Olive oil prices hit record highs following a prolonged drought in the biggest producer, Spain.

It is expected that the increased prices will remain for some time, writes CNB, quoted by BTA.

According to data from the International Monetary Fund, global olive oil prices reached $5,989.8 per metric ton, marking a 26-year high.

High prices may persist "for a while," Mintec oilseeds and vegetable oil analyst Kyle Holland said.

Unfavorable weather in Spain, in particular prolonged dry weather, is the main reason for the surge in prices.

"The issues driving prices to near historic highs are largely bad weather and drought across much of the Mediterranean, but most importantly what's happening in Spain, which is a major producer and exporter of olive oil," Holland said.

According to him, as a result of "extremely bad" weather conditions, the last olive harvest, harvested between October and February, yielded 50 percent less than usual, tightening global supply and pushing up prices.

"Extremely bad weather conditions meant that Spain produced around 630,000 metric tons of olive oil, a sharp drop from the usual levels of 1.4 to 1.5 million metric tons," Holland added.

Olive trees grow in a warm and dry climate, and the optimal temperature for them varies from 15-16 to 26-27 degrees Celsius.

Spain experienced a period of "very dry" weather in March, with just 36 percent of average monthly rainfall, according to the country's Ministry of Environmental Transition.

The country had 36 consecutive months of below-average rainfall.

If the weather does not improve, the upcoming harvest may yield even worse.

"It is possible that there will be a similar or even weaker harvest than the one obtained in the previous season, according to market participants. They also predict that prices may remain at current levels for some time," explained Holland. 

Demand pressure is putting even more strain on supply chains.

Demand for olive oil has been strong in recent years, with prices rising from 2020 as consumers eat and cook at home more often during and after the Covid pandemic, said David Valmorbida, president of the Australian Olive Oil Association.

The mercury in Spain hit 38.8 degrees

On top of that, sunflower oil shortages following Russia's invasion of Ukraine have also pushed prices higher.

"The outbreak of the war in Ukraine, which created a global shortage of sunflower oil, further increased the demand for olive oil," he added.

Changing consumer habits can relieve some of the pressure.

According to Valmorbida, consumers have already started to significantly reduce their consumption of olive oil.

Firstly, by being more sparing in its use and secondly, by switching to vegetable oils or seed oils or different blends of oils.

However, he maintained that the main demand for olive oil as a healthy and natural product "will almost certainly remain". 

Spain

drought

olive oil

rise in price