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About Olive Oil Prices: Opportunities and Threats

About Olive Oil Prices: Opportunities and Threats

2018/05/03 - On the occasion of the celebration of the VII edition of the World Olive Oil Exhibition (WOOE), the World Meeting of Olive Oil, the Golden Room of the IFEMA Fair Club hosted on Thursday, March 1, an interesting working breakfast in which representatives and industry experts debated various issues that are dominating the headlines in these times. Here is an extract of the meeting, which will receive more extensive treatment in the next issue of Mercacei Magazine.

The first question raised in this professional breakfast organized by the management team of the WOOE in collaboration with Mercacei referred to one of the major concerns of the sector: prices. Specifically, and taking into account variables such as the evolution of supply and demand, or the increase in the area devoted to the cultivation of olive trees worldwide, we wanted to know how they all influence the configuration of prices and what the trend may be in the short and long term.

For Teresa Pérez, Manager of the Spanish Olive Oil Interprofessional, "the price is determined by the actual availability of the market. The support of the current price situation will depend on whether or not there is an excess of production in Spain. It is evident that there are opportunities to recover consumption, but there are also threats."

The Strategic Consultant Juan Vilar, who has joined the management team of the WOOE in this edition, said that "we are facing a stable demand scenario subject to a highly unstable offer. With 3.5 million tons, and taking into account that there are resources for 4.4 million tons, there is only one way, the fall in prices, which in turn has an impact on consumption, which is decreasing in the large olive oil-producing countries."

"The offer is very fragmented and provokes an immediate response," said the Managing Director of Ferias Jaén, José María Valdivia. There is still a lot of obscurantism about the process by which the oil passes from the producer to the supermarket, and that darkness is also reflected in the prices. We are talking about exogenous factors that are difficult to explain. Depending if the agro-industrial sector has a greater relationship with the fat industry, the fluctuation of prices will be lower, there will be less volatility."

Pablo Leira, Head of the Agrifood Department of Extenda-Andalusian Agency for Foreign Promotion, pointed out that "if the price of olive oil is high, everyone is happy and nobody will protest. But this involves at least two risks. First, the replacement of this fat by others. Secondly -supported by official data- the recovery of Italy as a buyer of olive oils is an indicative that many of the initiatives carried out in other markets are relaxing. The market that has grown the most this year is Italy. That is why we should not abandon commercialization strategies and companies and cooperatives should search for added value at this time." For his part, the General Director of Agrifood Industries and Cooperatives of the Board of Communities of Castilla-La Mancha, Gregorio Jaime, believes that "in a globalized world were we receive a huge amount of information regarding the formation of prices I think that it will be very complicated to achieve a Price Observatory; I think the current system works well and is quite reliable."

Alicia Vives, General Director of the Olive Pomace Oil Interprofessional (ORIVA), highlighted the influence of an emotional component in prices, something that, in her opinion, only occurs in the olive oil sector. "In prices, the emotional aspect greatly influences, leading to speculation. It's an emotional speculation."

Keys and strategies
In this environment, what strategies should be adopted both in the commercial and in the productive sphere? Pablo Leira is clear about this issue: "The oscillations of demand are of the order of 1.5%; those of the offer, of 20%. It is necessary to design two strategies to differentiate the offer: one for the Premium EVOOs and another for the rest -olive pomace oil, lampante, virgin and extra virgin olive oil.- The key is to achieve that both coexist in a harmonious way, because sometimes they respond to conflicting interests."

"There are not so many differences -responded Teresa Pérez-; there are more synergies than conflicts. The short-term strategy is to value the product and its characteristics, especially in a scenario such as the current one where the volume does not weigh on the offer. It's about being clear on what my product is and how I want to sell it, what is the story I want to tell. That is the key."

For Alicia Vives, "olive oil is a difficult fat to sell outside the national market and the Mediterranean countries, by tradition and flavor. I think that in the sector we tend too much to navel-gaze, when we do not even represent 2% of all the fats that are consumed in the world. The sector accuses certain schizophrenia. The arguments we use to sell the product, such as its undoubted health properties, don't match the fall in consumption, and the consumer is the last to react. So something must be wrong here..."

In this sense, "the use of the product is fundamental to overcome this difficulty in the penetration of any market," says Teresa Pérez. We must highlight the wide variety of oils, nuances and flavors. Because what is unknown can't be valued."

Who said fear? "In a changing scenario, the key will be to adapt progressively. Every time we have to talk more about the consumer and less about the producer," she concludes.

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