Is olive oil a good investment?
Olive oil is a staple part of the diet for millions of people across the world. The olive tree is native to the Mediterranean basin and there is evidence that people have been cultivating and collecting the fruit since at least 8000 BC. After 10,000 years countries such as Spain, Italy, Morocco and Greece are still the home of olive oil production which has become a global industry.
Olive oil has been a valuable trading commodity for thousands of years thanks to its versatility. Any product which can be used as food and fuel source as well as being a component of pharmaceuticals and soaps is bound to command a premium. The Romans loved it so much that they used it as a moisturiser and an aphrodisiac. However, even though it was traded widely in the ancient world, it was nowhere near as ubiquitous as it is today, where annual worldwide production is estimated at more than three million tonnes.
On the surface, the olive oil market looks like one which might not be an ideal investment. It is so well established and long running that you could be forgiven for assuming that explosive periods of growth are in the past. However this does not look to be the case, and in fact this could be the perfect time to consider investing in olive oil.
Whilst it is true that consumption in the traditional heartlands of olive oil – Europe and North Africa – has pretty much peaked, there are two extremely significant markets which are growing at an impressive rate.
The first is Asia, where people are becoming wealthier and are able to purchase higher value foods from outside of their traditional diets for the first time. For instance, a population with increasing wealth tends to eat more meat which is why the amount of beef being eaten in China is increasing every year. Olive oil is considered to be a similar luxury product which is available to more and more people in Asia every year. This emerging market is certainly something to look at when considering a new investment.
The second major growing market for olive oil is the USA which manages to be growing at the same speed as the Asian market despite already being the third largest in the world. ADM Capital, an investment firm which is making moves in the olive oil market, notes that high level demand for the product in the USA is a relatively new phenomenon and that American consumers were previously unfamiliar with the product by and large. To complement its growing popularity, the United States Department of Agriculture has established clear standards for olive oil to enable consumers to understand the product better, and the Food and Drug Administration has both promoted the health benefits of olive oil and acted swiftly against companies mislabelling their products.
Olive oil production in the USA has grown by 9.2% in the last decade and this growth has been projected to continue until at least 2021. Do you know of an up and coming olive oil business in California, the state home to 99% of the USA’s olives? This might be the perfect time to invest and reap the rewards available in a growing market. At a time when olive harvests in Europe have been having issues with yield and disease, it could be a smart move to invest in California and get ahead of the curve.
