Brexit, Poor Harvests Cause Spike in Olive Oil Prices

Poor harvests in Europe and the uncertainty following the Brexit vote have caused olive oil price spikes of up to 20 percent in the UK.

By Stav Dimitropoulos
Jan. 26, 2017 08:45 UTC

The United Kingdom European Union mem­ber­ship ref­er­en­dum, or Brexit, has swayed not only the world of European pol­i­tics and eco­nom­ics but the world of the liq­uid gold too, with British olive oil con­sumers now expe­ri­enc­ing olive oil price spikes of up to 20 per­cent.

Imports into the UK from Europe are going to have to bear the effects of the no’ vote.- Jamie Johnson, FJP Investment

The price of olive oil has increased not due to the spike in the value of the Euro ver­sus the Pound. Since the June 24th result stunned the world, we have seen the exchange rate increase the costs of buy­ing from Europe at least 10 per­cent,” Jamie Johnson, CEO of FJP Investment told Olive Oil Times.

Trade mag­a­zine The Grocer reported that a 500ml bot­tle of pri­vate-label olive oil now costs £0.35 more in Sainsbury’s at £2.35 and £0.20 more in Tesco at £2.20. Sainsbury’s extra vir­gin olive oil of 500ml has also gone up by £0.10p to £2.35, and its pri­vate-label organic extra vir­gin olive oil of 500ml has increased by 20 per­cent in both Sainsbury’s and Tescos, set­ting the con­sumer back £3.00 to buy it.

Apart from the wider Brexit after­ef­fects, a main rea­son why olive oil prices have shot up is poor har­vests in Italy and Greece.

In Italy, pro­duc­ers saw their out­put fall to 230,000 tons in 2015 com­pared with the 350,000 tons pro­duced in 2014 due mostly to olive fly infes­ta­tions. For the same rason, Greece, which pro­duced an aver­age of 300,000 tons over the past two years, will prob­a­bly not sur­pass 200,000 tons this year.

While the pro­duc­tion of two of the strongest play­ers in the global olive oil mar­ket has fallen, the UK demand for olive oil has sky­rock­eted. From 6,200 in 1990, British olive oil demand soared to 65,000 tons in 2015, an inef­fa­ble increase of 763 per­cent.

Though it is true that there is enough olive oil in gen­eral to com­pen­sate the num­bers, it seems there is par­tic­u­lar inter­est from the British con­sumer for cer­tain seg­ments of the olive oil mar­ket, explained Johnson.

For exam­ple, some­one accus­tomed to buy­ing the same brand of olive oil for the last ten years will likely take the hit on the price increase. And while price is impor­tant, the prod­uct is equally impor­tant.

We can agree that all olive oil is not the same and with that it is impor­tant to dif­fer­en­ti­ate the regions of the world that are pro­duc­ing olive oil. Naturally, we are all feel­ing the pinch and we all have a price point before we change due to pric­ing. Certainly I would resist chang­ing olive oil at the con­sumer level until the pric­ing became too unrea­son­able.”

Attachment with the favor­able brand aside, the biggest fac­tor at play might be the exchange rate, and that is why British con­sumers are sud­denly see­ing the cost of goods higher than before Brexit, repeated Johnson:

While there are no guar­an­tees as to where the exchange rate is head­ing, for the time being all imports into the UK from Europe are going to have to bear the effects of a No Vote from Brexit.”


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