Record olive oil prices soar after drought in Spain

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Olive oil prices have hit record highs after a prolonged unusually dry season in southern Europe damaged crops.

European prices rose above €4 per kg for the first time in September, but have now crossed €7 per kg due to rising temperatures and lack of rain in Spain, the world’s biggest producer, as well as Italy and Portugal.

“Our harvest has been terrible, prices have never been higher, and concerns extend well beyond our current season,” said Kyle Holland, oilseeds and vegetable oil analyst at commodity data firm Mintech.

Spanish officials say the devastating effects of the heatwave and water shortages show the urgency of tackling climate change, but next week’s election that could install a new government is less assured.

The matter has become a hot topic in Spain, where olive oil is a major product with a huge impact on economic sentiment. News organizations have had extensive coverage of where consumers can buy the cheapest bottles when prices rise. Some large investors have warned that climate change could prove to be a permanent support for global inflation, partly because of the effect on food prices and partly because of the huge amount of spending by governments to try to contain or reduce it. because of the need.

The EU says it produces two-thirds of the world’s olive oil, with the US, Brazil and Japan leading the way. In Britain, the average price of a bottle of olive oil rose by 47 percent in May, according to the Office for National Statistics.

According to Mintek, producers in southern Europe had total olive oil stockpiles of about 205,000 metric tons at the end of June, down from 265,000 tons at the end of May.

“I cannot reiterate how low this is, this is completely unheard of in the market,” Holland said. “It’s not just your really high quality, it’s all the olive oil.” Spain produced only 620,000 tonnes of olive oil during the 2022-23 harvest, down from 1.5 million tonnes a year earlier.

Supplies are falling by about 80,000 tonnes every four weeks, meaning stocks are likely to run very low in the three months before this year’s harvest starts, which usually runs until February.

The declining production figures mean the outlook for the next quarter is grim, said farm lobby group Asaja. “The market is tense, so if prices are going anywhere they are going up,” said Luis Carlos Valero of Assaja in Jain, the capital of olive oil production in Andalusia.

According to the Ministry of the Environment, one-third of the country is suffering from a “prolonged drought”. Water levels in Spain’s reservoirs fell last week by the biggest margin in 10 months.

Welcome rains fell in scorched parts of Spain in June, easing water stress on olive groves, but farming groups said they came too late for an increase in the fruit they produced.

Juan Villar, an olive oil analyst and professor at Jane’s University, Said Prices were also rising because farmers’ costs had increased due to inflation in fertilizer prices due to high interest rates and the energy crisis.