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

Summary

Olive oil prices in Spain are cur­rently at record highs, with fac­tors such as ris­ing pro­duc­tion costs, poor har­vests, and global demand con­tribut­ing to the increase. However, it is expected that prices will even­tu­ally decrease in the long term as new olive groves mature, con­sump­tion sta­bi­lizes, and cli­matic con­di­tions return to nor­mal.

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.

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.”

“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.

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.

• Financial Times
• International Olive Council