With the drought that has hit the industry the hardest in recent years, EU olive oil production is expected to fall significantly.
At the same time, other market players - Turkey, Tunisia, Morocco and Syria - aim to replace the European product, but the quality of oil from these regions still raises some doubts among consumers.
OleoScope decided to find out what's happening with the premium product now, whether it's worth counting on a drop in interest in several countries, and how oil prices have changed over the past year.
effects of drought
The global olive oil market is not having the best of times this season. Global production could fall to its lowest level in recent years by the end of the current agricultural year as the drought in Europe has severely affected the condition of local olive trees.
The 2021/22 season was not bad overall, but the situation has deteriorated rapidly in recent months. The Mediterranean countries showed a decrease under the "bad scenario" due to the unfavorable weather conditions: a production decrease of 50% was recorded in Spain, 39% in Portugal and 27% in Italy.
Greece has become the only EU country to have increased the harvest, but it is impossible to offset the drop in volumes from neighboring regions with a small increase of 100-150.000 tons.
From countries outside the EU, Turkey received a bumper crop, but it will practically not affect the situation on the global market. Production in other countries (Morocco, Syria, Algeria, Lebanon, etc.), which initially have a much lower proportion of plants, can also only partially cover the shortage of European product in good weather conditions.
In addition, very hot and dry weather has established itself throughout the Mediterranean in April and May: there has been no rain since the beginning of January, and the flowering of trees is worse than last year.
As long as the restoration of production is forecast very early, everything depends on there being rain showers in the next few months. However, if the current weather trend continues, due to its limited quantity in the world market, consumption of this type of oil is also expected to decrease as prices rise.
“Olive oil is different in that its production is limited to the number of trees. Olives can no longer simply be planted in a country in the event of a poor harvest in a given location - the tree takes 3 to 8 years before bearing fruit and also needs planting areas with a suitable climate," one market participant told Oleoskop.
Production went down
According to forecasts by US Department of Agriculture (USDA) analysts, global olive oil production this season will fall to a multi-year low, practically 2,6 million tons - that's 660.000 tons less than 2021/22 and about 545.000 tons less than the average the last 5 years.
World production of olive oil, thousand tons
| 2017/2018 | 2018/2019 | 2019/2020 | 2020/2021 | 2021/2022 | 2022/2023 | |
|---|---|---|---|---|---|---|
| EU | 2188 | 2264 | 1925 | 2051 | 2235 | 1550 |
| Turkey | 263 | 194 | 230 | 210 | 225 | 340 |
| Tunisia | 325 | 140 | 440 | 142 | 240 | 200 |
| Morocco | 140 | 200 | 145 | 160 | 200 | 160 |
| Syria | 100 | 104 | 118 | 115 | 106 | 125 |
| Welt | 3285 | 3160 | 3153 | 2927 | 3274 | 2614 |
The largest drop will come to EU countries: according to the International Olive Council (IOC), a drop is expected as product output falls in Western Europe. The level of production in the three main regions (Spain, Italy, Portugal) will drop significantly due to the drought, while a slight decline is expected in France. A significant increase – around 1,5 times – is forecast for Greece. A slight increase is possible in Croatia, Slovenia and Cyprus.
At the same time, the USDA expects that the production of olive oil in 2022/23 will also increase in Morocco (from 200 to 160.000 tons) and Tunisia (from 240 to 200.000 tons), which are among the top 5 world producers of the product. will sink.
“It is likely that tensions in the global olive oil market will persist in the medium term as there are no players capable of making up the deficit that has arisen. Turkey, Iran, Tunisia and some other countries participating in the global olive market do not have production potential to fully replace exports from Europe, said the professor at the basic chair of trade policy at Oleoskopu. GV Plekhanova Ibrahim Ramazanov. –However, given the global warming processes and frequent droughts in Europe's olive oil producing regions, Turkey, Iran, Tunisia and other countries may increase their share of the world market in the long term.ъ
Importantly, against the backdrop of the drought in Europe, the volume of global olive oil trade this season is likely to return to 2018/19 levels – at 1,18 million tonnes. The EU share could therefore drop from around 65 percent (2021/22) to 50 percent. At the same time, Turkey will significantly strengthen its position in the global market, ending 2022/23 with a share of more than 18% compared to the previous season's 5%. Tunisia, in turn, will reduce product supply in the current agricultural year, but the region retains a 3% share of global trade.
