A perfect storm hits the olive oil market: prices surge

The Ongoing Crisis of Olive Oil: Challenges and Impacts

The olive oil industry is currently facing a crisis, with prices on the rise due to a combination of negative factors affecting this indispensable Mediterranean product on our tables.
The Spanish company Deoleo, the world’s largest olive oil producer, recently highlighted the industry’s struggle, describing it as undergoing a “profound transformation” and facing one of the most challenging periods in its history.
Miguel Angel Guzman, the group’s sales director, did not mince words in a statement to CNBC.

In recent months, a perfect storm of climate change, rising prices, high-interest rates, and strong inflation has severely tested the entire value chain of olive oil.
Two consecutive years of scorching heat in Spain have limited olive harvests, resulting in unprecedented price hikes that have astonished consumers and industry veterans.
Spain, responsible for over 40% of the world’s olive oil production, sets a global reference for prices.
Italy is also affected, with our olive groves experiencing a 37% reduction in production in 2023, according to Ismea data.
Unfortunately, 2024 hasn’t started on the best note either.

A decrease in the supply of this precious ingredient, mainly used in Mediterranean countries, translates into a direct increase in prices, impacting families’ budgets.
Therefore, the olive oil crisis extends beyond an economic issue.

Prices of extra virgin olive oil in Andalusia, Spain peaked at €9.2 per kilogram in January.
By April 19, they had dropped to around €7.8, as reported by the Mintec benchmark, down from approximately €8 at the end of March.
Price cooling was partly due to increased production estimates and beneficial rains in March and April.
However, the sector remains vigilant.
Deoleo, producer of domestic olive oil brands like Bertolli and Carbonell, believes the current situation is cyclical, expecting a return to more reasonable price levels when future harvest yields normalize.

Analysts predict that decreasing olive oil reserves will likely keep markets on edge for sudden price spikes in the coming months.
Kyle Holland, Mintec’s market research group analyst, emphasized concerns over the overall supply.
Vito Martielli, senior analyst at the Dutch Rabobank, noted unprecedented price volatility in his 20+ years studying the olive oil sector.

The record-breaking spike in olive oil prices has been unequivocally attributed to climate change by Helena Bennett, head of climate policy at the independent think tank Green Alliance UK.
The top olive oil exporter, Spain, halved its production due to drought and extreme heat, increasing prices by 112% since 2022.
This scenario is also affecting other food crops, signaling a broader impact.

The European Environment Agency’s early climate risk analysis warns of “catastrophic” consequences as the worsening climate crisis affects all sectors of Southern European economies.
The report underscores how climatic impacts on food production could significantly harm the region, especially Southern Europe, as extreme heat and changing precipitation patterns escalate.

Most of the global olive oil supply comes from the Mediterranean, with countries like Spain, Italy, and Greece being major producers.
Analysts highlight the “extreme” vulnerability of olive trees to the climate crisis.
Despite their general resilience to high temperatures and drought, recent conditions have been excessive.
Deoleo attributes severe Spanish crop shortages to recent drought and high temperatures during critical olive fruit development stages.
The broader olive oil sector is inherently susceptible to price volatility at the source.

The world is changing, and signs of this shift are concerning.
The crisis in olive oil production and prices is a clear example of the challenges ahead.