The Department of Commerce (DOC) has made a final determination in the countervailing duty investigation and found that countervailable subsidies are being provided to producers and exporters of ripe olives in Spain. DOC conducted the verification of the information submitted by the European Commission, the Government of Spain and the three mandatory respondents (Spanish ripe olives producers). At the end of the process the DOC has determined that there is a subsidy, or a financial contribution by an “authority” that “gives rise to a benefit to the recipient and that such subsidy is specific”, giving advantage to Spanish ripe olive producers over domestic producers on the US market.
These are the final countervailable subsidy rates:
||Subsidy rate %
|Aceitunas Guadalquivir S.L.
|Agro Sevilla Aceitunas S.COOP.
|Angel Camacho Alimentacion S.L.
In addition to the above countervailing duty rates the following antidumping duty rates will apply:
adjusted for subsidies %
|Aceitunas Guadalquivir S.L.
|Agro Sevilla Aceitunas S.COOP.
|Angel Camacho Alimentacion S.L.
The official notice by the International Trade Commission can be found in the Federal Register (insert link)
RIPE OLIVES FROM SPAIN: Anti-dumping and Countervailing Duty Investigations
As published in The Federal Register on Wednesday, June 28, 2017, the USITC (United States International Trade Commission) has just initiated an investigation to determine whether the domestic industry is “materially injured or threatened with material injury … by reason of imports of ripe olives from Spain.”
These investigations are instituted in response to a petition filed on June 22, 2017, by the Coalition for Fair Trade in Ripe Olives, consisting of Bell-Carter Foods, Walnut Creek, CA, and Musco Family Olive Company, Trace, CA. The Coalition alleges that Spanish ripe olives are sold in the United States at less than fair value and that their production is subsidized by the Government of Spain. Unless the Department of Commerce extends the time for initiation, the ITC must reach a preliminary determination in antidumping and countervailing duty investigation in 45 days, by August 7, 2017. The alleged dumping margins range from 84% to 232%.
It’s important to know that antidumping duties (AD) are assessed if foreign exporters sell to U.S. customers at “dumped” prices AND the U.S. industry is found to be injured or threatened with injury as a result of such imports. Countervailing duties (CV) are assessed if unfair subsidies are provided by a foreign government to benefit the production or exportation of the goods AND the U.S. industry is found to be injured or threatened with injury as a result of such imports. In this case the petitioners allege that both circumstances prevail.
The timing of the petition couldn’t have been worse; most Spanish olive packers and importers were busy preparing for and then attending the Summer Fancy Food Show in New York last week and earlier this week. With the long holiday weekend coming, the interested parties in the U.S. don’t have too much time to respond to the ITC’s quite extensive questionnaire that is due back on July 6th. Interested parties include Spanish manufacturers and exporters, as well as U.S. “importers of record” whose name appears on the Customs entry of products whose HTS numbers are listed in the scope of the petition.
The public records of the investigations can be found on the USITC website:
Although the olive trees in Spain have begun the new growing season on a good note, we are still a long way from the harvest, which begins in the fall. The trees require sufficient rain to allow the olives to mature to normal sizing.
The carry over from the last crop, plus the production of the current crop year (2016/2017) make up the total available for the year. Both the carryover and new crop for 2016/2017 were below budget, putting us into a very strong seller’s market due to the short supply. Prices have risen persistently since January and will continue to do so until the beginning of 2018!
Pomace in particular is very short in supply and extra virgin is short as well. The expectation is that as prices advance, sales will slow down which will hopefully allow the limited inventory to last until the new crop. To make matters worse, the value of the US dollar has dropped by about 8.5% in the past 2 months, increasing the cost of oil and all other European imports.
We have to get used to the “abnormal” being the new “normal” and this applies to the Spanish olive crop again. Whether the unusual crop results may be attributed to extreme weather conditions or to the nature of olives we won’t know; one thing is sure that the 2016 harvest didn’t turn out to be as it had been predicted just a few months before all olives were collected.
