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.
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.
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.