World olive oil exports, thousand tons
| 2017/2018 | 2018/2019 | 2019/2020 | 2020/2021 | 2021/2022 | 2022/2023 | |
|---|---|---|---|---|---|---|
| EU | 1410 | 1420 | 1445 | 1470 | 1495 | 1345 |
| USA | 326 | 365 | 406 | 395 | 423 | 381 |
| Turkey | 175 | 180 | 185 | 190 | 190 | 180 |
| Morocco | 130 | 145 | 135 | 140 | 145 | 137 |
| Great Britain | 65 | 80 | 83 | 88 | 90 | 82 |
| Welt | 2862 | 2927 | 3032 | 3067 | 3153 | 2816 |
However, despite the projected increase in natural exports from several regions, the question of the presence of quality olive oil on the market is acute. One of the interviewees of «Oleoskop» in the branch said that many buyers now have certain questions about the product quality of those sellers who are actively replacing European suppliers.
“A separate issue is the quality of the oil, which suffers with this weather as there are more damaged olives due to the drought, less quality oil volumes. Accordingly, the demand for high-quality oil is also increasing, which is driving prices further up,” a source in the market told us.
And the prices go up
At the moment the value of a ton of extra virgin olive oil has already increased by 2022% compared to May 54, the growth continues due to the increased demand, which has also been particularly established this spring.
“If we take into account the European countries and the largest producer of olive oil, Spain, on which prices in the world market depend, we see a significant increase in the value of the product. This is also due to the climatic conditions, Regina Gurina, assistant professor at the Agricultural Technological Institute RUDN, comments to "Oleoskop". –But it is worth noting that the increase in European olive oil prices depends not only on the drought observed in principle in some regions since 2014, but also on other situations: world economic crisis, energy problems, price jumps, etc.”.
And the demand will continue
However, in the long-term, the consumption of olive oil in the market is expected to increase, as this category has been growing steadily in almost all countries under normal price conditions, while the population strives for a healthy lifestyle.
“This trend in particular has intensified during the lockdowns – in some countries the category has shown growth of up to 30%. This is because many began to cook more at home, someone learned to do it and made it a habit. Also against the background of the epidemic, people began to show interest in their own health, vitamins," one of the interlocutors in the industry told Oleoskop.
At the same time, the USDA expects a slight decrease in olive oil consumption this season - from 3,15 million tons (2021/22) to 2,82 million tons. At the same time, the decline in the figures for the 2017/18 agricultural year will be only 2%, which indicates a fairly stable demand for this product, especially from the EU, the USA, Turkey and Morocco.
World consumption of olive oil, thousand tons
| 2017/2018 | 2018/2019 | 2019/2020 | 2020/2021 | 2021/2022 | 2022/2023 | |
|---|---|---|---|---|---|---|
| EU | 1410 | 1420 | 1445 | 1470 | 1495 | 1345 |
| USA | 326 | 365 | 406 | 395 | 423 | 381 |
| Turkey | 175 | 180 | 185 | 190 | 190 | 180 |
| Morocco | 130 | 145 | 135 | 140 | 145 | 137 |
| Great Britain | 65 | 80 | 83 | 88 | 90 | 82 |
| Welt | 2862 | 2927 | 3032 | 3067 | 3153 | 2816 |
“Each consumer has their own taste preferences, someone prefers Greek olive oil exclusively, and someone brings oil from Algeria and thinks it is the best,” explains Regina Gurina, assistant professor of agricultural technology at the RUDN Institute.
The expert also noted that due to the market situation, the domestic consumer does not feel significant changes and losses, and therefore will not feel.
“There are no changes on the retail shelves, the main producers of olive oil are still Greece, Spain, Italy. Demand will remain exactly at the level of previous years, there should not be an outbreak."
Source: Ukragroconsult (Ukraine)