For olive oil lovers, bad news: its price has doubled in the last year, it has multiplied by 4 since August 2020, and there is no prospect of it going down.
With world stocks at record lows, poor projections for the next harvest in Europe and the expectation of an advance in climate change, high prices should be the “new normal”, say analysts interviewed by BBC News Brazil.
The price of olive oil in the community of Andalusia in Spain, a country responsible for more than 40% of world oil production, stands at 8.20 euros (US$8.89) per kilo this August, more than double ( +116%) of the 3.80 euros (US$4.11) per kilo in the same month of 2022.
It is, in turn, the record value.
In Italy, olive oil prices have risen 98% compared to last year and in Greece the advance is 114%, according to a study by the market intelligence and commodity price company Mintec.
These three countries plus Portugal produce two out of every three liters of olive oil in the world, according to data from the International Olive Council (IOC), an organization that brings together olive and olive oil-producing countries.
“To explain the increase in the price of olive oil, it is necessary to go back to the past harvest,” Kyle Holland, a Mintec vegetable oil analyst, told the BBC.
“The main olive oil exporting countries had a period of growth [de las aceitunas, el fruto de los olivos] very very dry. The trees did not have enough moisture and many of them did not produce any fruit,” explains Holland.
Spain, for example, normally produces between 1.3 and 1.5 million metric tons of olive oil a year, the analyst notes (each metric ton equals 1,000 kilos).
But in the 2022/2023 harvest it is estimated that the country produced only 610,000 tons of oil, according to Holland.
“Send water, my God! Send water!”
The situation of olive groves in Spain is such that, in May, Bishop Sebastián Chico Martínez, from the city of Jaén, Andalusia, led a religious procession where the faithful cried out to heaven for rain – the province of Jaén has more than 60 million olive trees and produces 40% of all Spanish olive oil-.
Since 1949, a procession asking for rain has not been held in the region, according to the local press.
“Send water, my God! Send water!” a parishioner exclaimed as a figure of Jesus Christ carrying the cross left the parish.
“Without water there is no olive and, without olives, the province of Jaén suffers,” the bishop said then, according to the chronicle of the Spanish newspaper El País.
With the reduced harvest, oil stocks in Spain as of June stood at 205,000 tons, Mintec estimated, an unprecedentedly low level.
“We are not talking only about high-quality olive oil, but about all the olive oil that is in the hands of the producers. There is concern that as the year progresses and until the next harvest begins [en octubre]olive oil stocks can reach zero in Spain,” says Holland.
“Look at the madness of what is happening”
Tomy Rohde, an Andalusian farmer popular on social media, also expressed his fear in June that Spanish olive oil stocks might run out in the coming months.
“From September to October there are usually half a million tons of oil in reserve because Spain, in addition to producing more than half of the world’s oil and the best quality there is, also imports while exporting,” Rohde said in a video posted online.
“The monthly output rate of olive oil from the mill and packaging cooperative is higher than what we know we have for the oil produced this year,” he added.
“Something has happened that has never happened in history and that is that we do not know if we are going to reach September-October with oil in Spain. Look at the madness of what is happening.”
Export ban in Türkiye and bad new harvest
With weather problems in the main producing countries in Europe, the market turned to alternative producers such as Tunisia, Turkey, Morocco and Algeria.
However, faced with global shortages, Turkey announced in August a ban on olive oil exports until November, when the next harvest begins, with the aim of controlling rising prices on the domestic market.
“This has increased the pressure on the market, making it more difficult now to get oil from alternative countries,” says Holland.
But the negative outlook for olive oil prices does not end there, warns the analyst.
“The climate continues to be unfavorable in Spain and in most European countries. Therefore, the expectation for the next Spanish harvest, which runs from October to February, is that it will again be very low, with some market agents talking of a maximum production of 700,000 metric tons, once again below the historical average. ”.
Climate change and world food inflation
The case of olive oil, affected by the lack of rain in the last two years in Europe, illustrates a growing global concern: the impact of climate change on world food prices.
A study published in June by the European Central Bank (ECB) and the Potsdam Institute for Climate Impact Research (PIK) estimated that global warming could increase global inflation by up to 1.18 percentage points. per year until 2035 and food prices up to 3 percentage points per year during the same time horizon.
“Future changes in the climate will increase the magnitude of extreme heat, also amplifying its possible impacts on inflation,” the study authors warn.
Mintec’s Kyle Holland assesses that, for olive oil, the high price is possibly a path of no return.
“Olive trees resist heat well, but in prolonged periods of drought, when irrigation becomes more difficult, they suffer,” he says.
“Many traders believe that this trend will continue, so they are concerned that prices have no prospect of falling and that the current price level could become a ‘new normal,’” he summarizes.
Remember that you can receive notifications from BBC News World. Download the latest version of our app and activate them so you don’t miss out on our best content.
- Do you already know our YouTube channel? Subscribe!