This year’s decline in Italian production was also due to unfavorable weather during the critical spring flowering last year; the weather was hot and humid, which in turn set the stage for an outbreak of the destructive olive fruit fly (Bactrocera oleae). The bad weather did not stop there—Italy suffered from a number of damaging hailstorms in the fall and winter of 2014.
Luckily, other major producers, namely Greece and Tunisia, enjoyed bumper harvests that helped close the global supply gap.
Unfortunately, the 2015-16 Italian harvest seems to be paralleling that of last year, but this time it is Xylella fastidiosa—a highly communicable bacterium which is thought to cause Olive Quick Decline Syndrome (OQDS)—that is destroying crops. The first stage of OQDS is leaf scorching, which in turn quickly decreases tree yields, and typically concludes with tree death—a fate particularly devastating for a tree that takes years to mature. With yet another uncertain year of Italian harvests and the risk of Xylella spreading to other large EU producers, the current olive market lies in a fragile state.
Olives thrive in Mediterranean climates, and the central role they play in Southern European cultures and economies make them a fruit commonly associated with that part of the world. However, consumers around the globe have developed a growing appreciation for olives, and specifically olive oil, such that between 1995 and 2005, world consumption of olive oil increased by over 50 percent. Much of the growth has come from non-traditional consumers: developed countries including the United States and Japan, as well as emerging markets like China, India, and Brazil.
Olive farming techniques are typically passed down from one generation to another, but farmers following these timehonored methods are finding it increasingly difficult to adapt to current demands and economic realities. Much of this difficulty is rooted in the fact that olive trees take between five and seven years to reach mature production—meaning that farmers have to adjust production patterns based on relatively distant consumption predictions.
Olives can be grown in the traditional method—which involves un-irrigated plantations in elevated, rough terrains—or using more modern techniques such as irrigation and mechanization in drier areas. While modern farming methods like irrigation do help mitigate the effects of drought, they cannot prevent or defeat drought entirely, nor can they temper other weather risks, such as excessive rain or hailstorms. While these limitations are not unique to olive farming, they do wreak particular havoc on olive farmers due to one unfortunate, exacerbating reality of olive production: geographic concentration.
The world’s top three producers—Spain, Italy, and Greece—collectively produced over 80 percent of the world’s olive oil in 2013/14 , and Spain alone accounted for 72 percent of 2013/14 production. The distance between these three nations can be as close as a few hundred miles, and their topographies and climates are often identical. As a result, when unseasonably warm temperatures impact Spain’s crop, chances are other producers, like Italy, may also suffer the same fate. This trend also holds true for disease-contagion, as products—and the individuals who cultivate, prepare, and ultimately distribute them—are often travelling across Europe, even moving between these major producers.
Pain in Spain
Over the past several decades, Spain has been by far the world’s largest olive producer. Much of the country’s trees are located in the south of the country, particularly in the province of Andalusia. There, the olive industry is the backbone of not just the economy but of life itself: roughly 90 percent of residents, or 600,000 people, directly depend on the commodity. The region single-handedly accounts for 43 percent of Spanish production, which in turn means it is responsible for 30 percent of the world’s olive supply.
Olives are firmly rooted in Spanish culture, and are consumed in a number of ways—from traditional consumption as table olives or oil, to consumption as a consumer good, in soaps and cosmetics.
The 2013/14 Spanish harvest hit a record high, leaving olive trees in a delicate state—which is normal, as is the resulting oscillation between relatively strong harvests and poor harvests. However, a late 2013 drought worsened as it slid into 2014 and progressed through the sensitive spring flowering period. The drought was Spain’s worst in over 150 years, and its ill timing stressed a majority of olive trees between April and June 2014—the peak growth phase for the 2014/2015 crop. Unfortunately, Spanish olive producers are not unfamiliar with drought: a dry spell also plagued the country’s output just two years earlier, in 2012, although to a lesser extent. In fact, climate models and forecasters have warned that Spain’s seasons may become warmer and drier due to climate change, suggesting olive shortages may become more frequent.
Amidst an alarming harvest out of Spain which decimated carry stocks from other top producers—who had to dig into these stocks to help close the supply gap—the focus shifted to the east of the Mediterranean.
