Lack of rain in Spain raises olive oil prices to record levels – 04/24/2023 – Market

A lack of rain in Spain has pushed olive oil prices to record levels, with analysts warning that a particularly dry summer could yield even smaller harvests later this year.

Olive oil prices have risen by nearly 60% since June to around £5.4 per kilogram, due to a severe drought in Europe that last year ruined olive crops across the continent.

Spain, the largest producer of olive oil, has been particularly hard hit. The country’s farmers typically produce half of the world’s olive oil, although the annual supply has halved to around 780,000 tonnes in the past 12 months.

“In 20 years in the industry, I’ve never seen these prices,” said Vito Martinelli, a grains and oilseeds analyst at Rabobank. Last year “was a disaster” for Spain, and the harvest in Italy “was also bad, as in other Mediterranean countries”.

2022 was the driest year in Italy since 1800, said data analytics firm Centro Studi Divulga.

Prolonged dry conditions in Spain are casting doubt on a production recovery this year. Last month was Spain’s second hottest March this century and the second driest, according to the country’s meteorological agency.

April is expected to be the driest on record, according to forecasts. The Spanish meteorologist said this week that “not a single drop” of rain had fallen in more than half of the country in the first 17 days of April, with rainfall 23% below normal since the start of the hydrological year in October.

The exceptionally dry weather this summer could keep prices high. “The sporadic rains in Andalusia and Spain in general are not thought to be enough,” said Kyle Holland, oilseed and vegetable oil analyst at Mintec, a commodity data firm.

Olive oil is harvested in the Mediterranean zone between October and February, so “if it doesn’t rain soon, we’re going to have a bad harvest again,” added Holland. “The supply of good quality olive oil is also dwindling as there isn’t much around and buyers naturally want good quality. At this rate, market players are saying we’ll be lucky to have good oils for the rest of the season.”

Others are less concerned. “The rise in prices, especially in Spain, is good news because finally, perhaps, the race to the bottom that has hurt all European producers and depressed the entire market is over,” said David Granieri, president of the National Union of Producers of Olives.

“Under these conditions, we believe that producers who in recent years have multiplied their efforts to protect biodiversity and produce high quality oils will finally be able to be valued as they deserve.”

*Collaborated with Emiko Terazono, in London

Translated by Luiz Roberto M. Gonçalves