Although the average price of olive oil in supermarkets has risen to 13.45 euros in April, prices have fallen by 1.21 euros at origin. The data is from FACUAbut they clearly reflect what we are seeing: that, although we consumers do not notice it, the industry is installed in the ‘wild west’.
In fact, the pressure to get as much oil as possible before prices fall too much is about to leave us without oil before the new campaign arrives.
A resounding success… According to data prepared by the Food Information and Control Agency and the Ministry of Agriculture, olive oil shipments during the month of April reached 85,700 tons.
It is a very good figure and, taking into account how everything has gone these years, it can only be considered a success. But a success that, without a doubt, can bring an enormous amount of problems.
…which can leave us without oil. As explained in Olimerca“if this rate of output is maintained in the coming months, we would reach September 30 with less than 150,000 tons of oil available to market and with a month of October where production is still very low, we could find ourselves with stocks around 85,000 tons”.
It’s not exactly a surprise. Weeks ago we commented that the good feelings left by the spring rains and the “oversupply” produced by the threat of prices falling too quickly, were causing the price of oil to plummet downwards. And of course, that has caused reserves to go down. So much so that we could be left without a link.
And the link is necessary. “Fundamental”, even. The link is the reserves left over from a campaign and help limit price volatility in the latter part of the year. That is to say, they work like “as the guarantee that helps balance supply and demand.” Without a link, sudden price changes will return at the end of summer.
To do? That is the big doubt of a sector that finds itself at a crossroads. Oil owners have incentives to sell it when prices are high: if outputs are as high as they are now, waiting until September may be more profitable; But if everyone does the same, prices may end up being lower than they are today. And since we have had many bad years, very few are willing to risk it.
The result? In the words of Olimerca, “a drama.” A drama that may end up putting the finishing touches on a sector that is on the brink of disaster. We thought that with the spring rains the worst was over, but we can still manage so that it is not.
Image | César García Pons
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