A lack of rain in Spain has pushed prices for olive oil to record levels, with analysts warning that a particularly dry summer could lead to even lower crop yields later this year.
Olive oil prices have surged almost 60 per cent since June to roughly €5.4 per kilogramme, on the back of a severe drought in Europe that last year ruined olive crops across the continent.
Spain, the largest olive oil producer, was hit particularly hard. The country’s farmers typically produce half of the world’s olive oil, though annual supplies have roughly halved to about 780,000 tonnes in the past 12 months.
“In 20 years in the industry I have never seen these prices”, said Vito Martinelli, grains and oilseeds analyst at Rabobank. Last year “was a disaster” for Spain, and the crop in Italy “was also bad, along with other countries in the Mediterranean”.
2022 marked the driest for Italy since 1800, said Italian data analysis firm Centro Studi Divulga.
The prolonged drought conditions in Spain are casting doubt about a production rebound this year. Last month was Spain’s second warmest March this century and the second-driest, according to the country’s meteorological agency.
April is set to be the driest on record. The Spanish weather forecaster this week said “not a single drop” of rain fell across more than half of the country in the first 17 days of April, with rainfall 23 per cent below normal since the start of the hydrological year in October.
Unusually dry weather this summer could keep prices elevated. “Sporadic rains in Andalucía and Spain in general are not thought to be anywhere near enough”, said Kyle Holland, oilseeds and vegetable oils analyst at Mintec, the commodity data firm.
Olive oil is harvested in the Mediterranean area between October and February, meaning that “if it does not rain very soon, we are going to have a poor crop again”, Holland added. “Good quality olive oil supplies are also lessening as there isn’t much around and buyers naturally want good qualities . . . At this pace, market players are saying we will be lucky to see out the rest of the season with good oils.”
Others are less vexed. “The increase in prices, especially in Spain, is good news because finally, perhaps, the race to the bottom that has damaged all European producers and depressed the whole market is over”, said David Granieri, president of the National Union of Olive Producers.
“In these conditions, we believe that the producers who in recent years have multiplied their efforts to protect biodiversity and produce high quality oils can finally be valued as they deserve”.
Additional reporting by Emiko Terazono in London