Italy, historically the world’s second-largest producer, had also been battling a spate of poor weather, ranging from drought-like conditions to damaging hailstorms. While poor weather can certainly rain on world stocks’ parade, producers are typically able to recover from the setback relatively quickly. On the other hand, pathogenic outbreaks of lethal bacteria, such as Xylella fastidiosa, not only fleetingly limit supply, but also may do so semi-permanently as they can kill mature olive-bearing trees that have been in production for decades, sometimes even centuries.
Is Xylella to blame?
The most recent outbreak of Xylella fastidiosa was first documented out of Bari in Italy’s southeastern-most region of Apulia in October of 2013. It is suspected that the current strain of Xylella fastidiosa, known as CoDiRo (Complesso del Disseccamento Rapido dell’Olivo) originated in Costa Rica, as the strain matches bacteria that has damaged Costa Rican fruit-bearing trees.
While plant pathologists have not unequivocally established the root of pathogenicity—for which a number of specific experiments and qualifications must be fulfilled (a process known as Koch’s postulates)—the scientists do note a strong correlation between OQDS disease and the CoDiRo strain.
The disease is easily transmitted through tiny insects, known as leaf hoppers, who intake sap from an infected plant and then infect a healthy plant through feeding—a process similar to that behind mosquito-transmitted human diseases, like malaria. The first sign of a potentially infected tree is withering and the desiccation of shoots. Ultimately, the desiccation spreads throughout a grove’s canopy, which results in collapse and death of the vast majority of inflicted trees. Although there is still much research to be done in establishing a direct linkage between the Xylella bacteria, OQDS, and tree death, the reach and severity of the outbreak is likely to worsen.
Italy is at the helm of what could possibly become a European agricultural epidemic, and hopes for an improved 2014/15 harvest have quickly dissolved. Several agencies estimate the number of infected trees in the Salento region of Apulia to be over 1.1 million, or 10 percent of all trees in the area. The strong potential for a poor harvest both this year and in the future have propped up Italian olive oil prices, which have increasingly built a premium against those of Spanish oil.
Above is a reference map of the Xylella-stricken region. Lecce, the southern-most district, has been said to be in a state beyond disease eradication. Italian officials are keeping a close eye to the north of Apulia and adjacent provinces, as a confirmed case outside the immediate outbreak zone would reignite concerns over the possibility of a European contagion.
The saga has not only supported global fears of an olive oil shortage, but also sparked a debate among European Commission representatives as to how the bacteria can best be contained to Apulia.
A divided union
In a March 2015 meeting of the European Commission on Plant Health and Biosecurity, fellow European olive producers—namely Spain, Greece, and France—expressed their concerns of a European contagion of Xylella fastidiosa affecting not only olives, but also several other crops known to be susceptible to the bacteria, particularly grapevines and citrus trees. The Commission proposed the culling of 11 million trees across the Apulia region—a move which Italian growers vehemently opposed.
Italian growers and their supporters argue that since a direct linkage between the Xylella bacteria and OQDS has yet to be proven in a laboratory setting, enforcing such strict policy purely on assumption is unfair and potentially ineffective. The Italian farmers also noted that the destruction of so many trees would eliminate thousands of jobs, and ruin the scenery—an integral point for a region that earns a substantial amount from tourism. As a result of the 2014 blight and poor Spanish crop, prices have soared and Italian growers are now beginning to deal with theft, with many being forced to install surveillance cameras and hire guards to protect their groves.
The spate of recent supply shocks, coupled with strong growth in consumption trends, has provided long-term support for the price of extra-virgin olive oil. One metric ton of the commodity cost $3,300 in April 2010 - that same amount of olive oil would cost over $4,600 just five years later.
Rather than cutting down the trees en masse, the Italians proposed that the infected area be quarantined, and that any member state that discovered sudden tree dryness promptly notify the EU. Ahead of the April 21, 2015 meeting and vote on the issue, France announced that it would ban the import of certain types of Apulian vegetables, igniting chatter of a potential trade war between the two European powerhouses.
