Heatwaves hinder olive oil production, leading to 25% inflation prediction

09 Aug 2022 --- Acesur, one of the leading exporters of olive oil, is predicting a rise in the product’s price in the next three to four months as heatwaves threaten production capabilities in Spain and the demand for olive oil increases amid sunflower oil shortages.

As the supplier of the UK’s biggest supermarkets, Acesur’s export manager, Miguel Colmenero, warns that customers could see prices rise by 20-25%.

This comes as a direct result of the weather patterns starting in June 2022. The southern parts of western Europe suffered wildfires, evacuations and heat-related deaths as summer heatwaves surged. Italy, Portugal, France and Spain are most impacted as these countries experienced a lack of rain in recent weeks, causing vegetation to be under substantial stress. 

Due to the country’s worst drought in 70 years, Italy issued a state of emergency in five northern districts around the Po River in July.

Yearly yield slump
Half of the world’s olive oil is produced in Spain, posing threats to the stability of the product’s export and price. Out of the approximate 1.4 million metric tons of olive oil produced in Spain each year, Acesur produces more than 200,000 metric tons and exports its goods to more than 100 countries.

If olive trees are unable to sprout new branches, next season’s yield may be just as dire.It packs its own-label products for Sainsbury’s, Tesco, Waitrose, Morrisons, and Asda and sells about 20,000 metric tons of goods annually in the UK.

The third-largest brand in the UK, La Espanola, is also stocked by these supermarkets.

The majority of the olives used in its products are cultivated in Andalucia, southern Spain, where there hasn’t been much rain lately. Colmenero elucidates that whereas Spain produced about 1.4 million metric tons of olive oil last year, forecasts for this season currently call for as little as one million metric tons.

He elaborates on this and says that the impact of the heatwave on production is “drastic,” adding that the dry weather could also have a negative impact on next season’s crop. If olive trees are unable to sprout new branches due to a lack of water, next season’s yield may be just as dire.

As a result, extra virgin olive oil’s benchmark price would increase, which has an effect on worldwide prices. Although there would be a three to four-month delay since many corporations would have already signed 12-month contracts with retailers, Colmenero predicts that this would finally translate into the pricing for consumers.

The consumers may eventually face hikes of 20-25%, he continues, as businesses would eventually have to boost their pricing when they renew contracts.Spain produced 1.4 million metric tons of olive oil last year, forecasts for this season call for as little as one million.

Hoping for help from Eastern Europe
Among these spikes, there is hope that the grain corridor agreed from Ukraine could lead to more supplies of sunflower oil coming out of the country, and this would bring some relief.

Colmenero says that disruption to the supply of sunflower oil from Ukraine is also contributing to the “dramatic” price increases, as people turned to olive oil as an alternative, increasing demand.

Although sunflower oil holds unique functions and nutritional properties meaning that switching to a suitable alternative is not always straightforward, the shortage sparked the creation of a guide on how food manufacturers can address this reformulation challenge and avoid market disruption by using alternatives.

Ukraine was previously the world’s top exporter of sunflower oil, however, other parts of Western Europe which produce olive oil have also experienced record high temperatures and Colmenero said this would reduce production in other countries.

Edited by Mieke Meintjes