Olive Oil Prices Decline as Consumption Concerns Bite
The Mintec Benchmark Prices (MBP) for Greek extra olive oil declined €0.05/kg week-on-week (w-o-w) on 2nd February 2023, while Spanish extra olive oil prices shed €0.15/kg. Despite modest declines, market players commented to Mintec that this could be the start of a more significant downward price move in the coming weeks. The reason for the potential price declines is the increasing price on the retail shelf, which has started to limit demand for olive oil as consumers wrestle with inflationary price pressures on everyday food essentials according to industry sources. Demand limitation, according to the industry, is likely to continue as many players view olive oil as a premium product rather than a necessity.
The change in retail price is a symptom of contracts running out. Many market players had long contracts (some of which were put into place in early 2022 or even 2021) of olive oil. These contracts, from which market players would receive olive oil deliveries at prior years' prices, provided insulation from the strong price increases over this season, according to Mintec sources. Yet, many of these contracts have now ended and market players are being ‘forced’ to buy olive oil at the current levels which, in the case of the MBP for extra virgin olive oil EXW Andalusia, is up 60% year-on-year (y-o-y). 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. Therefore, olive oil could be replaced with cheaper oil products, such as sunflower and rapeseed oil, lowering prices from current levels in the coming weeks.
A separate olive oil trader told Mintec, “like many of the commodities which are more of a luxury than a necessity, consumers are thinking twice about buying them. It has caused a lot of nervousness on the market this week. If consumption continues to be low, buying large quantities of olive oil at these prices makes no sense. We need to see if the trend of low consumption continues over the next few weeks, but right now it doesn’t look good.”