We were hearing about a “fantastic” crop from growers and processors until September. Then the reports started changing: first it was the drought over the summer months that seemed to affect the overall tonnage; then it was the rain in October that was supposed to help the yield as the fruit absorbed more water and grew larger. However, as we understood the rain came too late for certain varieties and a lot of the “shriveled” olives didn’t recover. Large size olives grew larger that resulted in a good crop of the Queen (Gordal) variety but the Hojiblanca variety that’s used for both olive oil and ripe olives came in quite short, so did the Manzanilla variety that’s used for green table olives. Given the short crop we can expect the ripe olive market to be quite firm throughout the year.
The growing season of Kalamata olives in Greece is similar to that of the various olive varieties in Spain but the Kalamata olives are left on the tree much longer to ripen; Kalamata olives aren’t going to change color during fermentation and they must reach their desirable purple color on the tree. Just like for Spanish olives, we expected a good crop until about August when we started hearing about the drought in Greece and some fruit fly that caused considerable damage to the crop. Growers were hoping that the yield would improve when rains arrived in the fall but, unfortunately, this wasn’t the case. By the time they finished the harvest in December, they reported an overall shortage of about 30% compared to 2015. There was very little carryover from 2015 and prices started to increase sharply in the New Year.
Kalamata olive processors don’t own Kalamata olive orchards; they buy olives from growers that keep their crop in fermentation tanks until they are ready for further processing and they sell the fruit little by little at prevailing market prices. In other words, they can charge what they want as long as they have a taker; the price is set at the time of the transaction. We understand from our suppliers that right now growers are holding the olives and they are not only quoting much higher prices than last year but they are also anticipating even higher prices later because of the short crop and high demand. Some packers think that the price of Kalamata olives may reach levels this year that we haven’t seen in some 15 years.
Unusually cold weather in Europe in mid-January may adversely affect several crops.
Europe was in the grip of extremely harsh weather a few weeks ago; snow swept across areas that hadn’t seen snow in 35 years, like Murcia, Spain, the largest artichoke growing area. Temperatures dropped below freezing to around 20°F in Rome, to 15°F in Thessaloniki, Greece, and several Greek islands were blanketed with snow and freezing temperatures.
Agriculture is the backbone of the economy of several countries in the Mediterranean, such as Spain, Italy, Greece and Turkey and such unusual weather phenomena may cause long-lasting damage to the upcoming crop. While snowed-in artichoke fields may recover in 20-30 days, citrus and olive groves, peach, apple and pear orchards may experience permanent damage.
Spain was expecting an excellent artichoke crop in December, due to long-awaited rainfalls and mild temperatures. Then came the frost and snow that damaged the January cuttings. The Spanish variety of artichoke plants (“Bianca”) will bring more than one fruit in a season, so the growers are hopeful that the smaller fruits will recover and grow if there aren’t any more “winter blasts”.
However, it’s not certain how much of the crop has been lost or how long the season will be. Spanish packers usually process artichokes through March/April but if it becomes too hot too quickly, artichoke hearts will open into flowers and won’t be suitable for canning any longer.
The current year’s olive crop was affected by low rainfall, which inhibited sizing. Later in the season the fruit flies infested some of the crop, primarily in Italy and Greece, affecting the quality.
The main sources of oil in order of predominance are: Spain, 1.4 mt (million tons), Italy 350 kt (thousand tons), Greece 250 kt, Turkey 120 kt, Tunisia 60kt, Morocco 40 kt.
With the production in Greece and Italy reduced, the packagers (primarily in Italy) are creating a lot of demand from the Spanish suppliers, pushing the market up, perhaps beyond a normal supply & demand balance.
Olive Oil is a highly speculative commodity driven by:
- A few very large companies
- By ‘Speculadores’ which means speculators in Spanish!
These 2 forces unpredictably control the olive oil market. The market remains quite firm now and may remain so until the spring. In the spring, the olive trees begin to flower, just as other flowering trees, which is the first indication of how much fruit the tree will bear during the season, leading to the initial ‘speculation’ on the new season crop.
