The extra virgin olive oil becomes the true liquid gold

Author Kostas Liris

At the end of the 2021-2022 campaign, when we first received data on production volumes, we realized that something was amiss. The year 2021-2022 proved to be a challenging one, not only for Spain but also for other countries - producers like Italy, Greece, and Tunisia. However, it was particularly harsh for Spain, the main producer. The lack of rainfall during the winter and spring of 2021, coupled with adverse weather conditions during the blooming period in April and May, led to the first poor production year in many. This served as the initial warning sign that something was going on, and production would be relatively small. Indeed, this prediction came true in a few months. Additionally, the technical shortage in the market for sunflower and canola oils, caused by the war in Ukraine, further exacerbated the situation.

The small production in 2021-2022 started revealing the potential for olive oil prices to escalate after the harvest. As we realized that Spain's production would be extremely low, prices began to rise steadily, increasing by a few cents each day.

The shortage of Spain's stocks, the overall small production, and the global increase in prices for all commodities continued to put pressure on the market. The prices of essential materials such as fertilizers, insecticides, and gas had already increased by 30-40% since 2020-2021, affecting production costs. However, the final blow came from adverse weather conditions and a lack of water during the spring blooming of 2021, making it a year hard to forget.

Normally, Spain's large production creates a significant stockpile of olive oil every September, acting as a "shock absorber" for prices when a natural shortage occurs in September while awaiting the new production. This year, however, we won't have this "shock absorber” effect - a fact known since March 2022. Moreover, the rainfall during the past winter was exceptionally low in Spain, Italy, Greece, and Tunisia, at least until May, indicating a poor general production for the next campaign. The outlook is grim, with very few extra virgin olive oil stocks available, a poor expected production for 2023-2024, and basic producer prices reaching 9 euros per liter last week in some parts of Greece. These signs suggest what we can anticipate for the upcoming production.

The overall condition of the olive trees is poor, especially in non-irrigated areas. Olive oil stocks are expected to be completely depleted, and prices for the next year are projected to remain high. This means that even if the production for the following year, 2024-2025, is significantly higher, we will enter the market in 2025 with little to no stocks, and prices are likely to remain elevated.

No one believes that this situation will return to normalcy soon. Over the past 2-3 years, the prices of all goods have increased by 30% or more in some cases, and a similar trend was expected for olive oil. However, weather conditions, water shortages, and the global economic situation delivered the final blow. While we hope for a better year ahead, considering climate change and the general economic situation, I remain skeptical that we will see prices return to normal anytime soon.