Prices Continue to Break Records in Spain Ahead of Dismal Harvest Outlook

However, timely rain paired with stagnant global demand and an increasing number of olive groves entering maturity could reverse the price trends.

Barcelona, Spain
By Daniel Dawson
May. 2, 2023 18:42 UTC
4769
Barcelona, Spain

Olive oil prices at ori­gin con­tinue to rise in Spain, smash­ing records. However, sev­eral fac­tors could come together in the long term, dra­mat­i­cally low­er­ing prices.

According to Poolred, the online olive oil price data­base run by the Andalusian gov­ern­ment, the aver­age price of olive oil at ori­gin is €5,516 per ton, about €500 more than last month.

We are liv­ing in an unprece­dented sit­u­a­tion. There have never been olive oil prices at ori­gin like we are see­ing now.- Juan Vilar, strate­gic con­sul­tant

Meanwhile, International Olive Council data show that prices in Jaén, Spain’s bench­mark mar­ket, have risen steadily since June 2020, with a sharp accel­er­a­tion in recent months.

We are liv­ing in an unprece­dented sit­u­a­tion,” Juan Vilar, a strate­gic con­sul­tant for the sec­tor, told Olive Oil Times. There have never been olive oil prices at ori­gin like we are see­ing now.”

See Also:Olive Oil Prices Rising Faster than Inflation in Italy

In addi­tion, it becomes more unprece­dented because the prices move upwards every day,” he added.

Vilar is not alone in his sur­prise. In 20 years in the indus­try, I have never seen these prices,” Vito Martielli, an oilseed ana­lyst at Rabobank, told the Financial Times.

Vilar said the clos­est prices ever came to this point was in the 2017/18 crop year, and even then, prices remained 35 per­cent lower than they are now.

He has iden­ti­fied three rea­sons olive oil prices at ori­gin con­tinue to soar: ris­ing pro­duc­tion costs, Spain’s increas­ingly hot and dry cli­mate and global demand exceed­ing pro­duc­tion.

The first fac­tor was the ini­tial increase in inputs,” he said. There was a very high increase in the price of chem­i­cals, energy, water, elec­tric­ity, diesel and fer­til­iz­ers. These increases are directly passed on to the price of olives and, there­fore, to the price of oil.”

Along with ris­ing input costs, Vilar said the his­tor­i­cally poor har­vest in the 2022/23 crop year has also put upward pres­sure on prices.

According to the lat­est data from Spain’s Ministry of Agriculture, Fisheries and Food, pro­duc­tion reached 736,000 tons, the low­est yield since 2012/13.

Producers and offi­cials blamed a com­bi­na­tion of hot weather dur­ing blos­som­ing and the his­toric drought for the low har­vest.

Compounding the pres­sure on prices, hot and dry weather across Spain por­tend another low har­vest in the world’s largest olive oil-pro­duc­ing nation.

While it is still too early to tell how the 2023/24 crop year will evolve, reports are trick­ling in of dam­age to olive tree blos­soms in Andalusia, the world’s largest pro­duc­ing region, akin to what hap­pened last May. Vilar added that only rain this month or in the autumn would save the har­vest.

So the cli­mate is a long-term fac­tor, and only if it rains will the expec­ta­tions of next year’s har­vest improve,” Vilar said. And from there, prices would drop at least 20 to 25 cents at ori­gin. If it rains in May, the esca­la­tion of prices at ori­gin and des­ti­na­tion could be stopped.”

The third fac­tor cited by Vilar is the ten­sion between domes­tic and global olive oil con­sump­tion. Due to poor har­vests across the west­ern Mediterranean, Spain is increas­ingly ful­fill­ing demand from mar­kets abroad, fur­ther putting pres­sure on prices at home.

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The International Olive Council fore­casts that global olive oil con­sump­tion will reach 3.05 mil­lion tons in the 2022/23 crop year, while pro­duc­tion will be 2.73 mil­lion tons. While some coun­tries have olive oil stocks to dip into, these are barely expected to cover the short­fall.

If it does not rain in May, olive oil prices are likely to con­tinue ris­ing through the com­ing 2023/24 crop year, break­ing records weekly.

However, Vilar said prices are likely to fall in the long term as 4,000 new hectares of olive groves planted glob­ally in recent years enter matu­rity, result­ing in annual pro­duc­tion of more than 4 mil­lion tons; olive oil con­sump­tion con­tin­ues to stag­nate or rise slightly; and cli­matic con­di­tions return to nor­mal, and pro­duc­ers adapt to the impacts of cli­mate change.

These three fac­tors would com­bine to lower prices at ori­gin,” Vilar con­firmed. Still, he added that until the drought grip­ping the west­ern half of the Mediterranean basin breaks, prices will not stop ris­ing.”

While there is con­cern that ris­ing prices in pro­duc­ing coun­tries will con­tinue the trend of stag­nat­ing con­sump­tion, not every­one is con­cerned.

Vilar said con­sumers in Canada, Germany, Brazil, the United States and other mid­dle-income and wealthy coun­tries would con­tinue to con­sume olive oil because they are used to pay­ing €10 [or more] at the super­mar­ket with­out any prob­lem.”

David Granieri, pres­i­dent of Unaprol, Italy’s olive oil pro­ducer asso­ci­a­tion, cel­e­brated ris­ing prices at ori­gin.

The increase in prices, espe­cially in Spain, is good news because finally, per­haps, the race to the bot­tom that has dam­aged all European pro­duc­ers and depressed the whole mar­ket is over,” he told the Financial Times.

In these con­di­tions, we believe that the pro­duc­ers who in recent years have mul­ti­plied their efforts to pro­tect bio­di­ver­sity and pro­duced high-qual­ity oils can finally be val­ued as they deserve,” he con­cluded.



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