A look at Mediterranean olive oil exports through a Greek lens

I’m currently working on my post concerning the possibility of re-industrialization occurring in Greece, but on the way I bumped upon some data concerning olive oil exports. The importance of olive oil for Greece instantly makes this interesting for me so I thought to share it with you.

The noise being made from mainstream media regarding the return to agriculture and the fact that it is being presented as a kind of “get out of jail free card” makes this even more interesting in my humble opinion.

Maybe the next few charts will help us realize that there is no such thing as a free lunch.

source: Eurostat

As you can see in the chart Greece’s olive oil exports to EU15 countries are almost a mirror image of the ones of Spain. That trend is valid until 2004-2005, from then on I have the impression that they decouple. True to that, for the period of 1995-2005 correlation between Spanish and Greek olive oil exports stands at -0,718 while for the period 2006-2011 the correlation is 0,304.

Of course, there is a perfectly rational explanation for that. Italy is a major market for olive oil. The reason that up until 2005 Spanish and Greek olive oil exports were mirror images is that they competed fiercely for the Italian market. After 2005 Spain managed to differentiate and expand its market presence in other EU-15 markets, so its dependence on the Italian market waned. Unfortunately the same cannot be claimed for Greece, for which Italy remains almost its sole market in EU-15. The next charts are enlightening.

source: Eurostat

source: Eurostat

Now I want us to have a look at EU15-Extra exports of the major Euro-area olive-oil producers.

source: Eurostat

 

Greece is completely missing out on this market, isn’t it? Greek exports in extra-EU15 countries are negligible, while on the same time this is a market where Spain is constantly expanding its presence and what;s more this is the most important market for Italy.

But why did Greek exports in EU15 plummet? Is it because Greek exports were displaced by the booming Spanish exports or is there another reason?

I think that the decline can at least partly be attributed to a decline in Greek production of olive oil. Unfortunately I couldn’t find data about actual quantities of olive oil production. That means that I have to settle for volumes of Production Value in 2005 basic prices. I am not totally satisfied with that metric but once again I’ll make do with what I’ve got.

source: Eurostat

source: Eurostat

 It seems that after 1998-1999 production in Greece is in a downward trend and the same can be claimed for Italy after 2004-2005.

That doesn’t seem to be the case for Spain, where post-2000 production seems to have stalled and Portugal, where after 2008 there seems to be a huge spike in production.

The fact that Greece and Italy show an almost uniform fall in production from 2005-2006 onwards along with the fact that they are bound to be affected by common meteorological factors makes me wonder whether this could be the reason for that decline. Furthermore, Spain and Portugal do not seem to follow the same trend. The only other scenario that I can fathom is that olive oil prices have fallen that much that some farmers find it uneconomical to produce olive-oil. Of course I do not possess any special knowledge of that market, so anyone who knows or thinks differently about that should say so in the comment section and enlighten us all (and save me from embarrassment). 

One observation that I have to make and (if I’m reading this right) could be positive for Greece is summarized in the following chart.

source: Eurostat

Greek and Spanish exports to Italy continue to be mirror images of each other. The years that Greek exports to Italy spike Spanish ones seem to retreat. Could this mean that Italians prefer Greek olive oil to the Spanish one? (I do not mean to offend Spanish olive growers, this is just my interpretation and I could be wrong here)

To wrap this up, prospects for Greek olive oil seem to be good but that does not mean that getting there is going to be a walk in the park. I think that competition is intensifying and Greece is very slow to adapt to new developments or do anything to position itself correctly in the fastest growing markets. The depression that we’re living through could (and should) make producers more outward looking since the sector is essentially under-developed and is producing a tiny fraction of the added value that it could. If we want this to stop being the case then a complete overhaul of the way the sector is functioning is badly needed...