Olive oil prices climb as production falls to lowest levels in a decade

07 May 2024 --- Extra virgin olive oil prices have skyrocketed to an unprecedented level, a direct consequence of the harsh realities of climate change and the burden of high interest rates. The most influential olive markets in the EU — Bari (Italy), Chania (Greece) and Jaén (Spain) — are grappling with historic price surges, while global production has plummeted from 3.4 metric tons last year to 2.3 metric tons this year.

For the second consecutive year, industry experts are predicting a scenario where the demand for olive oil will outstrip the supply, exacerbating the cost of living crisis and putting a strain on consumer budgets. 

In Spain — which accounts for more than 40% of the world’s olive oil production — the International Olive Council’s (IOC) latest figures put extra virgin olive oil at €864.5 (US$ 931.02) per 100kg (+64.4% compared to the same period previous crop year), while for refined olive oil, it is €831 (US$894.94) per 100kg (+71.9% compared to the same period previous crop year).

Meanwhile, at €968 (US$ 1042.48) per 100kg, Italy is experiencing a 60.5% price surge of the oil, compared to last year, while in Greece it has jumped by 82.8% since last year, sitting at  €850 (US$915.40) per 100kg this year.

Premium prices for premium brands
Amid the rising demand and limited supplies, olive oil brands are expected to cost more. 

Premium brands, including Odysea and Belazu, are already charging consumers £18 (US$22.56) for a liter, while Napolina is selling for almost £15 (US$18.80) per liter in some stores, with Filippo Berio for just over £13 (US$16.26).

Premium olive oil brands like Filippo Berio have increased their product prices (Image credit: Filippo Berio).Producer prices for olive oil went up by 60% in Italy and Spain last month, crossing over 80% in Greece, according to the IOC. Rising prices are now instigating a switch to alternatives such as sunflower and rapeseed oils.

Meanwhile, UK grocery retailers have ramped up security measures to avoid cases of olive oil thefts in supermarkets, while extra virgin olive oil has been named as the “most wanted item” for shoplifters in Spain.

Ensuring economic sustainability
As crops, olive oil seeds are “exceedingly” susceptible to climate change, warn oilseeds analysts. Usually considered to be fairly drought resistant, the recent conditions have been too harsh for them to grow optimally.

“The increase in temperature, especially in the winter season, seems to impact flowering buds. The small number of days with low temperatures resulting in reduced flowering during spring will decrease the quantity and quality of olives and oil,” underscores a study on the impact of climate change on olive crop production in Halkidiki, Greece.

The study highlights that from 2031–2070, non-irrigated olive crops “cannot be maintained” in the Halkidiki region in terms of economic sustainability.

Scientists are sounding the alarm, warning that climate change could jeopardize the viability of olive groves in the region. They stress the urgent need for 'adequate and timely planning' of suitable adaptation measures to ensure the sustainability of the olive sector.

A “profound” transformation
To mitigate climate change and price challenges, Deoleo — the world’s largest olive oil producer in Spain — calls for the industry to undergo a “profound transformation” as it grapples with one of the most challenging moments in its history.

“Strong inflation along with high interest rates and unfavorable olive oil harvest forecasts (in terms of quantity and quality due to the drought cycle) has caused prices to increase considerably,” says Miguel Angel Guzman, chief sales officer at Deoleo.

The olive oil industry needs a profound transformation to battle price volatility, says Deoleo- Spain's largest olive oil producer.To save the olive crops from extreme weather, he urges the sector to “take the reins” to fuel a reduction in price volatility and increase in predictability.

“This will be key to prevent external factors, with a greater or lesser impact on supply and demand, from having such a decisive impact on the price of the product and, consequently, on the actions that companies are forced to take as well as on the future of the category.”

Erratic climate rages on
As per an FAO report on food security, disasters have caused US$3.8 trillion in crop losses over the past three decades, in which climate change, heat and erratic rains play a pivotal role.

“Agriculture is one of the most highly exposed and vulnerable sectors in the context of disaster risk, given its profound dependence on natural resources and climate conditions,” says FAO Director-General QU Dongyu.

“Recurrent disasters have the potential to erode gains in food security and undermine the sustainability of agri-food systems,” he warns.

Rising temperatures also impacted other crops like cocoa, earlier this year, when El Niño dry spells in West Africa sent chocolate prices soaring to a record high. This prompted Nestlé to raise prices too, amid higher ingredient prices.

Last year, India — the world’s largest rice exporter — also dealt with the effects of an irregular climate, when it witnessed record-breaking high temperatures due to the El Niño effect. This led to supercharged rice prices, rice hoarding and panic buying.

Meanwhile, coffee is battling erratic rain patterns and extreme heat that are increasingly damaging the crop, with the International Coffee Organization noting a decrease in coffee production in Asia & Oceania (4.7%) and Africa (7.2%) in a 2023 report. This can be attributed to adverse weather conditions negatively affecting key producers in Vietnam, Côte d’Ivoire and Uganda.

By Insha Naureen