the Gazette believes will be a 300,000 ton shortfall in the rest of the Mediterranean basin. Second, the presumed 90,000 tons of imports into Spain will, we suppose, becoming from those same countries that are short themselves. One would equally assume that they will only be had at prices that reflect this. Lastly, it is very difficult to imagine November 2008 carryovers in Spain equal to those of this year without the intervention of some sort of significant price increase to mitigate the continually increasing demand for olive oil in the world - and unless Mr. Salazar is already assured of a true record world crop for 2008-09, what he saves at the mill today by including carryover he will pay back double come next November.
According to the online edition of Forbes, world olive oil bottling leader, SOS-Cuétara, seems to be predicting production of some 1.6 million metric tons of olive oil in the current crop year - one assumes that the company is solely referring to production in Spain although, as usual, press releases from that company fail to actually specify this. They go on to say that this figure would cause production to exceed consumption so much as to leave a carryover for 2008-09 of some 345,000 tons. Why, in spite of the fact that the Spanish Ministry of Agriculture's mid-October prognosis for this country's crop came up with a total of 1.2 million tons and that the IOOC itself reduced its worldwide crop estimate from 3.4 to 2.8 million tons to accommodate the facts of the situation, would SOS suddenly be publicly floating these unrealistic numbers?
The Olive Oil Gazette believes it has the answer, and it has nothing to do with the olive oil industry, but everything to do with its stock price on the Bolsa de Madrid. The fact is that, despite reporting fairly good profit numbers over the course of 2007, the company continues to generate negative coverage within the securities industry. Of the five analysts reporting in Yahoo (on this publication date), three rate the stock an outright sell, one underweight and only one overweight. Behind this is the truth that almost all its profitability has been due to healthy margins in its olive oil business, the rice and cookie components apparently not carrying their share of the load. The company, in an attempt to maintain a share price still within spitting distance of historic highs, may be trying to give the impression that these margins will not be threatened by producer prices predicated on a production shortfall during 2007 and 2008 - not even the negative 300,000 metric tons that most observers believe will be the case.
SOS-Cuétara's Yahoo! ticker symbol is SOS.MC.
The panel of olive tasters is an integral part in the process of designating the extra virgin grade to a sample of olive oil. Aside from the fundamental requirement that it contain less than 0.8% oleic acid, among other restrictions on its chemical makeup, olive oil must pass through the noses and mouths of an officially approved panel to assure that it meets the sensory standards befitting a product of the highest quality. So who better to talk to about the art of olive oil tasting than a man bearing the official Spanish Ministry of Agriculture and International Olive Oil Council title of ‘tasting panel chief’, entitling him to set up panels throughout the E.U. and the member countries of the I.O.O.C., and who makes his living as a consultant assisting European denominations of origin and government bodies in establishing and receiving approval of their own.
Our interview today is with César Cólliga Martínez, a Madrid native holding a degree in agricultural and food chemistry from Universidad Autónoma de Madrid, who at 35 years of age has become one of the country's acknowledged experts in this field. Through his consulting firm, Arco Agroalimentaria, Mr. Cólliga has successfully guided the agriculture ministries of the autonomous communities of Murcia, Madrid and Castilla-La Mancha and Extremadura (ed. note: these political subdivisions can be considered the equivalent of individual states in the U.S.) and the Centre for Investigation and Quality Control of the Spanish Ministry of Health through the process of receiving official accreditation from the Spanish Ministry of Agriculture and the International Olive Oil Council. He is currently working with the Portuguese Protected Denomination of Origin, Tras Os Montes, to bring the skills of its tasting panel in line with what is required of a European P.D.O. The feather in Mr. Cólliga's cap is that no panel he has trained has ever failed to pass the rigorous certification test required for accreditation.... continue reading.
We'll publish a picture. This one was taken at about 9:15 AM last Sunday in the spot known as 'El Pocico' in La Iruela, Jaén just as the sun was burning through the morning fog.
When our local co-operative mill, Aceites Cazorla S.C.A., settled accounts with its members (this writer included) last month at 2.44€ per kilo, our immediate reaction was to go over and congratulate its manager, Juan Manuel Martínez Martínez, on a job well done in what had been a fairly difficult market for producers. In fact, despite selling production almost entirely comprised of olive oil proceeding from picual olives - typically the cheapest on the market - he managed to distribute the co-op's earnings, after expenses, at about 4 eurocents under the national average price for all grades and varietals. We also thought that an interview with Mr. Martínez would be appropriate, right about now, seeing as Aceites Cazorla switched on its four conveyor belts for this year's harvest on Monday. We trust our readers will find it interesting.... continue reading.
The online Jaén province edition of El Ideal reports that the price of sunflower seed oil is quickly approaching that of olive pomace oil in the Spanish market - this a result of a generalized worldwide uptrend in oil seed prices and a bad domestic crop. This latter, known as aceite de orujo in Spanish, has yet to recover from the benzopyrene health scare that spread from Czechoslovakia, where the problem was first encountered, to the rest of Europe in the summer of 2001. The situation was so bad that, in the following harvest, millers had to pay to have residues that they previously sold for a few cents a kilo hauled away. According to the article, national sales of pomace oil have, to date, only recovered to 40 percent of levels prior to the crisis - a situation that may finally be rectified.
Five days now into this writer's olive harvest, we are starting to get an idea of how much worse it is going to be than than last year's. In La Loba, where we are now working, the prior harvest weighed in at 42,392 kilos of olives which produced a net of about 12,000 kilos of oil, the greater part extra virgin. And it would have been larger had we not been caught with about 300 trees unharvested when hit by 60 centimetres of wet snow one Saturday, knocking to the ground most of the remaining crop along with a large number of the lower branches. (Yes, a grower can deliver olives picked off the soil, but the co-op separates them at source and they go directly into the lampante bin, with its corresponding reduction in price.) As it is turning out, we are hard-pressed to imagine even 30,000 kilos from the 1,100 trees of this property - and the remaining 400 picuales at other locations do not appear to be any better.
