So strange, yet true

The British government’s plans really are as mad as they sound. Try this example for size:

Fresh produce importer PML Seafrigo runs a private BCP at Lympne, near Dover. Company director Mike Parr picks up the story:

“PML Seafrigo has its own 24/7 border control post at Lympne, which is the closest point of entry to the Port of Dover (closer than Sevington), we have a dedicated transport and logistics hub for imported goods and yet our customers will still be charged the CUC even though they will not be using the Sevington facility. 

“The government is effectively asking businesses such as ours to collect taxes on their behalf. And the fact that this fee will be reviewed and updated annually by Defra is itself worrying, it could easily be increased in 12 months’ time. 

Parr is outraged by the casual way the government is abusing the trust of the country’s traders.

“The common user charge (CUC) is effectively another business tax that will be applied to each commodity line in a Common Health Entry Document (CHED). Although fees are capped – £145 for every consignment arriving via the Port of Dover or Eurotunnel –this is another expense for importers and retailers to bear, which will of course be reflected in further delays at the ports and another price hike for essential food items.

“What is particularly frustrating is that the fee is being levied for all fresh produce / plants goods passing through Dover or Folkestone – even if they don’t pass through the government controlled inspection post at Sevington.”

The question that most people would want an answer to is “WHY is the British government waging war on the very people that it claims to support? Any ideas, please add as a comment.

Mind the gap

 International olive oil packers face a very real threat of gaps in stocks of olive oil before this year’s harvest comes onstream. There is reason to believe that without any carry-in stocks, the scenario will be repeated next year. Prices have been high for months, as dwindling tonnages have been shipped from emptying tanks. Costs are not expected to ease before May 2024. This is an unprecedented situation, even to the industry veterans who remember the 1990s.

The Turkish government has banned bulk shipments of olive oil until November 1, as Italian and Spanish packers scoured the markets for available tonnages. The 2021-22 crop year came close to 230,000 tonnes of olive oil in Turkey, while official sources are predicting a record 400,000 tonne crop for the current crop year. The country has a large table olive sector, which is also expecting a bumper crop of 700,000 tonnes. The way the two harvests are managed reflect the different product requirements, but variables such as oil content and moisture content have a degree of wriggle room. Table olives are fragile and demand very careful handling to remain visually perfect, while olives bound for the pressing mill need to be intact but not necessarily pristine.

Turkey also produces three quarters of the world’s hazelnuts, with average crops of around half a million tonnes inshell equivalent in recent years. There are lingering memories among olive oil traders of instances when consignments were topped up with hazelnut oil, which is very hard to detect when mixed with olive oil in small quantities. Such adulteration introduces a nut allergy risk, proportional to the percentage added. It requires specialist laboratories using either chromatography or spectroscopy to detect it. The confident predictions of record olive oil tonnages in Turkey’s current crop year may not be completely fortuitous.

In June, Portugal’s producers were predicting a trend-busting crop topping 100,000 tonnes, maybe even a record 126,000 tonnes. Whether it turns out to be a record harvest or not, it will all sell through in very short order. There is reason to suppose that the country is benefiting from its extensive Atlantic facade, even though Portugal is not a major producer.

Normally a net importer of olive oil, the southern hemisphere olive oil producer Ecuador is preparing to empty both its harvest and its reserves into a transient seller’s market. In terms of tonnages, this is unlikely to top 3,000 tonnes The southern hemisphere crop is in its final stages this month and every tonne harvested has a number of potential buyers in Europe.

The growing concerns over olive oil supplies are surfacing in many different ways across southern Europe. Croatian olive oil producers are critical of the restaurant trade’s insistence on putting cheaper imported olive oils on tables, while local specialities are promoted on the menu. Award-winning olive grower Ivica Vlatkovic put the cat among the pigeons by urging restaurateurs should sell 100 millilitre bottles of good quality olive oil as part of the cost of a cover.

Burning question

Wildfires across huge areas of southern Europe mean even more bad news for olive oil and table olive packers. It is impossible to predict the full effect on this winter’s prices for olive oil or table olives, but there will be direct consequences. This is not a complete wipe-put story, since established olive trees with deep root systems can recover from fires, although this will take time. Young olive trees are more susceptible to fire damage.

Click image for latest information

The immediate impact will be on packers and blenders of olive oil, particularly in Italy: these skilled folk have a network of suppliers for very specific oils with relatively rare qualities. The suppliers of such rarities are spread over the continent, from Gibraltar and north Africa down to the middle east. The trading network is complex and known to a handful of olive oil blending experts.

