Following a prolonged drought, the olive oil market anticipates relief as weather conditions improve.
- The recent drought in Spain led to a significant decrease in olive oil production by 60%.
- Favourable weather conditions are expected to boost olive oil harvests in Spain.
- A stabilisation of production costs is anticipated, potentially reducing olive oil prices.
- The citrus industry faces its own challenges, impacting orange juice prices.
Following a prolonged drought that severely impacted one of the world’s largest olive oil producers, market conditions are beginning to shift towards relief. The past two years saw significant challenges as Spain endured consecutive summers of drought, resulting in a drastic 60% reduction in olive oil production.
However, recent weather patterns have been more favourable, providing Spanish olive growers with the opportunity to expect a more substantial harvest. This change is expected to lead to a decrease in olive oil prices, contingent upon stable production costs and weather conditions.
Pedro Álvarez Ondina, an economist from CaixaBank Research, highlighted the primary issue facing the olive industry was the extended period of insufficient rainfall over the last two-and-a-half years. He also noted the general rise in production costs due to the energy-intensive nature of olive oil production.
In May, predictions suggested that the price of extra virgin olive oil could exceed £16 a litre, a significant increase from earlier this year when it was priced at £14. This rise was attributed to the plummeting levels of global production, reaching its lowest in over a decade.
In a related development affecting the FMCG sector, major juice producers such as Tropicana and Innocent have raised concerns about the citrus greening disease’s spread. This disease, which affects both the colour and acidity of oranges, is projected to escalate orange juice prices, adding to the series of supply chain disruptions in 2024.
Favourable weather and stabilised production costs are poised to ease olive oil prices, though challenges remain for other commodities.
