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Climate crisis spurs olive oil price surge

Oct 30, 2023 06:58 AM IST

Droughts, heatwaves and wildfires linked to climate change in key producer countries have nearly halved the world’s harvests of olives for second straight year.

One of the healthiest cooking oils is now the priciest too, thanks to climate change impacting plantations in southern Europe, the world’s production hub for olives.

An August production estimate by the Spanish government proved the worst fears: a crisis in olive oil markets.(AFP)
An August production estimate by the Spanish government proved the worst fears: a crisis in olive oil markets.(AFP)

Droughts, heatwaves and wildfires linked to climate change in key producer countries have nearly halved the world’s harvests of olives for the second straight year, driving up prices to a record. Global benchmark retail prices rose to a record high of $9,000 per tonne in October, according to the US Department of Agriculture.

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An August production estimate by the Spanish government proved the worst fears: a crisis in olive oil markets. Several Mediterranean countries suffered dry weather and droughts, further skimping supplies.

In a forecast in May, global price setter Spain, the source of half the world’s olive oil supply, said production is expected to fall nearly 48% over last year. A severe summer and wildfires in the world’s biggest producer had decimated much of its crop.

The supply crunch is said to be worse than last year, and its impacts are rippling across food markets, restaurants and homes, from Europe to US and India, traders said.

“Prices of the extra virgin imported variety in India are up 22%. Restaurants are most likely to pass this off to customers,” said Abhishek Agrawal of Comtrade, a commodities trader. India consumes about 12,000 tonnes of olive oil a year, most of which is imported, according to the Indian Olive Association.

In May, the Italian government called a crisis meeting after a 20% jump in pasta prices, partly driven by higher prices of olive oil, triggered political protests. Spain’s production in the 2023-24 crop year has been about a third lower than the four-year average, according to official figures.

“I have stopped using olive oil for salad dressings and switched to canola oil for cooking,” said Ritu Grover, a New Delhi-based banker who switched to olive oil years ago after suffering from high levels of bad cholesterol.

Olive oil prices in Spain will remain at record levels at least until June, a Reuters report said on October 26, quoting Deoleo, the world’s largest olive oil producer. This will feed into all importing countries, including India, the report said.

The US Department of Agriculture has cut its global olive oil production estimate down to 2.5 million tonnes, a quarter lower than the five-year average. Consecutive droughts and wildfires in southern Europe point to extreme weather linked to climate change, experts said.

Spain recorded its third- hottest summer this year, with average summer temperature 1.3 degrees Celsius higher than normal, according to state weather agency AEMET.

“Climate change is changing the way Europe grows food,” Dorothy Azory, leader of an olive growers’ federation in southern Europe, said in a journal article last month. Climate change had made drought at least 20 times more likely in Europe, with implications for global and continental food security, research by the World Weather Attribution service found last year.

Olive oil, health benefits of which have been attributed to its antioxidant and anti-inflammatory properties, has been on an upward streak since a couple of years, numbers from the FRED database of the St. Louis Fed, which tracks the benchmark Polvoilusdm olive-oil price index shows.

The Polvoilusdm benchmark in October 2022 was $4777 a tonne in contrast to about $9034 now, an 89% increase. A year prior, the global rate was $4331 ton. European harvests usually hit the markets around September and October. The previous record was set in 1996 at nearly $6200 a ton, according to FRED data.

Supply outlook looks critical. “The supply tightness in olive oil is now getting even more dramatic if current production estimates materialize. We consider it likely that olive oil prices will soon reach or exceed US-$ 10000 per tonne on the world market,” Oil World, a top industry forecaster, said in an update on its website October 20.

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  • ABOUT THE AUTHOR
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    Zia Haq reports on public policy, economy and agriculture. Particularly interested in development economics and growth theories.

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