The 2021-22 EU Olive Oil Fundamental Picture is Looking Comfortable

Published 2022년 6월 28일

With two quarters before the end of the year amid inflation in food commodity prices, a comfortable fundamental picture for olive oil is expected to keep the market balanced and prices stable.

With two quarters before the end of the year amid inflation in food commodity prices, a comfortable fundamental picture for olive oil is expected to keep the market balanced and prices stable. EU olive oil production in the 2019-20 season was 1.92 million mt. In the 2020-21 season, EU production rose 7% YoY to 2.05 million mt while global production that same year fell 8% YoY.

So, while supplies from the 2020-21 season are already ample in the EU, 2021-22 production is also expected to go up. The provisional forecast for the 2021-22 crop from the European Commission is 2.26 million mt 11% up YoY and 12% above the 5-year average. So far, 2.25 million mt has been according to initial estimates.

Italy's production for the season is forecast to rise (+20%) to 0.32 million mt, Spain's (+17%) to 1.49 million mt, and Portugal's (+106%) to 0.2 million mt. Production in Greece on the other is forecast to fall (-16%) to 0.21 million mt, but that shortfall is offset by gains by other producers in the EU. While production is going up, consumption has also been firm. Total consumption estimated so far is 1.39 million mt leaving the final stock estimation at 0.67 million mt.

Looking at current prices of rapeseed and sunflower oil, we may see some domestic consumers shifting their demand to olive oil if they perceive the latter as a cheaper edible oil. Also, changes in consumption patterns like the interest in healthier cooking and mediterranean diets could add to an increase to demand.

Export from the EU is not expected to rise. As a matter of fact, the export number is expected to fall by 2% to 1.83 million mt. All this adds up as production in the rest of the world is also forecast at 1.12 million mt a whopping 17% increase YoY and 5% above its 5-year average.

This means the ending stocks estimates would be ample putting a bearish slant to the fundamentals going in the near term and into the next season. Prices of olive oil in the EU all else equal will remain steady throughout the season. The only bullish driver would be the cost of packaging which has been trending up in its recent history adding to the already high transportation cost.