Mixed Fortunes for European Olive Oil Sector Amid Covid-19 Pandemic

As the num­ber of coro­n­avirus cases closes in on one mil­lion and the death toll approaches 100,000 in the European Union, the 27-mem­ber trad­ing bloc’s agri­cul­tural sec­tor is prov­ing resilient.

“With no con­cerns of food short­age, the E.U. agri-food sec­tor has so far responded remark­ably well to chal­lenges of his­tor­i­cal mag­ni­tude,” the spring 2020 short-term agri-food out­look report said. ​“There have been, how­ever, spe­cific impacts and cer­tain agri­cul­tural sec­tors have been hit more severely than oth­ers.”

Strict con­fine­ment mea­sures, which have been put in place across the E.U., have helped drive up demand for olive oil in the main pro­duc­ing coun­tries and have coin­cided with a slight rever­sal in the dra­matic down­ward trend of olive oil prices.

“Most notably, the E.U. vir­gin olive oil price reversed the decline of the last five months, but still remains 40 per­cent below the last five-year aver­age for the same month,” the report said. ​“Prices of lam­pante and extra vir­gin olive oil saw their decline slow down.”

In spite of decreas­ing demand from restau­rants and food ser­vice com­pa­nies, which rep­re­sent about 15 per­cent of the olive oil pur­chases, con­sump­tion in the E.U. is expected to increase by 5.2 per­cent in the 2019/20 crop year.

“Following con­fine­ment mea­sures in reac­tion to Covid-19, retail sales of olive oil increased, in par­tic­u­lar in E.U. main pro­duc­ing coun­tries,” the report said.

According to the report, the E.U.’s main pro­duc­ing coun­tries are expected to see a con­sump­tion increase of 13 per­cent.

The same low prices that have plagued pro­duc­ers may have enticed con­sumers to stock­pile more olive oil than nor­mal in February and March, ahead of impend­ing lock­down orders across the Mediterranean. Greece, Italy and Spain all reported sig­nif­i­cant increases in olive oil pur­chases dur­ing that time period.

“At the same time, a mas­sive increase of demand for e‑commerce has been observed, and direct sales by farm­ers to con­sumers have report­edly been boosted,” the report said.

However, these same con­fine­ment mea­sures are expected to lead to a nine per­cent con­sump­tion decrease across the bloc’s non-pro­duc­ing coun­tries.

“Staple food prof­ited the most from the switch to home con­sump­tion… reflect­ing vary­ing national food cul­tures,” the report said.

While con­sump­tion increases in the E.U., olive oil pro­duc­tion fell by 15 per­cent in the 2019/20 crop year. The drop was mostly fueled by an off-year and lower-than-expected har­vest in Spain and came in spite of sig­nif­i­cant pro­duc­tion increases in Italy (+110 per­cent), Greece (+43 per­cent) and Portugal (+30 per­cent).

The com­bi­na­tion of an increase in con­sump­tion and a decrease in pro­duc­tion is also likely to result in a decrease of the trad­ing bloc’s olive oil stocks.

Current stocks in the E.U. are extra­or­di­nar­ily high and have par­tially con­tributed to the per­sis­tently low prices that have plagued pro­duc­ers across the trad­ing bloc.

These stocks (not includ­ing olive oil that is being stored until August as part of the E.U.‘s pri­vate stor­age aid) are expected to decrease by 100,000 tons by the end of the cur­rent crop year.

Complications from the coro­n­avirus epi­demic are also expected to dampen olive oil exports and imports in the 2019/20 crop year, with decreases of 8.3 and 4.8 per­cent, respec­tively.

“Until February 2020, E.U. exports con­tin­ued to grow in vol­ume (an increase of nine per­cent year-on-year), while falling in value by eight per­cent,” the report said. ​“U.S. tar­iffs, trans­port issues linked to Covid-19, and over­all eco­nomic con­di­tions are expected to weaken global demand for E.U. olive oil, result­ing in lower exports in 2019/20.”

• European Union