Local olive oil stocks in Europe are almost depleted and further shortages are expected after extreme weather damaged the second year's crop. Heat waves around the Mediterranean have damaged crops and forced growers to import from South America.
The world's largest producer said it had to import supplies from South America to meet demand.
“It is almost impossible to buy olive oil today. It’s sold out,” said Walter Zanre, managing director of Filippo Berio’s British division.
Olive trees have been grown in the Mediterranean for thousands of years, with Spain alone producing half of the world's olive oil, but forest fires and high summer temperatures mean the future of this ancient industry is increasingly uncertain.
According to the International Olive Oil Council, global production is expected to fall to 2,4 million tonnes, less than last year's harvest and well below global demand of around 3 million tonnes, after drought and heatwaves of over 40C hit production in Spain have.
Extreme weather conditions in other key growth regions, including Greece, Italy and Portugal as well as Turkey and Morocco, exacerbated the crisis.
Zanre said the company still had supplies to meet its needs, but had been forced to import olive oil from Chile to fill the gap until this year's harvest, which begins in October, due to wholesale supply shortages throughout Europe dried up.
The size of this year's harvest is currently well below historical norms: Spain is expected to produce 750.000 tonnes - more than the 660.000 tonnes produced in last year's bad harvest, but far less than the 1,3 million tonnes produced in could be expected in previous years.
“We are facing another difficult year,” said Zanre. “At the beginning of the summer we thought the situation would improve, but as the summer progressed the situation worsened.
Farmers say their incomes have suffered due to poor harvests coupled with rising energy and labor costs.
Rafa Guzmán, an olive farmer in Jaén - the cradle of olive growing in Spain - and head of the local association Asaja, Spain's largest farmers' association, said some farmers were facing ruin as drought continued to take its toll.
“The crop here is down 70 to 80 percent,” he said. “There are some producers who don’t even have a kilo of olives. Even if the olive oil sells for 8 euros per bottle, that's not enough to keep them afloat.
Greece is expected to produce just 200.000 tonnes this year, a third less than last year, due to extreme heat and problems with fruit fly infestations.
Manolis Yiannoulis, head of the Greek Olive Oil Association, said consumers should expect price increases of “more than 100 percent.”
“This year we expect production to be halved,” he said. “The imbalance between supply and demand has already led to very high price increases, which is good for producers but very damaging for consumers.
According to analysts at raw materials group Mintec, producers in Spain only have about 115.000 tons of available olive oil stocks, of which about 60.000 tons are consumed each month.
“If this depletion continues, market experts warn that olive oil stocks could be depleted before the start of the new harvest, which traditionally begins around October in Spain,” said Kyle Holland, edible oils analyst at Mintec.
Concerns about shortages have led to a sharp rise in wholesale prices. The cost of the first cold-pressed olive oil from Andalusia in southern Spain rose to 8,45 euros per kilogram this month, more than double last year and the highest price in Spain's history, according to more than 20 years of price data emerges.
According to Assosia analysts, this led to a 47 percent increase in retail prices in major British supermarkets.
Italy's hopes of producing up to 350.000 tonnes have been dashed by extreme weather conditions such as drought and even recent rains with hail in the main growing region of Puglia, which caused ripe fruit to fall from the trees.
Italian growers have also been hit by a bacterial disease nicknamed “olive Ebola” – Xylella fastidiosa – which has killed 6 million trees in recent years.
Tunisia, Turkey and Syria recently stopped exporting oil to protect the local product from high international prices.
Zanre predicts the situation will get worse in the coming years as a climate emergency will lead to hotter, drier and more extreme weather events. “There is a big problem with water,” he says. “Not just for olives, but for the entire Mediterranean growing region.” Olive oil prices in Spain have risen to unprecedented levels since mid-2020. Although the country is by far the world's largest producer, prices - even after a historically low harvest in 2022/23 - are much higher than in other Western European producing countries.
A study published by the Spanish Consumer Organization (OCU), a non-profit organization that monitors consumer prices, confirms that the retail price of virgin olive oil in Spain remains higher than in France, Italy or Portugal.
Based on a study of 20 online supermarket chains, the OCU found that the average price of virgin olive oil in Spain is €8,72 per liter, while in Italy it is €8,21, in France it is €7,52 and in Portugal it is €6,86 .XNUMX € reached.
Additionally, the Portuguese brands included in the study were Spanish virgin olive oils, so the finding that they cost 27 percent less surprised the researchers even more.
The OCU researchers and other experts cited several reasons why olive oil prices in Spain remain higher than other Western European producers.
One of the main reasons is the high demand for olive oil, which is deeply rooted in Spanish culture and gastronomy.
Over the past five crop years (from 2017/18 to 2021/22, the latest year for which complete data is available), Spain has consumed an average of 530 tonnes per year, making the country of 000 million inhabitants the largest consumer in the world . Unlike other fats, olive oil is an essential part of Spanish cuisine, which contributes to its consistently high demand.
According to Juan Vilar, strategic advisor for the olive oil sector, even with rising prices, consumers are not looking for alternatives but are reducing their olive oil consumption.
This causes retail demand for olive oil to constantly increase even as supply decreases, creating an imbalance that does not exist in other countries.
Another reason for the difference in olive oil prices between Spain and other Western European producers is the timing of olive oil purchases by major retailers.
According to Otilia Romero de Condes, executive director of the World Olive Oil Show, many retailers outside Spain made large purchases of olive oil at the start of the 2022/23 crop year, when prices were significantly lower.
In contrast, retailers in Spain have been making smaller purchases throughout the year directly from factories rather than intermediaries, meaning retailers have paid more for olive oil currently sold in stores.
“Spain is a very rapidly changing market for this product,” Rafael Pico Lapuente, executive director of the Spanish Association of Exporters, Industry and Olive Oil Trade (Asoliva), told El Periódico.
“This means that a bottle of oil will not sit on the shelves for more than 15 days,” he added. “In other countries, olive oil is not consumed as much. A bottle, briquette or jar of this product can stay on the shelf for more than a year”.
However, one of the main reasons for the price increase in Spain cited by OCU has to do with taxation.
In Spain, a 5% VAT is imposed on virgin olive oil, similar to the VAT in the United States. Portugal, on the other hand, has abolished VAT on olive oil, which partly explains the large price difference. In Italy the VAT on virgin olive oil is 4%.
Overall, experts expect olive oil prices to continue rising worldwide as the ongoing Mediterranean drought casts a shadow over the 2023/24 crop year, which officially began on October 1.
Officials in Spain expect production to remain below 1 million tons, resulting in an unprecedented harvest for the second year in a row.
Depending on how crops develop in other major producing countries, the world could again find itself in a situation where demand exceeds supply, meaning prices could continue to rise in 2024.
Source: The Guardian