Filippo Berio Execs See Equilibrium Returning to The Global Olive Oil Market

Summary

European extra vir­gin olive oil prices at ori­gin have reached their low­est lev­els since October 2022, with Spain expected to have a pos­i­tive fruit set this spring, poten­tially lead­ing to fur­ther price decreases. While Spain, Italy, Portugal, and Greece are expected to have sig­nif­i­cant olive oil pro­duc­tion increases, Italy faces pro­duc­tion declines due to sys­temic issues, with the gov­ern­ment work­ing on ini­tia­tives to revi­tal­ize the sec­tor.

According to mar­ket data from Granaria Milano, European extra vir­gin olive oil prices at ori­gin have fallen to their low­est lev­els since October 2022.

The Milan-based trade asso­ci­a­tion, which pub­lishes weekly agri­cul­tural com­mod­ity prices, indi­cated that the aver­age price for European extra vir­gin olive oil (exclud­ing Italy) is €4,750 per met­ric ton.

Walter Zanre, the man­ag­ing direc­tor of Filippo Berio UK, told Olive Oil Times that prices at ori­gin across Europe, except for Italy, may keep falling if there is a pos­i­tive fruit set in Spain later this spring.

“At the begin­ning of 2022, prices were lower than they are today, which is why I think there’s room for price to come down if there is the prospect of another good crop,” he said.

Filippo Berio’s lat­est data show that Spain is expected to pro­duce between 1.43 and 1.45 mil­lion tons of olive oil in the 2024/25 crop year, the largest har­vest since 2021/22 and the sec­ond high­est since 2018/19.

”Tunisia and Turkey are also fore­cast­ing big pro­duc­tions, and that is the result of high prices, which have attracted money to the sec­tor,” Zanre said. ​“Some of the olives that would’ve been des­tined to table olives have been diverted into the olive oil crush­ing busi­ness because there’s a bet­ter return short-term.”

Filippo Berio data fur­ther fore­casted that Greek olive oil pro­duc­tion would reach 280,000 tons, Portugal would har­vest 150,000 tons, Morocco’s yield would rebound to 120,000 tons, and Syria would pro­duce 140,000 tons.

Despite the rebound, Zanre said most of the olive oil pro­duced in Turkey and Syria, along with a sig­nif­i­cant por­tion of Tunisian and Moroccan pro­duc­tion, is des­tined for Middle Eastern coun­tries. Therefore, this olive oil would have a less sub­stan­tial impact on European and North American mar­kets com­pared to Spain, Italy, Portugal, and Greece.

“Global pro­duc­tion is com­ing in at around 3.3 mil­lion tons, which is the high­est for quite some time and puts every­thing back into equi­lib­rium,” he added.

The lat­est data from Spain man­i­fest the return of equi­lib­rium to the olive oil mar­ket, where monthly sales have returned to their nor­mal lev­els before the two his­tor­i­cally poor har­vests in 2022/23 and 2023/24. 

Olive oil sales reached 110,000 tons in February, ​“which is where Spain nor­mally is,” Zanre said. “ Last year, Spain had been 60,000 to 70,000 tons a month restricted purely by the avail­abil­ity of oil.”

The next three months will be deci­sive in deter­min­ing the future direc­tion of olive oil prices. Whether coop­er­a­tives and bot­tlers sit on replen­ished stock to last until 2026 or try to move prod­uct more quickly will depend on the fruit set in May.

“ At the moment, the co-ops are sit­ting on just over 880,000 tons, and bot­tlers’ stocks are at 200,000 tons, the high­est since July 2023,” Zanre said. ​“Bottlers had reduced their stock hold­ings since olive oil had become so expen­sive.”

“By the lat­ter part of 2024 into January, every­body was try­ing to carry no stock because they were expect­ing the price to come down,” he added. ​“But bot­tlers are now back to nor­mal stock lev­els, which means that the avail­abil­ity prob­lems retail­ers have seen prob­a­bly from October to January are now going away.”

While prices at ori­gin have sta­bi­lized, Marco De Feo, the vice-pres­i­dent of mar­ket­ing at Filippo Berio USA, expects some lag time before con­sumers find lower olive oil prices on the super­mar­ket shelves.