At an April 2015 European Commission meeting, the group decided to give the Italian plan a chance and allowed for a ‘buffer zone’ to be created across the Apulia region, while extending monitoring efforts further north into Campania and beyond. The new measures also state that infected plants must be removed and destroyed, and host plants within a onehundred meter radius must also be destroyed, regardless of whether or not these surrounding plants have shown any symptoms of infection.
Perhaps one of the most controversial points of the new measures is that Italy will be allowed to attempt containing the outbreak in the province of Lecce, where eradication has been deemed impossible. One special condition of Lecce will be that the Italians will have to remove all inflicted plants that lie within twenty kilometers of the bordering provinces of Brindisi and Taranto. Even with these more flexible terms, Italians are resisting destroying the historic and iconic groves that define Puglia’s landscape: an Italian administrative court recently suspended felling in Apulia, and meanwhile, Maurizio Martina, the Italian agriculture minister, has appealed the court’s ruling and maintained that no more than 35,000 trees would be destroyed under the current terms and plan.
Tunisia: a growing hedge
As the precarious olive situation in Europe continues to support elevated prices, the world’s second-tier olive producers have been hard at work, realizing this may be an opportune time to demonstrate their potential. Tunisia is a perfect example of a country capitalizing on ongoing European hardships as an opportunity to develop its own brand. Depending on where final figures tally, the North African country could quite possibly overtake Italy as the world’s second largest producer of olive oil for the 2014/15 production year.
Tunisia is one of a small number of countries in which consumers are replacing olive oil in everyday diets with other vegetable oils, leaving more product available for export. As much as 70 percent of Tunisian olive oil is exported to foreign markets, accounting for 40 percent of the nation’s agricultural exports and over 10 percent of all Tunisian exports. Moreover, Tunisia exports its olive oil to more than 60 countries, including markets with increasingly voracious appetites for the product, such as the United States and China. However, the main importers of Tunisian olive oil are actually Spain and Italy, which import the oil in bulk, blend the Tunisian product with that which has been domestically produced, and sell a blended packaged product. The EU cracked down on these types of activities under the “Olive Oil Action Plan”—a series of market standards created to ensure legitimacy in the origin and composition of extra-virgin olive oils. Tunisians are working to boost their brand, renewing emphasis on the importance of bottled, rather than bulk, exports.
The recent appearance of Tunisian olive oil on the shelves of American retailer Trader Joe’s and new bottle exports to Canada, Russia, and Italy will help put Tunisian extra-virgin olive oil on the map.
The Tunisians are not the only ones who are benefitting from Italy’s woes. Just a few weeks ago, major US retailer Costco Wholesale announced that the store would be switching out Italian extra-virgin olive oil for Greek extra-virgin olive oil in its signature 2-liter bottle. The company’s Chief Financial Officer, Richard Galanti, noted the availability of the Italian oil that the firm usually buys has fallen by 90 percent, and that the company was interested in purchasing quality product from a single reliable source. Similar to Tunisia, Greece must find a way to effectively brand Greek extra-virgin olive oil as a reliable, high-quality product. Italy has done a remarkable job of becoming the standard for premier olive oil, though these recent droughts and blights are true challenges to the strength and longevity of its brand.
Commodities whose supplies are heavily concentrated to a particular area are often the most susceptible to large-scale impacts from exogenous factors, like unseasonable weather or a blight outbreak—olives have proven to be no exception to this rule. The 2013/14 droughts that decimated Spanish supply, coupled with an Italian fruit fly outbreak, led to a shortfall in supply, which in turn forced countries to tap into their stockpiles. And this year, rather than offering any reason to be optimistic, has started off with the expansion of sudden tree dryness and deaths across Italy, reenergizing fears of long-term European production problems.
The recent Italian Xylella scare has also raised tensions among the 28 members of the European Union. Competing producers, such as Spain, Greece, and France voiced concerns over Italy’s ability to contain the disease without destroying the infected olive trees, and France outlined specific trade bans with Italy. These events underscore the difficulties of a coexistence of states as both economic community members and agricultural competitors. Furthermore, the increases in price and shortage of supply have not only incentivized, but also empowered second-tier producers, like Tunisia and Greece, to increase exports and build their brands.