“Issues contributing to the near-all-time price trend are largely bad weather and a really dry growing season across many of the Mediterranean, but most notably in Spain, which is a significant producer and exporter of olive oil,” said the corporate’s oilseeds division. Mintec. and vegetable oil analyst Kyle Holland.
Jeff Greenberg | Universal group of images | Getty’s paintings
Olive oil prices have hit record highs thanks to an prolonged drought for Spain’s biggest producer – and the elevated prices are expected to stay for a while.
When renowned Spanish-American chef José Andrés tweeted that eggs needs to be finger deep fried in olive oil, one user commented: “Olive oil could be expensive out of your fingertips. What’s the choice for those of us on a budget?”
“Aldi’s olive oil spread used to cost 99p. It now costs £1.29. Plus many basic items are gone. Even Aldi is pricey now!” said one other Twitter user living in England.
According to International Monetary Fund dataworld olive oil prices reached USD 5,989.8 per metric ton, reaching its highest level in 26 years.
And the high prices could proceed “for a while,” said Kyle Holland, an analyst for oilseeds and vegetable oils at Mintec.
“Extremely bad” weather conditions
The bad weather in Spain, in particular the prolonged drought, is the most important reason for the sharp rise in prices.
“The problems contributing to the near-all-time price trend are largely bad weather and a really dry growing season across much of the Mediterranean, but most notably in Spain, which is a significant producer and exporter of olive oil,” Holland said.
He said that in consequence of “extremely bad” weather conditions, the last olive harvest from October to February yielded 50% lower than normal production, limiting global supply and pushing up prices.
“Extremely bad weather conditions meant that … Spain produced an olive oil crop of around 630,000 metric tons, compared to the standard harvest of 1.4 to 1.5 million metric tons,” he said.
The outbreak of war in Ukraine, which caused a worldwide shortage of sunflower oil, further increased the demand for olive oil.
David Valmorbida
Australian Olive Oil Association resident
Olive trees grow in warm and dry climates, with optimum temperatures starting from 60 to 80 degrees F.
Spain had a bout of ‘very dry’ weather in March, receiving just 36% of average monthly rainfall, according to national data Ministry of Ecological Changes. Country survived 36 months in a row below average rainfall.
And if the weather doesn’t improve, the upcoming harvest might be even worse.
“According to market players who say prices may remain at current levels for a while, there might be similar and even lower yields than last season,” Holland said.
“It seems that the continued drought in Europe, and most notably Spain’s largest olive oil producing region, has caused a world olive oil shortage,” David Valmorbida, president of the Australian Olive Oil Association, told CNBC.
Demand pressure
Demand pressure puts more strain on already vulnerable supply chains.
Demand for olive oil has been strong in recent years, with prices rising since 2020 as consumers more often ate and cooked at home during and after the Covid-19 pandemic, Valmorbida said.
As well as, the shortage of sunflower oil after Russia’s invasion of Ukraine caused prices to rise.
“The outbreak of war in Ukraine, which caused a world shortage of sunflower oil, has further increased the demand for olive oil,” he added.
Staff shake olive trees during harvest, November 24, 2022, Jaen, Spain. “Consumers have already began to significantly reduce their olive oil intake, firstly by being less generous with their use, but secondly by switching to vegetable or seed oils or various blends of oils,” said one analyst.
Carlos Gil | Getty Images | News Getty’s paintings
Changing your consumer habits can ease the pressure a bit.
“Consumers have already began to significantly reduce their olive oil intake, firstly by being less generous in use, but secondly by switching to vegetable or seed oils or different blends of oils,” Valmorbida said.
Nevertheless, he maintained that the underlying demand for olive oil as a healthy and natural product would “remain at almost any price”.
“So without a rise in precipitation, we could proceed to see historically elevated prices at or above €5 per kg until the 2023/24 harvest 12 months.”