In a year when the mainstream crop is already looking patchy and fraught, this will mean higher costs for the retailers. In the UK, the multiples are reluctant to let their double digit margins take a hit and will do their level best to make sure that suppliers carry the burden. The situation is, however, beyond horse trading. Bulk olive oil prices will be non-negotiable, where there is product to be had. Looking at the Mediterranean over the next few weeks, the following impacts can be expected. Industrial tomatoes for peeled plum tomato canning lines can be expected to be short, since crop irrigation is being used for firefighting. Chopped tomatoes, passata and tomato paste can be made from almost any variety of tomato and production is not limited to southern Italy. Table olives are under a shadow, with a high risk of localised damage: a lot of olives will have been burnt off the trees. Durum wheat, essential for pasta manufacture, may have escaped the worst of the heat waves, but export tonnages will probably be restricted.

For the latest information on the European forest fires, click here.

Growing demand

Source: Intrastat

Total imports of Spanish olive oil to the UK topped 92,000 tonnes in 2021. That includes retail products, industrial, pharmaceutical, food manufacturing and UK-bottled own label product. The only tonnage it leaves out is olive oil sold by Lidl and Aldi. That represents a lot of demand for physical stock. Over the past decade it has climbed from 70,000 tonnes, with a wobble caused by high fuel prices in 2018.

Olive oil by numbers

The UK has been a strong market for olive oil in recent years, in a world where consumers are spending more than 14 and a half billion pounds a year on the Mediterranean’s most important crop. UK consumers will be paying rather more than their European neighbours in the coming months. They already pay over the odds, as it is.

The UK market caters for small introductory purchases: 250ml bottles currently retail for GBP 2.45p for olive oil, GBP 2.55p for EV (Sainsbury on June 1), while a Tesco 250ml bottle of bland mild and light olive oil has risen by 18% over the past year to GBP 2.83p. Tesco pricing for a litre of leading brand EV has risen steadily over the past 18 months by 50% from GBP 6.95p to GBP 10.40p, while ASDA increased the shelf edge price for the same branded litre of EV from GBP 6.50p to GBP 8 on June 1.

As of June 1, the ASDA shelfedge price for a one litre bottle of Filipo Berio EV went up to GBP 8, while Tesco was asking GBP 10.40 for the same product. It is safe to suppose that ASDA was not selling this line at a loss. So “every little helps” Tesco is charging 30% more than its rival. The day before, the differential was 60% for the same stock on the same shelves in their respective stores.

At a nearby town centre branch of Iceland during the same store check, the olive oil category was a one liner in every sense of the phrase. It comprised a single SKU, 500ml of ordinary olive oil for £4 in a tertiary brand, packed in a tidy plastic bottle. A no-frills distress purchase.

UK grocers selling olive oil have been milking the category. Spanish consumers get through a per capita average of 10 litres a year. They know what it’s worth and expect to get value for money. At the moment, headline olive oil prices are rising and are close to EUR 5,500 a tonne for EV grades. UK retailers will have to rethink their margin expectations if they are going to secure product and continue selling it. The party’s over, guys.

Rules Of Origin (ROO)

Goods that combine components from more than one trading bloc are subject to the Rules Of Origin procedure. Goods made in the EU are zero-rated on arrival in the UK, while the status of duty payable on third country components or ingredients used in EU goods is determined by applying Rules Of Origin. These establish whether or not the third country component has been transformed sufficiently for it to be considered an integral part of a new product. If it is a fellow traveller in a blended product, for instance, it is liable for duty.

The first target is to ascertain whether or not the component concerned has been absorbed into the finished EU product. If so, it can usually be covered by the duty payable on the finished product. If, on the other hand, it can be recovered from or identified within the EU product, the third country component may be liable for third country duty pro rata. The key marker is whether or not the third country component qualifies for a change of customs code. This will be decided by the UK customs staff on a case by case basis.

In the case of third country extra virgin olive oil (1509 2000), it is considered a fellow traveller in a blended product. This currently stands at 104 gbp per 100kg, according to the UK government online tariff service, https://www.trade-tariff.service.gov.uk/subheadings/1509200000-80 (as of check made on May 29).

Olive oil stocks under pressure

Spain, the world’s largest producer of olive oil, faces the prospect of running out of extra virgin olive oil in the coming months. According to industry figures seen by Urban Food Chains, forecasts for worldwide consumption of olive oil are expected to drop from 3.1 million tonnes to 2.9 million tonnes in the current campaign. There is a potential shortfall of 745,000 tonnes worldwide.

The Spanish industry invested heavily in extensive tree plantings around the turn of the century, with enough trees and crushing capacity to produce one and a half million tonnes of olive oil in a season. But the 2022-3 crop was a poor crop and down by over 50 percent against the previous campaign. This year a lot of flowers set on the trees, but like last year, the trees are stressed and are shedding the fruit.

With total olive oil stocks  across the Spanish industry hovering at just over 607,000 tonnes, the sector faces empty tanks later this year. Domestic consumer demand is strong and April sales in Spain topped 63,000 tonnes. With at least six months to go before the next harvest comes onstream, Spanish consumers will be competing with exporters for physical stocks of olive oil.

