The EU olive oil sector faces a major production drop due to recent droughts. Consequently, Turkey, Tunisia, Morocco, and Syria are aiming to fill the gap. However, consumers have quality doubts about oil from these regions.
OleoScope investigates the current situation for premium olive oil. Specifically, we examine potential interest drops in various countries. Also, we analyze how olive oil prices have changed over the last year. Therefore, this article aims to provide crucial market insights.
Despite the challenges, there is still interest in premium olive oil. Moreover, consumers are seeking high-quality options. Furthermore, OleoScope delves into these preferences.
Effects of the drought
The global olive oil market faces challenges this season. Moreover, global production may reach its lowest level in recent years by the end of this agricultural year. The drought in Europe has severely impacted olive trees. While the 2021/22 season was acceptable, the situation deteriorated recently. Mediterranean countries experienced declines due to unfavorable weather. For instance, Spain recorded a 50% production drop. Similarly, Portugal saw a 39% decrease, and Italy faced a 27% reduction.
Greece, however, became the only EU nation with increased harvest. Nevertheless, this small increase (100 to 150,000 tons) cannot compensate for the regional volume decrease. Turkey had a bumper crop, but it will have little impact on the global market. Production in other countries (Morocco, Syria, Algeria, Lebanon, etc.) can partially cover the European shortage only with good weather. These countries already have smaller crops.
Furthermore, hot, dry weather persisted throughout the Mediterranean in April and May. There has been no rain since January. Consequently, tree flowering is worse than last year. The restoration of production is predicted early. In short, everything depends on rain over the next months. If the weather trend continues, consumption is also expected to fall. Limited quantity and rising prices may cause this.
Olive oil production is limited by the number of trees. Unlike some crops, olive trees cannot be quickly planted to compensate for poor harvests. The trees need 3 to 8 years before bearing fruit. Also, suitable planting areas with a matching climate are needed, according to a market participant. Therefore, the market will respond slowly to shortages.
Production declined
Global olive oil production is projected to decline significantly this season. USDA analysts forecast a multi-year low of 2.6 million tons. This represents a substantial decrease compared to previous years. Specifically, production is down 660,000 tons from 2021/22. Furthermore, it’s about 545,000 tons below the recent five-year average. Therefore, the global olive oil market faces potential supply challenges. Consequently, prices might increase due to the limited availability.
Worldwide production of olive oil, thousand tons
| 2017/2018 | 2018/2019 | 2019/2020 | 2020/2021 | 2021/2022 | 2022/2023 | |
|---|---|---|---|---|---|---|
| EU | 2188 | 2264 | 1925 | 2051 | 2235 | 1550 |
| Turkey | 263 | 194 | 230 | 210 | 225 | 340 |
| Tunisia | 325 | 140 | 440 | 142 | 240 | 200 |
| Morocco | 140 | 200 | 145 | 160 | 200 | 160 |
| Syria | 100 | 104 | 118 | 115 | 106 | 125 |
| World | 3285 | 3160 | 3153 | 2927 | 3274 | 2614 |
Global olive oil production is facing significant challenges. Consequently, the largest decline is predicted in EU countries. The International Olive Council (IOC) forecasts a drop if Western Europe’s output decreases. Specifically, Spain, Italy, and Portugal are expected to see considerably lower production due to drought. However, France is predicted to have only a slight decline. In contrast, Greece anticipates a substantial increase, around 1.5-fold. Furthermore, Croatia, Slovenia, and Cyprus might experience modest growth.
Also, the USDA projects lower olive oil production in Morocco (from 200 to 160,000 tons) and Tunisia (from 240 to 200,000 tons) for 2022/23. These nations rank among the world’s top five producers.
Ibrahim Ramazanov, a professor at Oleoskop, stated, “Tensions in the world olive oil market will likely persist.” According to Ramazanov, no current players can fully compensate for the shortfall. Nevertheless, Turkey, Iran, and Tunisia lack the immediate capacity to replace European exports. However, global warming and frequent European droughts could increase their market share long-term.
