During the period of high inflation, the “liquid gold” known as olive oil is surprisingly in short supply, with prices soaring to historic highs, causing industry giants to express their dismay.
The world’s largest olive oil producer, Deoleo from Spain, stated that the industry needs to undergo a “profound transformation” to deal with what may be one of the most challenging times in history.
In recent months, factors such as weather changes, soaring prices, high-interest rates, and severe inflation have significantly impacted the entire olive oil value chain, especially in Mediterranean countries like Spain, Italy, and Greece.
Spain has experienced two consecutive years of scorching summers, limiting olive harvests and ultimately leading to unprecedented price increases, shocking consumers and industry veterans.
In January, the price of extra virgin olive oil in the Andalusia region of Spain hit a historic high of 9.2 euros per kilogram (9.84 dollars). According to the market research group Mintec’s benchmark index, as of April 19, their trading prices were around 7.8 euros, down from about 8 euros at the end of March.
Miguel Angel Guzman, Chief Sales Officer of Deoleo, told CNBC via email, “We are facing one of the most difficult periods in the history of this industry.”
“Severe currency inflation, along with high-interest rates and unfavorable olive oil harvest forecasts (impacted by the quantity and quality due to the dry cycle), have led to significant price increases,” Guzman said.
Currently, olive oil prices have cooled off partially due to expected production increases and beneficial effects brought by rainfall in March and April.
Spain accounts for over 40% of the world’s olive oil production, making it a global price indicator.
Kyle Holland, an analyst from Mintec, stated that according to data from the Import Promotion Center, Spain usually expects olive oil production between 1.3 to 1.5 million metric tons per harvest.
However, official data showed that Spain harvested only around 666,000 tons during the 2022/2023 planting season. Market participants surveyed by Mintec project an olive oil production range of 830,000 to 850,000 tons for the 2023/2024 season, an increase of about 40,000 tons from prior estimates.
Although recent rainfall in Spain is “undoubtedly positive news,” Deoleo remains cautious about the outlook for olive oil prices. However, the producer is confident that the current situation is cyclical and anticipates that prices will return to a “more reasonable condition” when future harvest yields normalize.
“We still have several months ahead to know the potential harvest volume for 2024/2025,” Guzman said. “Until then, prices will continue to fluctuate.”
“At the same time, the industry needs a profound transformation,” he said. “We have been committed to addressing the changes brought about by Deoleo, firmly dedicated to the best practices in sustainability, innovation, quality, and consumer-centricity.”
Deoleo, which owns household olive oil brands such as Bertolli and Carbonell, stated that recent droughts and high temperatures during critical stages of olive fruit growth have caused severe shortages in Spain, and the broader olive oil industry is fundamentally influenced by significant price fluctuations in the originating regions.
The company noted that the origin price accounts for 80% of its total costs and emphasized that this is a situation they must address, especially under the current circumstances.
“If we want to reduce price volatility and increase olive tree yields, the industry must take control of the situation,” Guzman told CNBC. “All participants in the industry must transition.”
The increase in olive oil prices has been accompanied by a series of theft incidents.
According to the Financial Times, supermarkets in Spain announced in early March that olive oil had become one of the most easily stolen products in large areas of the country. Allegedly, criminal gangs are the perpetrators, with their goal being to resell these essential food items on the black market.
Local media reported that in August of last year, a mill in the Cordoba region of Spain had around 50,000 liters of extra virgin olive oil stolen, with an estimated value exceeding 420,000 euros.