2022/23 Olive Oil Campaign

Interactive image, remember to activate the sound and click on the hand that appears in the upper right corner that will show you the interactions.

Salvador Alamar recalls the phrase that we could use related to the current olive oil campaign: "the little and expensive was left over and the much and cheap was missing"

When oil is cheap, buyers in the olive oil sector are not afraid to buy, to stock up, but when it is expensive, what buyers do is go every day, sell a truck, buy a truck, sell three and buy three. This situation creates uncertainty and the sector is resentful.

There are times when the changes we see in these cases may be real, but they are due to market adjustments. If the hydrographic data does not change between now and the spring of 2023 and the issue of drought is not alleviated, obviously, we will have this entire year of high prices.

Right now the drama is not only in the reduction of the production of olive oil and the quality of the olives, but in the consequences that this consumption situation usually has.

Because it is true that this year the olive oil campaign is characterized by a reduction in world production of approximately 11%, obviously counting on the deficiency of Spain, but if the price continues at these levels, the market will also fall more of 10%. Despite the fact that the production costs must be lower than the sales costs, that is, from the point of view of the producer, for this campaign prices from 4.5 euros is when we can start talking about "fair prices".

Consumer

You have to think that when the bottle of olive oil is put on the supermarket shelves at €6 and the bottle of sunflower oil is from €2 to €3 and added to a crisis situation the average consumer will tend to consume more sunflower and less olive oil. This is why it is so necessary to train all those involved in the sector and to spread the word as much as possible that when we talk about 6 linear euros, it is not expensive as a product, despite the fact that consumers currently value it as an expensive product because they compare it with other fats, and this is indeed a structural problem.

Another situation would be that olive oil is much more expensive than other fats, in a buoyant economy, but when the consumer is trying to save, the last cent, if olive oil is priced at 6 euros, it will become a product of luxury and this will decrease its demand. Despite this real situation, it must be combined with training campaigns, where the consumer understands that vegetable oils cannot be compared with virgin or extra virgin olive oil.

Sunflower is one of the most consumed fats and it is going down from the last brutal rise that it has had since the situation in Ukraine, although it has not received the real drop, which should be done according to the drop in origin, because it is still at a price tall. There are bottles at 3 euros, but sunflower oil, crude oil, is worth 1.4 euros at origin, and this means that it will go down again, although it will go back up later, and this will be motivated by the situation in Ukraine And let's not forget that sunflower oil is a fuel too.

Keep in mind that most consumers are used to combining olive oil with sunflower oil. As for the consumer, for example that for the fryer uses sunflower oil, and in the salad uses olive oil, it is possible that they stretch the consumption of sunflower more and that they leave or minimize much that of olive. There will even be homes that use sunflower oil for everything that is cooked and olive oil for everything that is raw.

We must bear in mind the background we have, and when olive oil is above 4 euros, consumption usually falls by around 20 or 25 percent.

It is important to bear in mind, speaking of the current 2022/23 olive oil campaign, that it is not good to lose consumers.

There is a percentage of consumers, which has been proven, that if they go to other fats, it is easy not to return to the previous amount of olive oil they consumed.

Once the consumer puts the sunflower in the kitchen and sees that the result is not dramatic, if he can then continue, then he will do it, or he will use half of one and half of the other, and in this way he will derive the expense that he did previously in olive oil to other needs. We insist that this is a reality, it is what we must try to overcome, and the only way to do it is with aggressive campaigns where the consumer becomes aware of the differences between consuming one fat or another at a health level, mainly, knowing that organoleptically there is no comparison.

Farmer

If we now think about the farmer, it is also a disastrous campaign, since, sometimes, it costs more to produce a short harvest than a long one. Let's keep the following points in mind:

• An operational oil mill has fixed costs: you have to keep spending on personnel, electricity, water, heating, etc. When the kilos that have been produced are less, the benefits decrease. So the oil mill can have fixed costs "almost the same" as if it were a large harvest, but nevertheless you have much less production.
• On the other hand, producing a healthy olive of great quality and yield is not the same as producing a wrinkled, dry, small olive with a lot of pits and less yield.
• You have to take into account a mathematical fact, answering the following question: how much money goes into your pocket?

If you multiply 1,440 tons, which were the kilos of last year's harvest, by 2.5, which was the average price per kilo at which olive oil was sold, we have a higher amount of euros than if we now multiply 750 tons, which are the kilos of this 2022/23 oil campaign, for 4 euros per kilo, the price at which it is at the moment. This formula is the one that must be reversed and that the consumer becomes aware that virgin olive oil has nothing to do with a vegetable fat, they are two different products and that is what we have to achieve

Now, in this 22/23 oil campaign we could say that the farmer or producer who has had a good load in his olive grove has benefited, because he has been able to irrigate, or because of his particular conditions.

Interactive image, remember to activate the sound and click on the hand that appears in the upper right corner that will show you the interactions.

The one that has been able to have a good harvest, you add that you can sell it at 4.5 euros, which is a "decent" price, that is an ideal situation to which we have to aspire. However as a general rule short harvests tend to be more ruinous, even if they have a higher price, than long harvests, even if olive oil is at a lower price.

But well, trying to analyze and talk about the current campaign, we must know that in general, for the entire olive oil circuit, a short harvest is worse than an abundant and long one.

Financing price

In this 2022/2023 olive oil campaign, we will also look at the price of financing and it may be that it is an aggravating circumstance.

The buyer, bottler, needs money to buy oil at four euros, and to this is added that the industrialist who has to work with campaign bank policies, it is not the same to work with the Euribor at +0.5 than with the Euribor at 4, because that means that you already have to earn at least 4 or 5% annually from the oil to be able to pay the financing.

Traders

Let's not forget that 80% of the oil is packaged by companies that have to buy that oil, that is, they do not produce it, they are the marketers.

One characteristic of this 22/23 campaign is that Italy is not buying Spanish oil and it is not just a matter of price. Italy is buying from Greece while it can because, at the same price, it prefers the Greek crop and given its proximity to Greece, the Greek is selling to the Italian with great ease.

The Greek sells to Italy with greater ease of transport than the Spanish, due to proximity and to this we must add that the Greek sells to the Italians in 30 days, with payment in 30 days, something that the Spanish seller does not usually do. The buyer of Italian olive oil as long as he has oil in Greece, which has good quality and has prices similar to Spain, will buy from Greece. Sometimes they even pay them a plus, up to 100 or 200 euros per ton, they pay more Greek oil than Spanish oil.

At the moment we can talk about inactivity from Italy to Spain, we will see, however, when Greek oil is lacking. Let's not forget that Italy is one of the major marketers of olive oil, despite the fact that the world price of oil is determined by Spain.

2023/24 campaign forecasts

We are going to close this article in a positive way, let's make two wishes.

On the one hand, that the prices of virgin olive oil are dignified, at the same time that the consumer understands that it cannot be compared with a vegetable fat, and this means that we can work with "high" prices.

On the other hand, we are also going to look forward to next year's harvest, that is, from the 2023/24 campaign, we are going to see if it is accompanied by rains, and these rains, added to the olive tree's rest this year, can bring us a great harvest.

Although we know that the olive tree has suffered a great drought and this is affecting the branches and next year's harvest as well as the fruit, it is not the same to start with a harvest, in an olive tree that has just produced 50% less than its usual harvest, the generosity of the woody “El Olivo” is well known to all. Let's bet on him and learn from his generosity and positivism.