Therefore, the global olive oil trade volume may return to 1.18 million tons, similar to 2018/19 levels. Indeed, the EU’s share might decrease from approximately 65% (2021/22) to 50%. Meanwhile, Turkey is set to significantly boost its global market position. In fact, they will likely end 2022/23 with over 18% market share, compared to 5% in the previous season. Additionally, Tunisia will reduce its supply this year. Nevertheless, the region should still maintain a 3% share of global trade.
Worldwide olive oil exports, thousand tons
| 2017/2018 | 2018/2019 | 2019/2020 | 2020/2021 | 2021/2022 | 2022/2023 | |
|---|---|---|---|---|---|---|
| EU | 1410 | 1420 | 1445 | 1470 | 1495 | 1345 |
| USA | 326 | 365 | 406 | 395 | 423 | 381 |
| Turkey | 175 | 180 | 185 | 190 | 190 | 180 |
| Morocco | 130 | 145 | 135 | 140 | 145 | 137 |
| Great Britain | 65 | 80 | 83 | 88 | 90 | 82 |
| World | 2862 | 2927 | 3032 | 3067 | 3153 | 2816 |
Despite projected natural export growth from various regions, high-quality olive oil availability is a key concern. Indeed, an “Oleoskop” interviewee mentioned buyer questions about product quality. These questions target sellers replacing European suppliers.
Furthermore, oil quality is suffering due to weather conditions. Specifically, drought is causing more damaged olives. Less high-quality oil is then produced as a result. Consequently, demand for premium olive oil is rising sharply. The higher demand is subsequently pushing prices even higher, according to a market source. Therefore, this situation presents both challenges and opportunities within the olive oil market.
And olive oil prices are rising
Extra virgin olive oil prices are surging. Currently, a tonne’s value is up 54% compared to May 2022. This growth is ongoing due to rising demand. Spring has particularly intensified this demand.
“Spain, the largest olive oil producer, significantly impacts world market prices.” Regina Gurina, RUDN agricultural technology institute, shared her insights with “Oleoskop”. Specifically, she noted a substantial increase in the product’s value. Furthermore, climatic conditions contribute to this rise.
However, the price increase isn’t solely due to drought. Drought conditions have persisted in some regions since 2014. Moreover, other factors are influencing the price. The global economic crisis also plays a role. Energy problems are contributing as well. Finally, price jumps are impacting olive oil value.
And the demand will continue
Olive oil consumption should rise long-term. The category shows steady growth under normal prices. Also, people are increasingly seeking healthy lifestyles.
This trend grew notably during lockdowns. Indeed, some countries saw category growth up to 30%. Many people cooked at home more often. In addition, new cooking habits were formed. Moreover, health and vitamins gained importance. One industry source shared this with Oleoscope.
However, the USDA projects a slight consumption dip this season. Specifically, it forecasts a drop from 3.15 million tons (2021/22) to 2.82 million tons. Still, the decrease since 2017/18 is only 2%. Thus, it shows stable demand for olive oil. Demand is strong from the EU, US, Turkey, and Morocco.
The global consumption of olive oil, thousand tons
| 2017/2018 | 2018/2019 | 2019/2020 | 2020/2021 | 2021/2022 | 2022/2023 | |
|---|---|---|---|---|---|---|
| EU | 1410 | 1420 | 1445 | 1470 | 1495 | 1345 |
| USA | 326 | 365 | 406 | 395 | 423 | 381 |
| Turkey | 175 | 180 | 185 | 190 | 190 | 180 |
| Morocco | 130 | 145 | 135 | 140 | 145 | 137 |
| Great Britain | 65 | 80 | 83 | 88 | 90 | 82 |
| World | 2862 | 2927 | 3032 | 3067 | 3153 | 2816 |
Olive oil preferences vary greatly among consumers. For example, some prefer Greek olive oil exclusively. Others consider Algerian oil the best, says Regina Gurina from RUDN Institute. She is an assistant professor of agricultural technology.
Furthermore, Gurina believes domestic consumers won’t feel significant market changes. Therefore, they will not experience noticeable losses. Retail shelves show no alterations now.
The primary olive oil producers remain Greece, Spain, and Italy. Consequently, demand should mirror previous years’ levels. A breakout is not expected in olive oil consumption. In addition, the expert guarantees a stable market situation.
Source: Ukragroconsult (Ukraine)