Spanish Olive Oil Supply Shortage Cause Soaring Prices for Sector

Spanish olive oil sector faces depletion and soaring prices amid supply shortages

The Spanish olive oil sector is currently grappling with mounting concerns regarding the availability of olive oil in the coming months. This comes as the July report from the Spanish government reveals a significant reduction in stocks. According to the report, stocks have declined by approximately 73,000 to 75,000 metric tonnes in July. Industry insiders estimate that manufacturers possess around 151,000 metric tonnes of available olive oil stock. Notably, these issues have arisen due to a drastic reduction in olive oil volumes produced by Spain last season, estimated by market players to be around 610,000 metric tonnes — significantly lower than the typical 1.3 to 1.5 million metric tonnes Spain usually produces. Concerns, however, extend to the upcoming harvest, with estimates suggesting the production of 700,000 metric tonnes, another significant decline from Spain's typical volumes.

Should this pace of drawdown persist, market players have told Mintec that they predict olive oil supplies could be depleted before the arrival of fresh harvests, which traditionally commence in Spain around October. The diminishing quantity of olive oil across all quality grades has led to unprecedented price hikes, as indicated by Mintec data. The Mintec Benchmark Price (MBP) for Extra Virgin Olive Oil from Andalusia soared to €8.20/kg on 11^th August 2023, marking the highest price ever recorded for Spanish olive oil, according to Mintec data, representing a substantial 115% year-on-year increase.

The olive oil market has entered a phase of intense volatility, with prices skyrocketing due to scarcities and the ever-evolving situation drought situation. This volatility renders previously quoted prices obsolete within mere hours, leaving the market struggling to achieve stability.

Furthermore, the situation is compounded by concerns of reduced production in other major European olive oil-producing countries like Italy and Greece, where drought conditions are prevalent. These conditions may result in a significant decline in olive oil production compared to the five-year average. Market insiders have provided Mintec with estimates ranging from 1.3 to 1.45 million metric tonnes of olive oil production in the EU — a notable drop from the five-year average of 2.1 million metric tonnes reported by the EU commission.

Adding to the apprehensions surrounding the potential of further olive oil price increases is Turkey's recent decision to suspend bulk olive oil exports until 1^st November, a move attributed to the global surge in olive oil prices. Moreover, concerns arise about the potential impact of Turkish oil sales to third countries by Spain and Italy as If these are not mitigated, this could render domestic consumption challenging due to a supply shortage. The suspension could exacerbate the already limited volumes in Spain, as buyers will have fewer sourcing options, potentially leading to difficulties obtaining the product.

Mintec will continue to provide updates on the situation in the olive oil market as more details emerge.