Global Olive Oil Prices Surge, Reshaping Consumer Habits Worldwide

Olive oil prices have surged due to drought and poor harvests in major producing countries, with varying consequences across different regions. The recent price increase in Spain is attributed to rising production costs after the conflict in Ukraine and prolonged drought conditions. Global olive oil prices continue to rise, with no signs of abating as farmers in the northern hemisphere gear up for the upcoming harvest.

In August, the International Monetary Fund's primary commodity price index reported that the global monthly average price of olive oil exceeded $8,900 (€8,250) per ton, marking a staggering 130 percent increase compared to the previous year. This year's unprecedented spike in prices shattered the previous record set in 1996, which was slightly above $6,242 per ton.

Economists at the United States Department of Agriculture (USDA) attribute the price hikes to a combination of off-year growing cycles and exceptionally dry weather across much of the Mediterranean region. Concerns in Greece, Italy, Spain, and Turkey—four of the world's top five olive oil producers—regarding potential poor harvests in the coming year are exacerbating the situation, and experts anticipate that prices will remain elevated well into 2024.

Data from the International Olive Council (IOC) reveals that olive oil prices at their source in Europe's major benchmark markets have steadily risen throughout the year. Jaén, Spain; Bari, Italy; and Chania, Greece, collectively accounting for 60 percent of global olive oil production, have seen extra virgin olive oil prices more than double compared to the previous year, reaching €670, €900, and €735 per 100 kilograms, respectively. Prices for virgin olive oil, refined olive oil, and lampante have also reached record highs.

Outside of Europe's largest producers, extra virgin olive oil prices in Trás-os-Montes, Portugal, have also hit a record high of €669 per 100 kilograms. Meanwhile, prices in Tunisia rose to €753 per 100 kilograms in July, nearly doubling their value since the beginning of the year.

The USDA economists explain that prices have been steadily climbing since the extent of harvest damage became apparent. Recent concerns over supplies in Spain have further propelled prices upward as the market strives to ration resources toward s the end of the marketing year. Consequently, olive oil consumption is expected to remain stagnant or decline in 2022/23 for nearly every country except Turkey, where the government has imposed a ban on bulk olive oil exports to ensure domestic supplies and alleviate price pressures, despite record domestic production.

However, the impact of rising prices varies across different regions of the world. In Southern Europe, demand for olive oil is expected to remain relatively stable, with higher prices and reduced supply somewhat moderating consumption. Consumer and cultural preferences for olive oil make it challenging to substitute with other vegetable oils, according to USDA economists.

Conversely, the USDA predicts a significant drop in olive oil consumption in lower-income countries in the Middle East and North Africa, as consumers favor higher export prices to meet demand in wealthier countries that either produce no olive oil or far less than they consume.

Juan Vilar, a strategic consultant in the olive oil sector based in Jaén, believes that consumers in major olive oil importers like Brazil, Canada, Germany, and the United States will continue to purchase olive oil, as they are accustomed to paying €10 or more at the supermarket without hesitation. The USDA economists concur, stating that less price-sensitive buyers have demonstrated a relatively inelastic preference for olive oil as prices have risen. As a result, the United States, which typically accounts for around 30 percent of global olive oil trade, is projected to increase its share to 35 percent this year and 37 percent in 2023/24, according to the USDA report.