Brexit, Poor Harvests Cause Spike in Olive Oil Prices

Summary

The Brexit ref­er­en­dum has caused olive oil prices in the UK to spike by up to 20 per­cent, mainly due to the effects of the ​‘no’ vote on imports from Europe. Poor har­vests in Italy and Greece have also con­tributed to the increase in olive oil prices, despite there being enough sup­ply glob­ally to meet demand.

The United Kingdom European Union mem­ber­ship ref­er­en­dum, or Brexit, has swayed not only the world of European pol­i­tics and eco­nom­ics but the world of the liq­uid gold too, with British olive oil con­sumers now expe­ri­enc­ing olive oil price spikes of up to 20 per­cent.

“The price of olive oil has increased not due to the spike in the value of the Euro ver­sus the Pound. Since the June 24^th result stunned the world, we have seen the exchange rate increase the costs of buy­ing from Europe at least 10 per­cent,” Jamie Johnson, CEO of FJP Investment told Olive Oil Times.

Trade mag­a­zine The Grocer reported that a 500ml bot­tle of pri­vate-label olive oil now costs £0.35 more in Sainsbury’s at £2.35 and £0.20 more in Tesco at £2.20. Sainsbury’s extra vir­gin olive oil of 500ml has also gone up by £0.10p to £2.35, and its pri­vate-label organic extra vir­gin olive oil of 500ml has increased by 20 per­cent in both Sainsbury’s and Tescos, set­ting the con­sumer back £3.00 to buy it.

Apart from the wider Brexit after­ef­fects, a main rea­son why olive oil prices have shot up is poor har­vests in Italy and Greece.

In Italy, pro­duc­ers saw their out­put fall to 230,000 tons in 2015 com­pared with the 350,000 tons pro­duced in 2014 due mostly to olive fly infes­ta­tions. For the same rason, Greece, which pro­duced an aver­age of 300,000 tons over the past two years, will prob­a­bly not sur­pass 200,000 tons this year.

While the pro­duc­tion of two of the strongest play­ers in the global olive oil mar­ket has fallen, the UK demand for olive oil has sky­rock­eted. From 6,200 in 1990, British olive oil demand soared to 65,000 tons in 2015, an inef­fa­ble increase of 763 per­cent.

Though it is true that there is enough olive oil in gen­eral to com­pen­sate the num­bers, it seems there is par­tic­u­lar inter­est from the British con­sumer for cer­tain seg­ments of the olive oil mar­ket, explained Johnson.

“For exam­ple, some­one accus­tomed to buy­ing the same brand of olive oil for the last ten years will likely take the hit on the price increase. And while price is impor­tant, the prod­uct is equally impor­tant.

“We can agree that all olive oil is not the same and with that it is impor­tant to dif­fer­en­ti­ate the regions of the world that are pro­duc­ing olive oil. Naturally, we are all feel­ing the pinch and we all have a price point before we change due to pric­ing. Certainly I would resist chang­ing olive oil at the con­sumer level until the pric­ing became too unrea­son­able.”

Attachment with the favor­able brand aside, the biggest fac­tor at play might be the exchange rate, and that is why British con­sumers are sud­denly see­ing the cost of goods higher than before Brexit, repeated Johnson:

“While there are no guar­an­tees as to where the exchange rate is head­ing, for the time being all imports into the UK from Europe are going to have to bear the effects of a No Vote from Brexit.”

• FJP Investment


• World Olive Oil Consumption Increased by 73 Percent Over a Generation