European Olive Oil Supply Hits Decade-Low

Summary

The European Commission has con­firmed a mod­est increase in olive oil pro­duc­tion in the E.U. for the 2023/24 crop year, but warned that key indi­ca­tors for the sec­tor are still very poor, includ­ing low avail­abil­ity and decreased con­sump­tion. Despite the pro­duc­tion increase, olive oil prices remain high, lead­ing to reduced con­sump­tion and exports, with a fore­casted three per­cent decrease in demand in the E.U. and a 10 per­cent drop in exported vol­umes.

Despite con­firm­ing a mod­est increase in olive oil pro­duc­tion in the European Union for the 2023/24 crop year, the European Commission warned that other key indi­ca­tors for the sec­tor are still very poor.

According to its lat­est short-term out­look report for the agri­cul­tural sec­tor, E.U. olive oil pro­duc­tion is set to rise by seven per­cent com­pared to 2022/23, reach­ing 1,489,000 tons. Despite the increase, the cur­rent yield remains 28 per­cent below the aver­age of the past five years.

Olive oil avail­abil­ity – the com­bi­na­tion of pro­duc­tion, stock and imports minus exports and con­sump­tion – is also low, with a fore­casted five per­cent decline com­pared to the pre­vi­ous year and a stark 28 per­cent reduc­tion com­pared to the five-year aver­age.

Starting stocks were 406,000 tons, and end­ing stocks are expected to drop to 365,000 tons due to revived imports from tra­di­tional trad­ing part­ners, such as Turkey and Tunisia, and Southern Hemisphere pro­duc­ers, includ­ing Argentina and Chile.

“While the level of begin­ning stocks might look com­fort­able, it is mainly due to a reduced demand, both in the E.U. and glob­ally,” the com­mis­sion wrote.

As olive oil prices have risen sig­nif­i­cantly in the last two years, Brussels reported that many con­sumers have turned to cheaper edi­ble oils or reduced olive oil con­sump­tion.

Consumption in the E.U. is expected to decrease to 1,189,000 tons, 18.6 per­cent below the aver­age of the pre­vi­ous five years.

Spain, Italy, Portugal and Greece, where olive oil is a sta­ple, are expected to expe­ri­ence far steeper declines in con­sump­tion. The com­mis­sion esti­mates con­sump­tion will fall below 900,000 tons, mark­ing a sig­nif­i­cant 19.9 per­cent decrease com­pared with the aver­age of the past five years.

Olive oil con­sump­tion per capita in the European Union is also expected to decrease in 2023/24, falling to 2.6 kilo­grams, a 19.2 per­cent decrease com­pared to the five-year aver­age.

While olive oil prices at ori­gin have decreased from the record highs reached in mid-January, they remain far above the aver­age for the pre­vi­ous five years.

The report cited the exam­ple of extra vir­gin olive oil prices in Jaén, Spain’s bench­mark mar­ket. At the end of March, extra vir­gin olive oil prices were 2.5 to 2.7 times above the aver­age of the last five years.

According to the com­mis­sion, reduced avail­abil­ity for the cur­rent crop year means prices will remain above the five-year aver­age in the short and medium term.

“In 2023/24, some addi­tional reduc­tion [in olive oil demand] is likely to occur, as the trans­mis­sion from pro­ducer prices to con­sumers (espe­cially if more pos­i­tive har­vest devel­op­ments are con­firmed) will take time,” the com­mis­sion wrote.

This sce­nario could fur­ther reduce the demand for olive oil in the European Union by three per­cent.

The com­mis­sion noted how global demand is also weak, cit­ing the 14 per­cent drop in exports to China and Japan in the first four months of the crop year.

Prices also impact exports and demand from abroad, with a 10 per­cent expected drop in exported vol­umes.

“On the other hand, E.U. will remain an attrac­tive mar­ket for imports, both due to lower domes­tic avail­abil­ity and higher prices,” the report noted. Imports are expected to reach 200,000 tons at the end of the cur­rent crop year.