Olive Oil Prices Soar on Drought and Poor Harvests, Impacting Consumers Worldwide

Summary

Global olive oil prices are surg­ing due to off-year grow­ing cycles and dry weather in major pro­duc­ing coun­tries, reach­ing record highs in Europe and beyond. Despite the price increases, demand for olive oil remains rel­a­tively sta­ble in major import­ing coun­tries, with con­sump­tion expected to decline in lower-income regions.

Surging global olive oil prices show no signs of abat­ing as farm­ers across the north­ern hemi­sphere pre­pare for the start of the har­vest.

According to the International Monetary Fund’s pri­mary com­mod­ity price index, global monthly aver­age olive oil prices exceeded $8,900 (€8,250) per ton in August, a 130 per­cent increase com­pared to last year.

Before this year’s unprece­dented spike in global prices, the pre­vi­ous record from 1996 sat at slightly more than $6,242 per ton.

Economists at the United States Department of Agriculture (USDA) attrib­uted the ris­ing prices to ​“the real­iza­tion of off-year grow­ing cycles and extremely dry weather in much of the Mediterranean.”

Concerns in Greece, Italy, Spain and Turkey, four of the world’s five largest pro­duc­ers, over the poten­tial for poor har­vests this year are exac­er­bat­ing the sit­u­a­tion, with experts antic­i­pat­ing prices to rise well into 2024.

According to data from the International Olive Council, olive oil prices at ori­gin in Europe’s three major bench­mark mar­kets have steadily risen over the year.

Jaén, Spain, Bari, Italy and Chania, Greece, make up 60 per­cent of global olive oil pro­duc­tion. Olive oil prices from these three places pro­foundly impact global olive oil prices.

IOC data show that extra vir­gin olive oil prices have more than dou­bled in Jaén, Bari and Chania com­pared with last year, reach­ing €670, €900 and €735 per 100 kilo­grams, respec­tively. Virgin olive oil, refined olive oil and lam­pante prices have also risen to record highs.

Outside of Europe’s largest pro­duc­ers, extra vir­gin olive oil prices in Trás-os-Montes, Portugal, have also hit a record-high €669 per 100 kilo­grams. Meanwhile, prices in Tunisia rose to €753 per 100 kilo­grams in July, nearly dou­ble the value from the start of the year.

“Prices have risen steadily since the extent of the dam­age to the har­vest became appar­ent,” USDA econ­o­mists wrote. ​“However, more recent con­cerns over sup­plies in Spain sent prices sky­ward as the mar­ket attempts to ration sup­plies towards the end of the mar­ket­ing year.”

“As a result, olive oil con­sump­tion is fore­cast flat or down in 2022/23 for every sin­gle coun­try except Turkey, where the gov­ern­ment recently banned bulk olive oil exports in an attempt to ensure domes­tic sup­plies and alle­vi­ate price pres­sure even with record domes­tic pro­duc­tion,” they added.

However, the impacts of ris­ing prices have been felt dis­tinctly in dif­fer­ent parts of the world.

USDA econ­o­mists antic­i­pate demand for olive oil in Southern Europe to remain at nor­mal lev­els, with higher prices and lower sup­ply some­what mod­er­at­ing con­sump­tion.

“Consumer and cul­tural pref­er­ences for olive oil make it dif­fi­cult to sub­sti­tute despite plen­ti­ful sup­plies of other veg­etable oils,” they wrote.

Meanwhile, the USDA said olive oil con­sump­tion was likely to fall sharply in lower-income coun­tries in the Middle East and North Africa in favor of higher export prices to meet demand in wealth­ier coun­tries that pro­duce no olive oil or far less than they con­sume.

According to Juan Vilar, a strate­gic con­sul­tant for the olive oil sec­tor based in Jaén, con­sumers in major olive oil importers, includ­ing Brazil, Canada, Germany and the United States, would ​“con­tinue to con­sume olive oil because they are used to pay­ing €10 [or more] at the super­mar­ket with­out any prob­lem.”

USDA econ­o­mists largely arrived at the same con­clu­sion. ​“Less price-sen­si­tive buy­ers, how­ever, have proven that their pref­er­ence for olive oil holds rel­a­tively more inelas­tic as prices have risen,” they wrote.

“For exam­ple, U.S. imports usu­ally make up around 30 per­cent of global olive oil trade, but this year are slated to be 35 per­cent and 37 per­cent in 2023/24,” the USDA report con­cluded.