On Tuesday, October 8th, the European Commission announced that with the largest olive oil producer, Spain, recovering from drought conditions, olive oil production is expected to increase by almost half this season. This boost in production is projected to ease the supply tightness that led to price hikes over the past year due to two consecutive poor harvests.
In its agricultural outlook report released on Tuesday, the European Commission forecasted that olive oil production in the EU for the 2024/2025 season would reach 2 million metric tons, a 31% increase from the previous season and 9% higher than the five-year average.
The report highlighted significant increases in production in Spain, as well as growth in Greece and Portugal, which are expected to offset the impact of poor harvests in Italy.
According to predictions from the Spanish Ministry of Agriculture, Fisheries, and Food, the world’s largest olive oil producer is expected to yield around 1.26 million tons, a 48% increase from 2023, bringing Spanish production back to long-term average levels.
The olive oil industry has experienced years of crisis, with a series of heatwaves and droughts severely affecting production and driving prices to historic highs. Last year, Spain’s largest olive oil producer, Deoleo, stated that the industry was facing one of its most challenging periods in history.
Two consecutive years of poor harvests in the Mediterranean region turned olive oil into “liquid gold,” with prices soaring to record levels. This sudden spike in prices led households to purchase more sunflower oil than olive oil in the first half of 2024, causing a shift in consumption patterns.
The signs of improving harvests are already causing prices to drop by over a fifth from the high of over €9,000 per ton. However, since supply contracts are usually negotiated months in advance, consumers may ultimately benefit from lower prices in the future.
According to a report by The Telegraph, KTC Edibles in Birmingham, a supplier of olive oil to major supermarkets, anticipates a “40% to 50% drop” in prices due to increased supply.
Based on data from the International Monetary Fund, this price reduction would bring prices back to late 2022 levels.
Gary Lewis of KTC Edibles mentioned, “If you cast your mind back to this time last year, wholesale prices for extra virgin olive oil were approaching €10,000 per tonne. I think (soon) prices will be closer to €4,000 to €5,000, so that’s quite a significant drop.”
He added that the price drop is expected to start soon, with consumers likely seeing the “full impact” of the improved olive harvests in the first quarter of next year.
The European Commission forecasts a 7% increase in olive oil consumption in the EU for the 2024/2025 season, following a 22% decrease over the past two years. The expected supply recovery may continue the recent downward trend in prices.
“The main uncertainty for 2024/25 is how quickly prices will adjust to the increase in supply and how consumers will react after changing consumption habits due to high prices,” the Commission stated.
The European Commission also noted that EU olive oil exports are expected to rise by 10%, while imports will decrease by 7%. However, the abundant harvests in price-competitive producer countries like Tunisia and Turkey may hinder trade rebalancing.
The report highlighted that spring rains have facilitated early olive growth, but the weather in the coming weeks will be critical for the final harvest levels.
The Spanish government also mentioned that weather conditions in the coming weeks could affect production as the olive harvest has just begun.
Olive harvesting typically starts at the end of October and continues through February of the following year.