The price of olive oil has reached its highest level since 2010, as a lack of rain and high temperatures in the south of Europe have resulted in a significant drop in production.
The situation is particularly critical in Spain – the world’s largest olive oil producer – which accounts for 40% of global and 65% of European production.
Drought and abnormally high temperatures are jeopardising the harvest and causing fears of a ‘catastrophe’ for the sector, already shaken by a very difficult year in 2022.
The early heat of April came at the worst-possible time, during the flowering of the olive trees.
For Spain, which exports nearly €3 billion of olive oil per year, the situation is all the more worrying, as the sector is emerging from a calamitous 2022-23 campaign.
Due to the lack of water and extreme temperatures, Spanish olive oil production reached a ceiling of 660,000 tonnes during the period, compared to 1.48 million tonnes in 2021-22 – a drop of 55%, according to the country’s Ministry of Agriculture.
The scenario is likely to be repeated this year, with the Spanish agricultural sector fearing a 50% drop in revenue.
As the young olive trees have not developed long-enough roots to draw water, this is likely to affect production over the next two to three years.
Read More: Drought In Spain Likely To Halve Its Olive Oil Output
Lower VAT On Olive Oil
The Spanish government intervened and lowered the VAT on olive oil from 10% to 5% at the end of 2022, as part of an anti-inflation plan.
It has also provided support to farmers affected by the drought, by reducing income tax for the sector by 25%.
However, the measures are deemed insufficient, as the olive oil sector is also suffering from increases in the prices of energy, fertilisers, glass, packaging and transport.
In mid-April, olive oil was selling at €5,800 per tonne, up from €5,300 in January 2023 and €3,500 in January 2022, according to data from oil and fat brokerage firm Baillon-Intercor.
Read More: Buyer’s Brief: Sláinte Mhath To The Olive Oil Industry ... Or Not?
© 2023 European Supermarket Magazine – your source for the latest supply chain news. Article by Branislav Pekic. Click subscribe to sign up to ESM: European Supermarket Magazine.