Mandarin Orange production to finish early in China due to poor crop.
Our buyers have recently traveled to China and visited several mandarin orange packers in Zhejiang province (Ningbo area).
There are several growing areas in China, like Hunan, Hubei, and Zhejiang Provinces. According to packers, the crop in Zhejiang is some 40% shorter than in a regular year, while the crop is decent in the other provinces in terms of volume but poor in quality as fruit is small due to lack of rain. These other growing areas are in the middle of the country and domestic freight from Hunan and Hubei Provinces to ocean ports or to other factories in Zhejiang or Shandong Provinces makes the raw material very expensive.
Also, it may be hard to believe, but factories are having a hard time hiring workers. Processing mandarin orange segments requires a lot of manual labor and it’s a seasonal job. Some large factories pack nothing but mandarin oranges and they are only open for 2-3 months per year, so a temporary and tough job is not very appealing to workers.
China is facing challenges regarding environmental issues. The country is very polluted and the air quality is bad; as we can all see on the news and on the internet. The government is taking tough measures in order to “clean up” the air and the land; these clean-up efforts affect the food processing factories as well: they must contain and clean their waste and that costs a lot on money. Higher fruit prices, rising labor cost and expenses related to environmental clean-up contribute to higher production costs.
On the other hand, China’s largest competition in this business, Spain, is experiencing a good season, with expectations to exceed normal production volume due to strong demand. Chinese mandarins are subject to anti-dumping duties in Europe that can make their product hardly competitive when the crop is abundant in Spain.
The USA remains China’s main export market and even though the cost of production seems to have increased we expect the prices to remain around last year’s levels because of the decreased demand from Europe. Chinese packers traditionally continue processing mandarin oranges through Chinese New Year that falls on January 28th this year but we are hearing that production will be completed by end December or early January in most factories.
Olives are harvested in the fall for the Mediterranean areas of Spain, Italy, Greece, Turkey, Tunisia, and Morocco. Thus far, the growing conditions have been very good, but rain is still needed for the olives to mature to full size so the farmers can get the best yield. The fruit fly incidents have been causing some concern, but if the weather turns cooler, perhaps this will reduce the risk of crop damage. This is a newly reported problem still being assessed.
Olive Oil has been under some pricing pressure, keeping prices firm. There seems to be sufficient inventories of most varieties used for table Green Olives. The supply of the Hojiblanca Olives, used for ripe olives in Spain, and the Kalamata Olives in Greece, also have good numbers which maintains strong supply. Because of the financial crisis in Greece, over the past few seasons the farmers have been asking for more money which pushes up pricing.
Typically, new crop prices for olive oil and table olives are announced in January. The pricing for new crop Kalamata Olives is also usually announced early in the year as well, as this crop is still harvested into the first quarter of the year.
The market is typically tumultuous and this year is no different. The market is now at a low point for the crop year (December – November).
This year, things are pointing to a good crop, but the right amount of rain, no hail, and good sun are still needed during the growing season. An early indication of the crop season is to see the conditions of the Spanish crop when the olive trees bloom in April.
Production from other sources such as Tunisia, Turkey, Greece, Morocco, and South America will provide our year’s total supply. Spain, however, is the dominant source of olive oil while Italy is the dominant country for bottled olive oil.
The pricing of olive oil is quite complex. There are several very large olive oil companies who can change the market with just a few trades, which makes the market very difficult to predict. The fact is Spain, the world’s largest producer of olive oil, came up short of budget and a lack of rain late in the season put an upside pressure on pricing, despite weak consumption. Predicting pricing on olive oil is a very risky business, but currently pricing is steady with a lot of upward pressure.
The new crop of olives begins in April when the trees begin to flower. Professionals can get an early indication as to the yield of the upcoming crop by analyzing the amount of flowers on the trees and the amount of growth on the branches. Then, of course, they need favorable weather during the next 6 months of growing into the fall harvest to ensure a good crop.