Olive oil fell victim to a perfect storm

The global olive oil industry is going through one of the most challenging times in its history and needs a “profound transformation,” according to Miguel Angel Guzman, sales director of Spain’s Deoleo, the world’s largest producer of the product.

Global climate change, soaring prices, high interest rates and sustained inflation in recent months have affected the entire olive oil chain, he explained to CNBC. Two years of scorching heat in Spain have led to a limited olive crop and, as a result, unprecedented price increases.

Spain accounts for more than 40% of global olive oil production, making it a global price benchmark. Most of the global supply of olive oil comes from the Mediterranean, with the southern European countries of Spain, Italy and Greece among the world’s leading producers of this precious commodity.

Prices for virgin olive oil in Spain’s Andalusia reached a record high of 9.2 euros ($9.84) per kilogram in January. Admittedly, they later declined, partly due to rains and higher production forecasts. By mid-April, a kilogram of olive oil was worth about 7.8 euros, according to Mintec’s benchmark index.

The recent rains in Spain were “undoubtedly positive news” and Deoleo expects a return to a “more reasonable price situation” in the future, but remains cautious in its forecasts for now.

“We still have a few months to go until we know the possible volumes for the 2024-2025 crop, and until then prices will be volatile,” Guzman said.

The industry is inherently prone to high price volatility and needs new approaches to production, he said. Oilseed analysts warn that olive trees are “extremely” vulnerable to the climate crisis. And while they can usually tolerate high temperatures and are fairly resistant to drought, conditions have been too harsh recently.

Asked what can be done to better protect olive trees from extreme weather caused by climate change, Guzmán said, “The sector must take the reins and all actors must transform if we are to reduce price volatility and increase predictability.”

Tags: prices, olive oil