Concerns Mount Over Olive Oil Shortage in Spain

Summary

Olive oil stocks in Spain are at his­toric lows, with fears of run­ning out before the next har­vest. High prices, caused by low sup­ply and high demand, are expected to con­tinue ris­ing until May of next year.

Olive oil stocks in the world’s largest pro­ducer could be exhausted before the start of the next har­vest.

The lat­est mar­ket data pub­lished by Spain’s Ministry of Agriculture, Fisheries and Food (MAPA) show that olive oil stocks fell to 455,000 tons at the end of June.

By com­par­i­son, stocks at the end of June 2022 sat at 809,000 tons, finally arriv­ing at 454,600 tons in September 2022, the last month of the 2021/22 crop year.

“We are going to arrive in October with almost zero stock,” Juan Vilar, a strate­gic con­sul­tant for the sec­tor, told Olive Oil Times.

While the olive oil mar­ket his­tor­i­cally tends to expe­ri­ence rel­a­tive inac­tiv­ity in July and August, activ­ity returns in September.

Fears of an olive oil short­age have seen his­tor­i­cally high olive oil prices at ori­gin con­tinue to rise. According to data from Infaoliva, extra vir­gin olive oil is sell­ing for €7.625 per kilo­gram, nearly 125 per­cent higher than in July 2022.

Prices for vir­gin olive oil and lam­pante olive oil at ori­gin are also at record highs but have not increased as sharply as extra vir­gin prices due to higher lev­els of avail­abil­ity rel­a­tive to demand.

“Unprecedented sit­u­a­tions are occur­ring right now,” Vilar said. ​“The cur­rent prices have never been reached. There has never been a link [the amount of olive oil car­ried over from one har­vest to the next] like the one that there is cur­rently. And there has never been a price on the shelf like the one that there is cur­rently.”

How olive oil prices will evolve in the com­ing months depends pri­mar­ily on whether rain arrives in the Andalusian olive groves in September, October and early November.

“That rain has two effects,” Vilar said. ​“It will improve the weight of the exist­ing olives, which could increase pro­duc­tion a lit­tle. But it also has another prob­lem: if it rains dur­ing the cam­paign, it will cause the price to rise more” because it will not be pos­si­ble to har­vest all the olives on time.

Alarm bells about the sit­u­a­tion fac­ing the olive oil mar­ket also sounded in Brussels, home to the European Commission, where var­i­ous agri­cul­tural groups warned about the state of the olive oil sec­tor at a recent meet­ing of the Civil Dialog Group on the Agricultural Market.

A rep­re­sen­ta­tive from Copa-Cogeca, the influ­en­tial union of farm­ers and agri­cul­tural asso­ci­a­tions, pre­dicted that Spain’s har­vest in the 2023/24 crop year would not exceed 800,000 tons, which would keep pres­sure on prices.

Vilar agreed that next year’s olive oil yield will be sim­i­lar to the 663,000 tons pro­duced by Spain in 2022/23. As a result, he said prices would likely con­tinue ris­ing until May.

“There has never been a sit­u­a­tion like this one where, off the back of a his­tor­i­cally poor har­vest, another one is also expected,” he said. ​“We are in a sit­u­a­tion where prices will con­tinue to grow until May of next year.”

A Federation of the E.U. Olive Oil Industry (Fedolive) rep­re­sen­ta­tive also warned that yields in Greece and Portugal, Europe’s sec­ond and fourth-largest pro­duc­ers last year, respec­tively, are also expected to decline.

While the prospect of back-to-back below-aver­age har­vests in Europe has caused con­cern in Spain and Brussels, ris­ing olive oil prices resulted in record-high sales by value for two of the world’s largest sell­ers in 2022: DCOOP and Jaencoop.

Cristóbal Cano, head of the olive and olive oil sec­tor at the Union of Small Farmers (UPA), also has been bull­ish about the mar­ket and said high prices are not hurt­ing demand.

“The mar­ket­ing of olive oil con­tin­ues to be launched despite all the doom­say­ers who, month after month, have been inten­tion­ally insist­ing that the mar­ket­ing of olive oil suf­fers because con­sumer prices are very high,” he told Agroinformación.

“All the olive oil that is pro­duced is sold, and even more so in a cam­paign as low as the one we have expe­ri­enced, and there is no price prob­lem because the con­sumer remains faith­ful to olive oil,” Cano added.

However, Fedolive warned the European Commission that demand and exports had not seen the impact of higher prices since com­pa­nies have hes­i­tated to pass those prices on to their cus­tomers, but this was likely to change.

The fed­er­a­tion said the expec­ta­tions of another poor har­vest in Europe would force non-European importers to look else­where and cause some con­sumers to seek cheaper alter­na­tives.

“These new trade rela­tions would be harm­ful in the long run for E.U. pro­duc­ers,” the rep­re­sen­ta­tive said. ​“At the inter­na­tional level, there are many other alter­na­tives to olive oil that con­sumers are more prompted to choose.”

While Vilar does not dis­pute that real olive oil demand is about as high as it could be, he said a recent analy­sis con­ducted by his firm, Juan Vilar Strategic Consultants, found that poten­tial demand is far greater and con­sumers were buy­ing less olive oil than they oth­er­wise would due to higher prices.

“People are remain­ing faith­ful to olive oil [instead of buy­ing sun­flower oil, the other main edi­ble oil used in Spain], but they are buy­ing olive oil in smaller for­mats and con­sum­ing it less gen­er­ously,” he said.

Vilar added that while olive oil sales remain strong rel­a­tive to cur­rent avail­abil­ity, the mar­ket faces a par­tial short­age because not every­one who wants to buy olive oil can do so. This sit­u­a­tion will likely be exac­er­bated as stocks can­not be replen­ished and prices con­tinue to rise.

“In the com­ing har­vest, we are going to have a sit­u­a­tion where all the olive oil that is pro­duced each month is com­pletely con­sumed that month,” he said. ​“The less oil there is and the higher the con­sump­tion, the more the prices rise.”

• Agroinformación