Olive Oil Prices to Surge Due to Drought in Mediterranean Region

Mediterranean countries including Spain, Greece, and Italy have seen a sharp fall in production due to the hot, dry conditions that have prevailed.

By Julie Al-Zoubi
May. 25, 2017 14:26 UTC

Industry experts are warn­ing that con­sumers will have to fork out more for olive oil, as droughts in the Mediterranean region take their toll on olive oil pro­duc­tion. Consumers across Europe have already seen prices rise by an aver­age of 26 per­cent in the last two years. Spanish con­sumers have felt the pinch of a mas­sive 36 per­cent price rise accord­ing to research group IRI.

We have had bad weather affect­ing pro­duc­tion three years out of the last five.- Vito Martielli, Rabobank

The price of EVOO has already spiked by nearly 25 per­cent this year result­ing in whole­sale prices of reach­ing over $4,200 per ton. Retail prices have not yet caught up, due to the time lag and super­mar­kets buy­ing in bulk.
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Panayotis Karantonis, direc­tor of the Athens-based Greek Association of Olive Oil Processors and Packers told the Financial Times, Over the com­ing months the prices in super­mar­kets in the U.S. and U.K. will be higher than two-to-three months before.”

A pre­dicted drop of 14 per­cent in world pro­duc­tion has been fore­cast. Mediterranean coun­tries includ­ing Spain, Greece, and Italy have seen a sharp fall in pro­duc­tion due to the hot, dry con­di­tions that have pre­vailed.

The International Olive Council (IOC) esti­mated that Italian out­put may halve this year to 243,000 tons from last year’s 475,600 tons. Greece could see a 20 per­cent drop from 320,000 tons to 260,000 tons and Spain’s pro­duc­tion is expected to be over six per­cent down, from 1.402 mil­lion tons to 1.311 mil­lion tons. Tunisia’s pro­duc­tion is expected to fall by 17 per­cent.

Vito Martielli, a grains and oilseeds ana­lyst at Rabobank pre­dicted the global har­vest will decrease by about 600,000 tons. Martielli told the FT, We have had bad weather affect­ing pro­duc­tion three years out of the last five.”

Jonathan Watson, chief ana­lyst at Foreign Currency Direct told the Telegraph, A drought in the Mediterranean has hurt crop yields and major exporters like Greece and Italy are strug­gling to meet out­put expec­ta­tions.”

Watson added, The other major con­trib­u­tor is Brexit, with the drop in the value of the Pound mean­ing ris­ing costs for U.K. importers and super­mar­kets. Faced with the Pound some 13 per­cent down ver­sus the Euro since the ref­er­en­dum vote, the cost to buy goods from over­seas has increased for British busi­nesses.”

Production has been higher than in 2012 when drought hit Spain, and 2014 when the Xylella fas­tidiosa bac­te­ria infected many of Italy’s olive trees, but more fre­quent declines in out­put and shorter sup­plies have made the olive oil mar­ket increas­ingly vul­ner­a­ble to price spikes.

European demand for olive oil has decreased due to lower sup­plies and price hikes caused by the low value of the British pound. Demand else­where remained high, par­tic­u­larly in Australia, Brazil and China accord­ing to the IOC.

Earlier this year Walter Zanre, the boss of Filippo Berio U.K. proph­e­sized that 2017 Will be a very bad year for olive oil.”


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