Buying a bottle of extra virgin olive oil has become a small luxury for part of the household. The private label liter exceeds six euros in most linear and the manufacturer's brand ranges between 7 and 9 euros. For soft oil, prices are around 5-7 euros.
This basic food of the Mediterranean diet has suffered an unprecedented increase in cost in the last two years, beginning the rise in April 2021 and ending last March with a CPI of 32.1% when inflation in all foods was 16.5%. Its price at source has also reached record figures, exceeding 5.2 euros per kilo.
“We have never seen prices like this before, we have to go back to the time before the euro, when in some campaign they had touched 700 pesetas per kilo. Since then we have not seen such strong increases”, says Primitivo Fernández, president of Anierac, the Spanish association of oil packers and refiners.
The drought and episodes of extreme heat have reduced the 2022-2023 harvest by half in Spain, with a production slightly above 660,000 tons, when under normal conditions it can reach a million and a half, according to data from the Ministry of Agriculture –see graph–. "This has caused price increases both nationally and internationally, given that the peninsula represents 55% of world production and, as the main player, sets prices," explains David Prats, CEO of Borges.
As a consequence, less olive oil is sold. Outputs of the product for the domestic market have fallen by 33% up to March, and exports by 23%. Consumers have also reduced the purchase of this product due to the high prices, although farmers, manufacturers and distributors insist that not all the increase in costs has been transferred to the final price. "We are perceiving a decrease in consumption," confirms David Prats. Data from the consulting firm NielsenIQ show a reduction in retail sales of 14% for the third week of April 2023 compared to the same period in 2022, while the value in euros has grown by 15.1% due to the inflation.
The fall in consumption, however, has provided some relief to the oil market, considers Rafael Sánchez de Puerta, head of the sector at Cooperativas Agroalimentarias de España: "If regular demand remained at normal levels, there would not be enough oil to supply all".
This brake on consumption due to high prices, both in Spain and in the rest of the world, nevertheless has risks for the future, points out Rafael Pico, general director of Asoliva (Spanish Association of the Olive Oil Industry and Export Trade). The consumer, especially that of the international market, is beginning to replace olive oil with other vegetable oils. “We could lose market share against other foods; also compared to producing countries such as Italy, Greece or Tunisia, with more adjusted prices ”, he adds.
With a low production and the continuous increase in prices, the current harvest –2023-2024 campaign– will be decisive for the sector and to set food prices. The olive tree flowers during the month of May, and it is now when it most urgently needs water and adequate temperatures that allow the flower to set and transform into an olive. The entire value chain –producers, processors, distribution and exporters– are more aware than ever of the sky. And they warn that it does not seem something conjunctural. All those consulted agree that it is urgent to study the effects of the climate crisis on the olive grove and adapt the crops.
