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Turkey will reduce its production of olive oil by 26.5% this campaign

Turkey will reduce its production of olive oil by 26.5% this campaign

2019/01/04 - Turkey's production of olive oil will be reduced by 26.5% in the 2018/19 season reaching 194,000 tons due to the weather, according to a report prepared by analysts from the Foreign Agricultural Service (FAS) of the United States.

Regarding this report, the number of trees in Turkey has reached 178 million in 2018, of which 152 million are estimated to be fruit bearing trees. The orchard planting trend is continuing, though at a slower pace. Olive trees are mostly planted along the coastal regions in the Marmara, Aegean, and Mediterranean areas and also in the Southeast Anatolian region.

The former tobacco producing fields in the Aegean region have become the center for olive and olive oil production during the last twelve years. Along with the increasing planting, the Ministry of Agriculture and Forestry has expressed its intention to graft about 80 million wild olive trees, of which 40 million are said to be productive, to increase olive and olive oil production.

According to the government’s action plan, about 1.5 million trees were going to be graftedbetween2015and2019,yettheprojectisproceedingslowerthandesired. Ontheother hand, while planting is increasing in new areas, older olive tree orchards are under pressure from metal mining industries, tourism, and housing developments, though the rate of loss is much slower than the increase in plantings.

The 2018/19 campaign was an “off year” for olive oil production and early season estimates for olive oil are 194,000 MT. According to the local industry, this is down about 70,000 MT compared to last season due to it being an off year and the weather. Even though production still varies during on and off years, the larger number of trees and better picking practices have caused a narrowing in the production gap between on and off years.

For the 2019/20 campaign, which is an “on year,” production is projected to be about 250,000 MT, though this is weather dependent. Overall, an increase in the number of fruit bearing trees and better farming practices are expected to contribute to higher levels of olive oil production in the coming years.

Following five years of lobbying by producers, the production premium for olive oil was increased fourteen percent to TL 0.80 per kilogram (around US$ 200 per MT) for the 2016 crop and then has remained the same for the 2017 and 2018 crops. Despite this subsidy, producers argue that they cannot compete with EU-sourced olive oil in international markets due to the higher EU support which they claim is 1.30 Euro per kilogram. Additionally, Turkish domestic support is provided in the Turkish currency, which depreciated about forty percent in CY 2018 against the leading foreign currencies, and producers argue that the depreciation reduces the subsidies’ effectiveness.



Consumption
Along with increasing production, domestic consumption has also increased over the years among the health conscious urban population. The amount of local production and the local economic situation impacts domestic consumption of olive oil since it is a premium oil and the market price is about five times higher than sunflowerseed oil.

The high domestic production in the 2017/18 campaign pressured local prices and helped domestic consumption to increase to about 185,000 MT, up from 145,000 MT in MY 2016/17. In 2018/19 however, domestic consumption is expected to decline due to the recent economic downturn that limited the purchasing power of local consumers. Consumption in MY 2019/20 is expected to recover to reach 175,000 MT, due to anticipated pressure on prices due to higher local production.

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