Pressure on the struggling olive oil market has alleviated slightly after production estimates for the upcoming Spanish harvest significantly increased.
Supply estimates for the October harvest season in Spain were bumped to 700,000-750,000 tonnes, a notable increase of 100,000 tonnes on earlier estimates, according to commodity analysts Mintec.
This was due to recent rains as well as a good forecast of more wet weather in the coming weeks.
While market sources said production in the Andalusia region might experience a drop of 6%-7% compared with the previous season, to approximately 550,000 to 560,000 tonnes, this is being offset by improved production in other parts of the country.
There are also hopes that early harvesting in neighbouring countries such as Portugal might help provide the markets with much-needed volumes of extra virgin olive oil.
“These supplies are being offered at prices ranging from €8.00/kg to €8.10/kg, representing a significant decrease compared to the prices of the previous crop, which stood at €8.40/kg to €8.50/kg just a few weeks ago,” said Mintec analyst Kyle Holland.
The news was received with optimism, seen in the Mintec Benchmark Price (MBP) for extra virgin olive oil from Granada, which last week dropped for the second time in several weeks.
The €0.20 fall is a welcome shift in olive oil markets, which have struggled this year due to low availability in most of the producing countries.
However, British supplier Filippo Berio has warned that the bump in Spanish production is not enough to tame sector apprehension in the longer term.
“The 750,000 tonnes Spain is forecasting is another disaster, it’s 50% of a good year,” said the company’s MD, Walter Zanre. “The only positive is that it is 100,000 more than last year.”
Spanish olive oil production slumped from 1.5 million tonnes in 2021/2022 to around 660,000 tonnes in the 2022/2023 season, according to International Olive Oil Council (IOOC) data.
This was mostly due to extreme drought conditions, which have continued to affect Spain as well as other European producers such as Greece and Italy this year.
The IOOC 2023/24 forecasts point to a total 1.45 million tonnes of olive oil production in the EU, an increase on last year’s 1.39 million tonnes total supply. However, it stands in stark contrast with the EU Commission’s five-year average of 2.1 million tonnes.
There are also fears that there will be “virtually zero carryover” following two years of poor availability, according to Zanre, which will almost inevitably lead to shortages in 2024.
“We quite literally have an industry in crisis,” he added. “The view of our head of olive oil trading is that prices will have to increase to dampen demand so that the supply becomes sufficient.”