Spend Matters welcomes a guest post from Yuliya Nam-Wright of Mintec.
Lovers of the Mediterranean diet may have to curb their appetite because prices for olive oil in Europe are rising again. Olive oil may not be part of the traditional US diet, but its consumption has been growing rapidly in recent years. In fact, American consumption of olive oil has risen by more than 50 percent since 2001 and the country is now the third largest olive oil consumer, behind Italy and Spain.
Although the domestic olive oil industry is growing, most olive oil consumed in the US is imported. The European Union is by far the largest producer and exporter of olive oil, accounting for over 75 percent of global production. Consequently, international prices are largely driven by demand and supply in the EU, particularly in Spain and Italy, the top two producers. Although around half of the world’s exports originate in Spain, Italy is the top importer into the US, with close to 30 percent of total imports. This is due to Italy exporting not just its own products, but re-exporting significant volumes of olive oil from other European origins, primarily Spain.
Prices for olive oil have risen sharply in Italy, up 32 percent since the start of the year and 15% year-over-year. Spanish prices had been falling since September 2013 due to a record production year; however at the start of June prices started rising and are currently over 10 percent higher than a month ago.
This rapid price acceleration has been driven by the weather. There was above average dry and warm weather throughout the Mediterranean olive-growing belt in May and June. This dry heat hit the olive trees during the blooming period when moisture is vital to ensure maximum olive growth and the eventual oil yield. This is on top of the stress this season’s record output had put on the Spanish trees. Consequently, alarm bells are ringing and concerns are being raised over the yield prospects for the 2014/15 crop. The painful memories of the Spanish drought in 2012, when the price of Spanish olive oil shot up to nearly €2.90 per kg, are still very fresh and may be causing some additional speculation in the market.
It is yet too early to assess what the full impact will be on the 2014/15 crop. In the meantime, the plentiful 2013/14 crop is meeting demand and stocks are rising. European olive oil production in the current 2013/14 year, which ends in September, is expected to rebound to 3.0m tons, up 30 percent year-over-year.