Research
Record Olive Oil Prices Driven by Supply Shocks
Olive oil prices hit record highs in recent weeks, breaking USD 9,000 per metric ton, while other vegetable oil prices have dropped after reaching a record highs in 2022. Olive oil is a niche vegetable oil market with its own market dynamic and olive oil supply has become more unstable in recent years. Demand patterns in the olive oil market have changed as olive oil demand has become global.
Supply Shocks More Frequent and in Different Countries
Weather conditions have impacted the most important producing countries five times in the last ten years, causing supply shortfalls, in turn resulting in price volatility (see Figure 2). Athough some may think so, this is not a result of olive trees being a biennial fruit-bearing tree. In the current harvesting campaign 2022/23 (Oct-Sep), Spain, Italy, Portugal and Tunisia have been highly impacted by changing climate conditions. Spain – the largest olive oil producing country in the world and price setter in olive oil – has reported a drop of 48% compared to the previous year. The drought and lack of water of the past months in Spain is creating concerns about the new crop season 2023/24 that will start at the end of October, and it has resulted in the current record prices. For the second time in a row, Spain is expected to harvest less than one million metric tons. In the last weeks, heavy rains and thunderstorms have also impacted Apulia, the most important olive oil production region in Italy, the second-largest olive oil producing country worldwide, causing damages to the upcoming harvest.
In the medium term, climate volatility is a key concern that will likely continue to impact supply in key production regions and result in ongoing price volatility. Further research will need to done to assess the structural impact on the crop for the 2024/25 crop year and beyond.
Globalization of Olive Oil Demand
Historically, olive oil has been a niche vegetable oil. Olive oil is perceived by the consumer as a healthy oil, and plays a key role in the environment and sustainability as the olive trees have carbon-removal properties. In the last few decades, new consumer markets have developed for olive oil, increasing its demand (see Figure 3).
In the next five years, olive oil demand is expected to grow at different rates in different parts of the world. There are four main consumer groups: .
• Traditional consumers – mature markets in southern Europe (i.e. Spain, Italy and Greece) with high per-capita consumption.
• Developed countries – growing markets (i.e. the US, northwestern Europe, Japan), driven by strong growth in Mediterranean cuisine. Perceived favorable health considerations are also a driving force in demand in these regions.
• Emerging countries – very fast-growing markets (i.e. Brazil, China, India), coming from very low low initial consumption levels.
• MENA region – growing market, driven by population growth and increasing consumer preference.
Current olive oil stocks are depleted. High prices are going to ration demand in the coming season, particularly in traditional consumer markets and the MENA region. Short supplies and record-high prices will force consumers to seek out other vegetable oils to replace olive oil.