“Even though we’ve seen a drop in raw mate­r­ial costs, we have not seen the full effect of shelf price reduc­tion,” he said. ​“Supermarkets still have stock at the old price, and it will take time to deplete the cur­rent stock — maybe two or three months — and then we might start see­ing a price reduc­tion on the shelf.”

In the mean­time, Zanre said every­one in the sec­tor is wait­ing to see how the flow­er­ing evolves in Spain. 

Another wet win­ter means reser­voirs have refilled across Andalusia, which is respon­si­ble for most Spanish olive oil pro­duc­tion. Temperatures in April and May will dic­tate the 2025/26 crop year’s out­come.

The sig­nif­i­cant pro­duc­tion declines in 2022/23 and 2023/24 were mainly due to extreme heat in May dam­ag­ing the olive trees as they flow­ered, which pre­vented any fruit from set­ting.

“If there’s a good flow­er­ing, then I expect prices to weaken quite con­sid­er­ably,” Zanre said. ​“If there’s a poor flow­er­ing, then we’re back into the good year, bad year cycle, which could force pric­ing up.”

“But if there’s good flow­er­ing, the Spanish crush­ers will not want to be hold­ing stocks car­ry­ing them into next year,” he added.

Lowering prices at ori­gin have made some Spanish pro­duc­ers wary of return­ing to the sit­u­a­tion they found them­selves in at the begin­ning of the decade when prices at ori­gin dropped below the cost of pro­duc­tion.

Zanre warned that a bumper har­vest in Spain and strong har­vests in Italy and else­where in the Mediterranean basin could cause prices at ori­gin to fall to sim­i­larly low lev­els.

”Spain has pro­duc­tion costs of around €2.50 per liter,” he said. “ Anything that gets down towards €2.50 or below becomes a real prob­lem for the indus­try.”

“Unfortunately, we have a mar­ket­place with no futures,” Zanre added. ​“You buy and you take deliv­ery which makes it highly spec­u­la­tive.” 

However, the sit­u­a­tion is dis­tinct in Italy, where Filippo Berio antic­i­pates pro­duc­tion to decline to 200,000 tons in 2024/25. Granaria Milano data indi­cate that extra vir­gin olive oil prices in Italy orig­i­nate at €9,600 per ton.

“I can’t see any rea­son other than a really good flow­er­ing for the Italian price to come down,” Zanre said.

He attrib­uted this year’s pro­duc­tion decline in Italy pri­mar­ily to the olive tree’s nat­ural alter­nate bear­ing cycle, with many pro­duc­ers enter­ing an ​‘off-year.’ 

However, Zanre added that broader sys­temic issues in Italy have steadily declined olive oil yields over the past decade.

“There’s declin­ing pro­duc­tion in Italy for two rea­sons,” he said. ​“One is the Xylella fas­tidiosa prob­lem in Puglia where they’ve lost six mil­lion trees. The other thing is that Italy has­n’t been invest­ing in olive agri­cul­ture, unlike Spain, so you’ve got a declin­ing pool of pro­duc­tion.”

Zanre pointed to Portugal and Spain, where large pro­duc­ers and pri­vate equity have made sig­nif­i­cant invest­ments to plant new super-high-den­sity groves in the south­ern regions of Alentejo and Andalusia and develop new milling tech­nol­ogy to max­i­mize yield and qual­ity.

“There is a desire in Italy to change that,” he said. ​“The prob­lem is that it takes five to seven years before an olive tree is pro­duc­ing com­mer­cially, and the peo­ple with the money don’t want to wait five to seven years.”

As a result, he believes the Italian gov­ern­ment will need to spear­head any ini­tia­tive to revi­tal­ize Italian olive oil pro­duc­tion. 

Indeed, the gov­ern­ment is cur­rently work­ing to imple­ment a National Olive Plan to plant thou­sands of new groves, fund upgrades to exist­ing mills, and cre­ate an inter­pro­fes­sional asso­ci­a­tion to pro­mote the sec­tor. 

In the mean­time, Zanre antic­i­pates that olive oil pro­duc­tion could con­tinue to rise in Spain. ​“There is the capac­ity to exceed two mil­lion tons,” he con­cluded.