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The Committee plans to support the struggling oil sector

27 May 2009 650 views No Comment

As demand for olive oil falls and prices follow suit, the European Commission is considering support that would let beleaguered producers tender for aid so they can store their surplus.

Since the beginning of the 2008/9 marketing year olive oil prices have plummeted. Over the last 12 months prices paid to producers of Jaen and Chania extra virgin olive oil have fallen by 29 per cent to €1.82 and €1.80 per kilo respectively, according to data from the International Olive Council. Costlier Bari extra virgin olive oil fell 25 per cent to €2.32 per kilo.
An industry insider told FoodNavator.com that the demand for olive oil – relatively expensive compared to other vegetable oils – has dropped in the recession. In addition, Spain, the world’s largest producer, has experienced good harvests recently, leading to over-production.
The Commission’s proposal would allow anxious producers to tender for aid for private storage of extra virgin and virgin olive oil for 180 days, up to a maximum of 110,000 tonnes.
“Given the present market conditions, a maximum quantity of 110,000 tonnes seems adequate to help rebalance the olive oil market,” said the Commission.
Producers will be able to ask in compensation a certain amount per tonne stored per day; the best offers will be accepted and payment made at the end of the storage period. The tended is likely to be open from June, with subsidised private storage starting in June and July.
The trigger levels for private storage aid for olive oil are €1779 per tonne for extra virgin olive oil, and €1710 per tonne for virgin olive oil.
Outlook
No representatives from olive oil associations Conseil Oléicole International or from COCERAL were available prior to publication of this article for their views on whether the measures will be sufficient to re-balance the market.
But in its most recent market report Conseil Oléicole International said that Spanish production in the first five months of the 2008/9 campaign was 1.018m tonnes – actually a 17 per cent fall from last year. The projected total for the current campaign, 1.150m tonnes, is not expected to be reached due to fierce winds and rain that have caused the trees to lose considerable quantities of fruit.
If the market does not swing back into balance, however, the European Commission has the possibility to extend its storage compensation measures.
The harvest forecast for 2009/10 will be available later this year.

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