The price of olive oil has risen sharply over the last year, surprising not only consumers, investors and long-standing experts. At the beginning of 2024, it had climbed to an all-time high of USD 10 281 per metric tonne. In March, the price saw a small decline of 1.58 percent, yet it is still hovering around the $10,000 level. In comparison, in the same period in 2023, the price of the commodity stood at around USD 6,200 per metric tonne. *

Evolution of olive oil prices over the last 5 years (source: fred.stlouisfed.org)*

According to Benchmark Prices (MBP), an independent provider of commodity prices, Mintec, record levels of €9.20 (US$9.85) per kilogram were recorded at the beginning of the year for the world's largest producer, Spain. These were down slightly to €7.80 ($8.34) at the end of April, but still remain high.*

Olive oil prices by country (source: Mintec Global)*

Price development

The recent slight decline in liquid gold prices was due to a short rainy season and an increase in olive production estimates. Nevertheless, the price of this oil is holding high and according to Eurostat statistics, with a 50% increase within the EU compared to last January. The sharp year-on-year price rise started in the second half of last year, with a continuing trend up to the current figures. The biggest increases in annual olive oil inflation have been recorded in coastal countries such as Portugal and Spain, when it was more than 60 per cent. In Greece, which is one of the biggest consumers, the price in the shops ranges from €12 to €15 per litre, an increase of 70 per cent compared to last year, according to the statistics office Elstat. *

Year-on-year change in the inflation rate of olive oil (source: Euronews.com)*

Decrease in production

The prospects for this season's harvest do not bring good news either. The European Commission (EC) forecasts a 7% increase, but according to Mintec, these figures are still below the 5-year average. The continuation of high prices is supported by experts' forecasts, which despite the increases, still call for a drop in production across the continent. In the case of Spain, production is expected to be between 830 000 and 850 000 tonnes, which, although an increase on last year's harvest, is a far cry from the usual figures of between 1.3 million and 1.5 million tonnes. The same negative forecast applies to Greece, where the forecast is for only 150 000 to 170 000 tonnes, a significant difference compared with the 340 000 tonnes produced last year. In the case of Turkey, which is considered to be a major supplier to the European Union, production is forecast to fall to 180 000 tonnes, compared with 410 000 last year. [1]

Positive outlook in Italy

By contrast, the EC has a positive forecast for Italy, where production is expected to reach 330 thousand tonnes, up 37 per cent on last season, according to Olive Oil Times. Spanish oil producer Deoleo told CNBC that the current situation is cyclical and expects everything to return to normal. While the company has a positive outlook for the future, it remains cautious, adding that change is needed if producers want to keep prices in check.

This is mainly due to the weather

The common denominator for low yields and high prices is low supply due to extreme weather fluctuations. Olive growers agree that although olive trees can cope with drought and heat, the current changes are already too much. In recent years, key producers such as Spain, Italy and Greece have been struggling with extreme droughts, lack of rainfall or, conversely, heavy rains and hailstorms. In its report published in March, the European Environment Agency drew attention to the persistence of extreme weather, particularly in these regions, and its consequences. A possible solution is to plant trees that are more resistant to high temperatures, but the results of such a change would only be visible in a few years' time. Apart from the weather, another reason for the low yields is the flies that infest olive trees, particularly in Greece. In addition, the interest in healthy eating is fuelling the high consumer demand for olive oil. These influences, however, are not the only ones driving up the price, and they are compounded by continued high inflation with high interest rates.

Export ban as a measure

As a way of stabilising domestic prices, Turkey decided last summer to ban oil exports, which it extended indefinitely in November. Such a measure is part of regular export restrictions when domestic prices climb too high. This was also the case, for example, during the Covid pandemic. Despite this measure, the Turkish National Olive and Olive Oil Council remains optimistic about Turkey's role in supplying oil to European markets. Although this year's harvest is expected to be significantly down on last year, the country's existing stocks and new production are considered sufficient to meet both domestic and European market demand.

Oil and organised crime

The current situation has made olive oil a prime target for theft in Spanish supermarkets, where organised crime groups are trying to profit from the shortage. Traders are introducing measures such as the use of chains or labels on the bottles, which are removed by staff when they are sold, reflecting the seriousness of the situation. Similar thefts are occurring in Greece. In addition, in Spain, an international gang was also broken up, offering cheap oil as expensive and high quality.  Not surprisingly, prices, which have almost tripled in recent years, show the increasing value and demand for olive oil, making it a lucrative target for fraudsters and thieves.

Olivia Lacenová, principal analyst at Wonderinterest Trading Ltd.

[*] Past performance is no guarantee of future results

1][1] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or on the current economic environment, which may change. Such statements are not guarantees of future performance. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.