Fortunately, this is not generally the case in Spain, where a total oil crop slightly larger than last year's 1.1 million tons is expected, this less than offsetting smaller harvests in almost all other Mediterranean countries. The end result of these figures will be a production shortfall of some 300,000 tons with respect to expected worldwide demand - a deficit that can only be remedied through price increases.
In light of this seemingly unstoppable demand, propelled forward by both the health and culinary qualities of the Mediterranean diet as well as the international marketing efforts of the I.O.O.C., one has to question the long term merits of the successfully orchestrated buyers' strike we witnessed this spring and summer. Presumably held to compensate for the squeeze that the previous year's drought had placed on bottlers' margins, we cannot help but think that having EVOO trade at 2.35 to 2.40€ for months on end (clearly knowing that volumes were not sufficient to last through to the new crop) is merely inviting a repeat of the same price spikes at the slightest sign of short supplies in the future. Might the more appropriate long term program not be to sacrifice some consumption now through marginal price increases in the interests of stability rather than attempt to minimize short term costs. After all, paying 2.45 to 2.50 (at which unlimited quantities could have been had between May and September) when the market was 2.35, but no one was trading, certainly would have been better than trying to make up for shortfalls in late autumn at 2.70.
The Olive Oil Gazette firmly believes that EVOO will be trading at a considerably higher price during the present campaign. If bottlers and marketers do not want to find themselves time and again dealing with consumer reaction to volatile prices, it might be a thought to recognize the effect that current consumption growth must have - and stop attempting to create unsustainable paradises postulated on self-interested and misleading crop predictions, and the like. In other words, if money cannot be made bottling and selling olive oil at market prices, perhaps one should reconsider one's business plan.
As an interesting aside, current cash prices, particularly for lampante, find themselves under some considerable downward pressure. Curious, though, is the fact that an extremely large proportion of the thin volumes transacted recently have been for virgin (not extra) olive oil which finds itself fairly steady at around 2.55€. Those familiar with this industry will know which bottler is the biggest buyer of that grade of olive oil and will wonder if they are not buying in this market at a much higher price than they had hoped for last spring - and less than they might come March.
At the end of this week, arbequina EVOO could be had for 2.85-2.90 per kilo, picudo for 2.70 and picual at 2.50. These are real prices, as opposed to PoolRed averages, which we will make every attempt to keep current for the reader.
*Today was a national holiday in Spain. MFAO and PoolRed prices are left unchanged.
In recent years, and partially because of steadily rising temperatures, a large amount of agricultural land in the world-famous northern vinicultural region of La Rioja has been turned over to the cultivation of olives for olive oil, often at the hands of wine producers who see a certain synergy of gourmet interests in the two products. In this vein, the online version of Lleida (Catalunya) newspaper, La Mañana, reports that an extra virgin olive produced in that region by KEL Grupo Alimentario has won an Alberquina-only competition held in the Pyrenees ski resort of Boí-Taüll, beating out two finalists from the Mediterranean province of Tarragona.
The arbequina cultivar, native to that same province of Lleida, is said to be the most used varietal in new olive plantations worldwide owing to its relatively small size and suitability for intensive and super-intensive plantations, its extreme precocity and lastly, the high price EVOO of this type commands in the market.
Harvest now being underway, we find ourselves with a little less time to dedicate to The Olive Oil Gazette. However, our readers can keep track of our whereabouts using SIGPAC, the Spanish Ministry of Agriculture system that allows anyone to see an aerial photo of any tract of agricultural land in the country using land registry data to access it.
Those wishing to keep an eye on our progress should go to http://sigpac.mapa.es/fega/visor/ and follow this procedure:
1). Click on the introduction screen to make it go away.
2). Click on the binoculars in the toolbar.
3). Click 'Directa' on the drop down menu.
4). Type '23' into 'Provincia'. That's Jaén.
5). Type '47 into 'Municipio'. That's the town of La Iruela.
6). Type '35' into 'Polígono'.
7). Type '65' into 'Parcela'. That's the piece of property we are harvesting now.
8). Finally, click 'Buscar'.
When the photo redraws, take your mouse pointer over to the panel on the left and check off the box beside the word 'Parcela'. Red lines will appear around individual properties. Our current location will be centred on the '+' in the middle of the screen.
To find out where this all is inside Spain, the right hand side of the screen has a scaling tool. Click '-' at the bottom until you find the suitable point of view. Clicking '+', at the top, will bring you in closer.
We expect to be in 'Parcela 35' for another day and a half. From there we will proceed to 'Parcela 63' immediately to the south, followed by 'Polígono 34, Parcela 6', to the left of the previous. These properties are jointly referred to as 'La Loba'. Lastly, we will move west a couple of kilometres to 'La Mesta'. That's 'Polígono 21, Parcela 47'. Enjoy.
SIGPAC requires that Adobe Flash be installed on your computer. Download it here.
Those who follow the price charts on the right hand side of the page might have noticed that, in mid-December, the January lampante contract had been trading as much as 10 cents above cash for the same grade of olive oil. That situation of disconnect seemed to have been resolved with spot rising to the mid-2.40's over Christmas, and the basis shrinking to approximately flat. Today, however, with a little over three weeks remaining until delivery, the nearby futures traded at 2.52€/kg with all deliveries opening with a several cent jump in the bid, once again leaving behind the cash market. At one point during today's session, it seems the sell side market maker got a little nervous after seeing 25 January's picked off at 2.52 and removed all offers from May forward, to replace them at 1 or 2 cents higher a few minutes later.
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