The European Commission’s latest estimate suggests the bloc’s olive oil output could be down 25% this year.
Echoing previous warnings from producers and national governments, the Commission’s short-term outlook for crops said the production drop, which would likely be around 25% year on year and 20% against the previous half-decade average, could contribute to consumption falling by almost 10%.
Plunging output in Italy and Spain would be offset “to some extent” by a strong Greek harvest and by imports from outside the EU, the Commission’s agriculture and rural development department said, but with the caveat that external sources such as Tunisia would “likely keep certain stocks in its domestic market”.
Despite the likelihood of smaller harvests, EU olive oil exports were likely to hold up due to demand from China and the US, the Commission reported, as the strength of the dollar against the euro makes eurozone-sourced olive oil competitive across the Atlantic.
But that outcome would likely further tighten the market in Europe, the UK included, as suppliers sell to faraway customers in the world’s two biggest economies. In the UK, supermarkets began hiking own-label olive oil prices in mid-year as the first accounts of drought emerged in Europe’s main olive-growing nations, prompting speculation that the price spikes would in time lead to consumers looking to other oils.
“Lower availability in main EU producing countries and ongoing pressure on consumer prices might lead to the EU consumption decline,” the Commission said, putting the poor harvests down to “heat during the flowering period, combined with water deficit during the olives’ growth phase”.
The Italian Association of Olive Oil Producers separately warned of shortages on European supermarket shelves due to “disparity between supply and demand” after poor harvests.
The rising olive oil prices followed sharp price increases and shortages of supply for other oils earlier in the year. The invasion by Russia of Ukraine, the world’s biggest sunflower exporter, was followed by temporary curbs on exports of palm oil, the world’s most-used oil, imposed by Indonesia, the biggest source by far of the commodity, in turn pushing up prices and demand for oils such as rapeseed and soy.
Olive prices had not climbed as sharply as other oils until recent weeks, as predictions of poor harvests prompted what was described as an “unprecedented” commodity-level price spike for Spanish extra virgin olive oil at the start of the month.
An industry insider, who asked not to be named, echoed warnings that olive oil could soon be in short supply at the consumer end, warning processors could retain stocks in the expectation of getting even more money later in the year.
“It is now very difficult to get hold of oil,” he said. “People are sitting on stocks and trying to renegotiate prices and deals agreed only a few weeks ago.”