Dry weather and contract expiry bolster olive oil prices

March 3, 2023

2 mins read

Dry weather and contract expiry bolster olive oil prices

 

In a follow-up to an article published here, the Mintec Benchmark Prices (MBP) for Greek extra virgin olive oil has increased €0.08/kg since publication, while Spanish extra virgin olive oil prices have climbed by a similar margin. The price rises are largely because retail contracts continue to expire leaving market players exposed to current olive oil price levels, which are up circa 49% year-on-year (y-o-y). These contracts, allowed market players to receive olive oil deliveries at prior years' prices and provided insulation from the strong price increases over this season, according to Mintec sources. Despite many retailers attempting to absorb these price rises into margins, “many have experienced price rises across too many commodities and, thus, some ‘passing on of the cost’ has to occur,” an olive oil trader told Mintec.

Consumption has fallen significantly in the past few weeks and is estimated to fall globally y-o-y to 1.4 million metric tonnes, down from 1.6 million according to industry sources. However, buyers are being ‘forced’ onto the market to purchase olive oil, as changing blends to include less olive oil, and to avoid paying high prices, with limited time frames is very difficult. In addition, weather across the Mediterranean key olive growing regions continues to be dry, although small scattering showers have appeared. “The water has not sunk in at all and the ground is bone dry. Most of the rain did nothing to alleviate the situation,” a trader told Mintec. If poor weather conditions continue, although it is early in the season to extrapolate weather data, the key Spanish olive oil crop may be severely constrained in size and may be of similar levels (680,000 metric tonnes) to this year's crop or even less, according to market players.

The potential poor crop at the new harvest in late 2023 has caused market players to raise concerns to Mintec about the long-term consumption of olive oil. If weather issues continue to plague the crop, not only is overall size likely to be reduced, but also olive oil quality. Competition for good extra virgin olive oil would likely increase and could cause prices to either move up or remain elevated longer term. Therefore, olive oil could remain at a premium price point and could be a challenging consumer choice, even if inflationary pressures decline as expected by the European Commission in H2 2023.

 

 

Kyle Holland
Kyle Holland

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