Business

Uncertainty Leads to Higher Prices in Spain

Skewed data and a killer disease have cast a sense of anxiety over the Spanish olive oil market. Production has decreased and olive oil prices are likely to spike.

Nov. 26, 2016
By Reda Atoui

Recent News

Spain will likely reduce olive oil pro­duc­tion while increas­ing prices in 2016 mainly because of the Spanish government’s down­ward pro­duc­tion cor­rec­tions that have brought uncer­tainty upon the Spanish olive oil market.

The Spanish Agricultural Council had esti­mated in a recent report that Spain would pro­duce 1.3 mil­lion tons of olive oil in 2016 but it turned out that esti­mate was a bit pre­ma­ture. In fact, it did not fully account for the pro­duc­tion fig­ures of Andalusia and Extremadura, which revealed them­selves to be lower than expected; the Spanish Agricultural Council actu­ally based its esti­ma­tions on skewed data and antic­i­pated yield fig­ures that were too opti­mistic.
See more: Complete Coverage of the 2016 Olive Harvest
The gov­ern­ment con­sid­ered more rel­e­vant fig­ures and thus has stated that the actual yield would be closer to 1.311 mil­lion tons, which is still insuf­fi­cient to meet demand. It is impor­tant to note that the Spanish government’s newly-released 2016 yield figure serves as the offi­cial barom­e­ter for olive oil pric­ing and eco­nomic analy­ses.

The uncer­tain­ties stem­ming from the government’s revised fig­ures cast a sense of anx­i­ety over the Spanish olive oil market, but it is not the only factor explain­ing the fall in olive oil pro­duc­tion (as well as the rise in prices).

In fact, a dis­ease that proved to be a seri­ous threat has just arrived on the island of Mallorca. The island has taken pro­tec­tive mea­sures as the Xylella fas­tidiosa pathogen is cur­rently wreak­ing havoc on olive oil trees there.

Moreover, Spanish olive grow­ers have started their yield rel­a­tively late and many stores don’t even have olive oil stocks.

Advertisement

Not being able to meet the domes­tic demand fully is eco­nom­i­cally penal­iz­ing, but the late har­vest in Spain also had other severe con­se­quences: Portuguese olive grow­ers have started har­vest­ing much sooner than their Spanish coun­ter­parts and the market share for Spanish olive oil in Portugal is cur­rently expe­ri­enc­ing a sig­nif­i­cant drop as Portuguese shelves have already been stocked with domes­tic olive oils.

All those fac­tors have con­tributed to making olive oil prices spike in Spain. According to Poolred — the indi­ca­tor of prices estab­lished by the Spanish Olive Foundation — olive oil prices are cur­rently head­ing towards an ascend­ing path. A kilo­gram of extra-virgin olive oil costs €3.46 ($3.67) while a kilo­gram of virgin olive oil costs €3.17 ($3.37).

The only Spanish province that has ben­e­fited from the rise in market price is Jaén. Indeed, the world-renowned province has had a better har­vest than the rest of the coun­try. As a result, Jaén will likely be able to earn new market shares and take advan­tage of the rise in olive oil price by sell­ing its prod­uct at a higher price com­pared with last year while main­tain­ing sat­is­fac­tory yield levels.

Advertisement