Demand is strong and prices are high but expected to go up even further. Assuming that Spanish consumers ease up on their purchases of olive oil, which is not a given, a 5% drop in month on month sales volumes would represent a requirement of just over 277,000 tonnes between now and the next crop. The Spanish industry delivers shiploads of olive oil around the world and all over Europe by tanker truck. Exports as of around 50,000 tonnes a month would empty the country’s remaining stocks by November.

data source: International Olive Oil Coouncil

Like any other crop-driven commodity, there is a numbers game in play and prices will rise steeply to head off strong demand. Retail margins will come under pressure as physical product becomes harder to obtain. The EU has trade deals with north African producers, who can ship quota  tonnages that member states can draw down with zero duty. Should any of this third country olive oil be packed for the UK market, even in a blended product, Rules Of Origin (ROO) would apply on arrival at the UK frontier, where duty would be charged on the non-EU content.

But the underlying concern has to be the drying out of water tables across a huge swathe of southern Europe and the Mediterranean basin. Olive trees have deep roots, but not deep enough, it might seem. In Spain, the planting of thousands of trees has propped up crop yields most years, but not all. This year’s forecast being a case in point.

Background notes about olive oil.

Asparagus and strawberries

Money is a totally meaningless measure of value for many things. Take food production for instance.

From an accountant’s point of view, there is no monetary distinction to be made between a farm growing a thousand pound’s worth of wheat during a crop year and a market gardener’s business growing a thousand pound’s worth of asparagus and strawberries over the same period of time. It is only when you come to live on these harvests that the difference becomes apparent.

Luxury crops such as asparagus and strawberries, or Yorkshire rhubarb, became potentially more profitable when the Victorian railway network suddenly cut the cost of market access, moving delicate products quickly and efficiently. Market gardeners were by definition close to urban centres, but the railways extended the range over which they could sell.

The reason asparagus-and-strawberries is such a common combination is that both crops need a lot of skilled labour to harvest. Having assembled a gang of labourers to pick asparagus, it makes sense to have another crop to follow through and move the workforce from one to the next as the season progressed.

In the case of Yorkshire rhubarb, production is concentrated into an area surrounded by railway lines. Like the asparagus-and-strawberries growers, market access was the key to their profitability.

However, especially given the short seasons for these luxury crops, no-one is going to live on a diet of asparagus and strawberries. We use a different set of values to establish what a sustainable food system might look like and what it would need to produce.

Longer shelf life for fresh produce

Swiss researchers have found a way of using fruit and vegetable peelings to make a coating that extends the shelf life of fresh produce. Staff at the Empa research body have been working with Lidl Switzerland since 2019 to develop what promises to be a game changer.

Bananas have been chosen to test Empa’s cellulose coating.

Testing the coating on bananas, a gain of up to a week was recorded in the product life. There is the added benefit that with a reduction in the use plastic materials, the risk of condensation or rot in transit is also lower. “The big goal is that such bio-coatings will be able to replace a lot of petroleum-based packaging in the future,” explains Gustav Nyström, head of the Empa lab.

Lidl Switzerland has 150 stores that will take part in testing the new coating as it continues its development over the next two years.

Further details from the Empa website.

Dietary gold on trees

pic Wikimedia Commons

Today (Friday November 26) is World Olive Tree Day, as growers in the northern hemisphere prepare to pick the next crop of olives. More than two thirds of the world’s olive trees grow in the Mediterranean basin and survive thanks to their deep roots. Younger trees planted in more recent groves will often be irrigated until their roots have reached cooler, damp rock formations.

Olive oil ranges in colour from green to gold.

Olives are a winter crop: starting in November unripe green olives are gathered and pressed for distinctively strong, green oil. As the winter progresses, the olives darken and ripen, the oil changing to gold as the flavour softens with the fruit. The harvest continues into February and March, depending on varieties and locations.

Traditional olive-picking techniques needed the olives to be hard enough not to break up as pickers beat the trees with heavy sticks. Today, large groves are harvested with a mechanical arm attached to the trunk of the tree. The tree is then shaken vigorously, emptying the fruit onto large sheets spread out to catch the crop. The process is stressful for the tree, but is quicker than the stick-wielding villagers. The remaining winter months are a time of recovery.

Once picked, olives are fragile. Away from the tree, the olives start to accumulate free oleic acid as they oxidise during the different stages of processing. Only when the oil is extracted and stored under nitrogen can the oxidation be halted. The largest pressing plants, typically in Spain, where batches are consolidated and have more time to oxidise, face the prospect of minimising the effects as best they can.

Olives picked for the table have an additional constraint: unlike olives bound for pressing, every table olive needs to be visually perfect. To remove the stones from olives, the flesh needs to be firm and the olive must be unripe. To produce black pitted olives, green olives are treated to make the flesh black and then the stones can be removed mechanically. By the time an olive has fully ripened and turned black naturally, it is no longer possible to remove the stones mechanically, since the soft flesh just falls apart. The taste, however, is exquisite.