Spanish olive oil market numbers

According to the Spanish “Agencia para el Aceite de oliva” the olive oil consumption has felt last months (I think because the higher price of the product). this is also aligned with what is said by the IOC. I'm going to put together all the information we have for this campaign (from October “10” to March “3” of 2013) and lets see what are the conclusions we can obtain.

In the next graph we can see the olive oil existences (Existencias), production (Produccion), and imports (Importacion), we also can see the exports (Exportaciones) and the internal local consumption (M. Interno) that I have added as consumption (Gasto).

The basic idea is to see graphically the amount of existences Spain has and to compare it with the demand for that active that exists in total, which is the local market plus the international one. The best idea to really understand the business where you want to sell something is to see what is the quantity you own and the demand that exits which is going to be what makes customers to come to you and to pay for your product. Lets see the next graph.

Spain starts October with 599K Tons of olive oil, existences that grow from November because the recollection campaign. In February when the the campaign is almost over, the existences are about 864K Tons. So when February comes, we have this amount of product and a monthly demand of around 100K Tons in October, (if we think that we need to provide to the local market with 38,7K Tons. and the international market with 68,6K) but going down to 85K Tons in February.

To me, the most important thing is that even keeping a demand on 100K Tons per month Spain needs 1200K Tons per year to satisfy this demand with no leftovers. This year will not have problem but Spain will be ready to produce almost 2 million Tons per year in a good one very soon, and then Spain will need 166K Tons of market demand per month.

So now being realistic, and seeing that in March Spain had a demand of only 63K Tons (far from the minimum 100K Ton needed for this year), and seeing that the drop comes because the falling in the exportations, I think that it is capital to recover the international market (never leaving the local one).

This year the production has been minimal in comparison with a normal one. That lack of product has made the local producers think that to a less amount of product a bigger price the distribution will have to be willing to pay leaving producers in Spain not willing to sell for less than almost 3000 € per Ton. This situation has obligated the distribution to get their product out of Spain (while there was the chance to find cheaper product) but now comes the moment that there is no more product out of here and the distribution will finally have to decide. If prices go higher in the retailers we are going to see how the demand falls even deeper (that has already happen here when local Spanish people have decided not to buy EVOO for more than 16€-20€ the 5L pet.). Do Spanish producers should allow the price of their product to go that high that the customers will no longer be willing to buy it? I personally think that 16-20€ is not that high price for a 5L pet of good EVOO, but it is not me who makes the market.

Countries start producing EVOO due to the rising demand.

This weekend I had a conversation with a close friend about an important tech company and its problems to grow business in Latin America. Many countries prefer the companies to build up new confection plants in-site than importing finished devices from abroad. The countries have risen the border tariffs (to provoke the companies to invest locally) and these companies can not compete against the other companies that actually do have local confection plants. I was still thinking about the different ways a country has to protect its interests inside their own local market when I saw this link in Olive Crazy . “There is money to be made in olive oil” was the sentence that made me realize I was in front of something that could easily grow inside the USA. USA is the most important market out of the Mediterranean area and is of their own right starting to produce their own products and profit in this way, alike the example with tech companies.

I don’t know how far the Americans can go or how fast they can come to produce the EVOO (I suppose the weather and the soil have something to say about), but the market is going to change for sure and all producers are going to feel it. EVOO producers back in Spain (an world wide due to the fact that the market is global) have another reason to rethink their position and to take a more active role into the distribution. What is going to happen if the biggest consumer actor in the international market starts to auto provide itself? What if the other countries come to the point that don’t need anymore to go abroad for EVOO supply? What happens with the new EVOO producers countries in the Mediterranean?

Whatever it is the answer, we will all need again to compete in price and quality with the rest of producers in the world for consumers to be more interested in going outside than producing it inside. You may think this is crazy but this is actually what is going on these days in Spain, big local distribution companies find more interesting to import EVOO from outside even though Spain is the biggest producer in the world. What is crystal clear is that producers just cannot expect any importer/distributor to come right to the door to take away their stuff. The good news about it are that if countries like USA, China and India are researching new methods to grow olives it is because they see demand inside their market. This history of producing something and not caring about how it is distributed because there is a secure demand is over.