Extremely hot weather and persistent drought conditions have hit olive oil production in southern Europe hard, causing prices to rise sharply.
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Spain’s De Orio, the world’s largest olive oil producer, said the industry needs to undergo a “profound transformation” as it deals with one of the most challenging moments in its history.
The perfect storm of climate change, soaring prices, high interest rates and strong inflation has taken its toll across the olive oil value chain in recent months.
Two consecutive years of intense heat in Spain have limited olive harvests, ultimately leading to unprecedented price increases that have alarmed consumers and industry veterans.
Spain accounts for More than 40% Half of the world’s olive oil production makes it a global price reference.
“We are facing one of the most difficult moments in the history of this industry,” Deoleo chief sales officer Miguel Angel Guzman told CNBC via email.
“Strong inflation coupled with high interest rates and unfavorable olive oil harvest forecasts (in both quantity and quality due to drought cycles) have led to significant price increases,” Guzman said.
In January, the price of extra virgin olive oil in Spain’s Andalusia region hit a record high of 9.2 euros ($9.84) per kilogram. As of April 19, they were trading at about 7.8 euros, according to the data. Mintec Benchmark Indexdown from around 8 euros at the end of March.
Olive oil prices have cooled, in part due to higher production estimates and beneficial rains in March and April.
Bottles of Bertolli brand olive oil are placed on a conveyor belt on a production line at the Deoleo SA factory in Cordoba, Spain, Friday, November 11, 2022.
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Deoleo, the maker of household olive oil brands such as Bertolli and Carbonell, said it was convinced the current situation was cyclical and expected a return to “more reasonable price conditions” when future harvest volumes return to normal.
However, while the recent rains in Spain are “definitely good news”, the company is cautious about the outlook for olive oil prices.
“We still have several months to go before we know what the likely 2024/2025 harvest will be, and until then the changes will be on time and prices will continue to fluctuate,” Guzman said.
“At the same time, the industry needs profound transformation. Starting with Deoleo, we have been committed to addressing best practices in sustainability, innovation and quality, with the consumer at the center.”
The olive oil industry must “take control”
Most of the world’s olive oil supply comes from the Mediterranean, with southern European countries such as Spain, Italy and Greece being the world’s leading producers of this precious commodity.
Oilseed analysts have warned that olive trees are “extremely” vulnerable to the climate crisis. Although they can usually handle high temperatures and are fairly drought tolerant, recent conditions have been overwhelming.
Drought and high temperatures during critical stages of olive fruit growth in recent years have led to severe harvest shortages in Spain, and the wider olive oil industry is “essentially an industry subject to large fluctuations in origin prices,” De Oreo said.
Extremely hot weather and persistent drought conditions have hit olive oil production in southern Europe hard, causing prices to rise sharply. The impact of these adverse climatic conditions is particularly evident in the European Union (EU), which together account for two-thirds of global olive oil production and up to 900,000 tons of table olives.
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The company said origin prices accounted for 80% of its total costs, adding that this was “a situation we have to address, especially in the current circumstances”.
Ask what can be done to better protect olive trees climate driven “If we want to reduce price volatility and make it more predictable, the industry must take control and all players involved in the industry must transform,” Deoelo’s Guzman said.
He added: “This is essential to prevent external factors, large or small, affecting supply and demand from having a decisive impact on product prices and therefore on the actions that companies are forced to take. As well as the future of the category.”
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