By Franziska Finck — January 22, 2024

 

What’s happening this month?

The start of 2024 is seeing a continuation of the market dynamics from the end of 2023, leading to record-high valuations for both Extra Virgin Olive Oil and Refined Olive Oil.

 

The Mediterranean region, which is responsible for most of the world’s Olive Oil supply, is still suffering from a prolonged drought, particularly in Spain, as well as low inventory reserves. Despite a partial slowdown in local consumption, sustained demand from export markets is keeping prices high.

 

According to the main trade monitoring platform in Spain, Poolred, the price level for Extra Virgin Olive Oil is 9.20 Eu/Kg for local production, while ISMEA, its Italian equivalent, marks Italian Extra Virgin Olive Oil at almost 9.60 Eu/Kg.

 

Historically, the gap between the Spanish and Italian origin for similar quality grades was wider, mainly due to the Iberian country’s much higher production volumes. However, two consecutive crop failures in Spain have contributed to the narrowing of that gap. To understand the magnitude of the current market increases, we can turn to official data released by the International Olive Oil Council in January 2021. Spanish Extra Virgin Olive Oil reached a peak at €2.50 per kilogram, while Italian Extra Virgin Olive Oil was trading around €4.80 per kilogram.

 

In comparison to when our previous market report was released in November 2023, the current prices indicate a rise of approximately 15% in percentage terms. Additionally, when compared with the prices from last month and the corresponding period in the previous year, we observe the following scenario:

 

Italy: 9.56 Eu/Kg → + 5% versus last month, + 58.3% versus price same period 2023
Spain: 9.09 Eu/Kg → + 5% versus last month, + 83% versus price same period 2023
Greece: 9.25 Eu/Kg → +3% versus last month, + 84.7% versus price same period 2023
Tunisia: 7.88 Eu/Kg → +3% versus last month, + 53.7% versus price same period 2023

 

ISMEA and Poolred are useful for tracking macro trends, but may not always account for variations in quality and grade evaluations.

For high-quality Extra Virgin Olive Oil, with low pesticide residuals and suitable for export our sourcing team reports that Spanish Evo is available on the market at no less than 10 Eu/Kg, while Italian trades slightly higher at 10.50 Eu/Kg. Greece and Portugal origins also exceed the 10 Eu/Kg mark, and Tunis has seen prices of nearly 9 Eu/Kg.

Despite some optimistic predictions from experts betting in a relaxation, it is evident that the market has yet to stabilize following a tumultuous holiday season and a busy start of the year for sourcing specialists and food buyers.

 

Spain Eliminates VAT on Olive Oil

To alleviate the financial burden on Spanish households during a time of rising living costs, the Spanish government has announced that olive oil will be exempt from the current 5% VAT.

 

This decision was made in light of recent price increases for olive oils, which have been implemented by major Spanish retail chains. As olive oils are a staple in Spanish cuisine and the Spanish people are among the highest consumers of this ingredient, these price hikes have caused significant frustration and protests.

 

According to an article in Olive Oil Times, data from the Nielsen Institute indicates that retail purchase for all grades of olive oil in Spain has sharply declined, with a 41% drop in extra virgin olive oil, 14% drop in olive oil, and 11% drop in virgin olive oil. These figures reflect the most significant decline in demand since the Spanish Civil War in the 1930s.

---

Final Thoughts

The olive oil sector is currently facing a crisis due to high prices caused by extreme weather conditions. The producing countries are particularly sensitive to these price increases, as olive oil is deeply ingrained in their cultural identity and switching to alternative vegetable oils is not an easy transition for many. Unfortunately, the reality is that olive oil is becoming less accessible for many consumers, and governments are being called upon to provide solutions.

 

Recently, the International Olive Council (IOC), an intergovernmental organization founded in 1956 with headquarters in Madrid and 19 member states worldwide, has been addressing how the olive oil sector can adapt to the climate crisis and its inevitable consequences.

 

Specifically, the IOC is exploring how different genetic varieties can better prepare for unpredictable weather conditions. The organization recognizes that the olive tree is not just a “producing being” that helps us meet a global demand, but also plays a crucial ecological role in mitigating the effects of the climate crisis.

 

We agree with the newly elected executive director of the International Olive Council (IOC), Jaime Lillo López, who recently told Olive Oil Times “Not everybody is aware that behind olive oil or table olives, there are more than 11 million hectares of olive trees, forming a kind of manmade forest that removes 4.5 tons of carbon dioxide per hectare from the atmosphere on a yearly basis.”

 

This crisis extends beyond the exorbitant prices of olive oil, often called “liquid gold.” It also concerns the survival of olive trees, which play a vital role in mitigating the global climate crisis, regardless of their economic value: a holistic way to look at food and farming, which is worth considering.

 

In spring 2024, the blooming trees in the Mediterranean will offer a first insight into the potential of future crops, especially in Spain, which could relieve some market tension.

 

As we recommend to our business retail partners to be cautious with promotions and discounts during 2024 and monitor unit sales and inventory trends carefully, we want to look with optimism at the initiatives of the country’s members of the IOC in improving water management practices and strategies to support struggling farmers and producers for the future of this historical ingredient, at the center of numerous food cultures and traditions.

 

 

Back to blog