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“We see supply problems which used to happen every six to seven years in the previous decades becoming more frequent,” warned Vito Martielli, grains and oilseeds analyst at Rabobank, the Dutch bank that is one of the largest lenders to the agribusiness industry.
Olive oil prices surged last year to an 18-year high of $5,886 a tonne after drought and pests limited supplies in Spain and Italy in 2017. Global olive oil production fell 26 per cent in the 2017-18 crop year to 2.4m tonnes.
Prices have since come down as supplies have rebounded 28 per cent and are at $3,980. However, with early forecasts from the International Olive Oil Council for the 2017-18 harvest pointing to a 7 per cent decline in production, prices have started to creep up again.
Over the past five years, bad weather has hit the most important producing countries — Spain, Italy and Greece — three times, causing supply failures, said Rabobank. The supply volatility comes at a time when global demand for olive oil, which has traditionally been consumed in the Mediterranean countries, is growing in new markets thanks to its health benefits.
A decade ago, Italy, Spain and Greece accounted for almost 60 per cent of worldwide demand, but now consume just over 40 per cent of global supplies. Demand in the traditional consumer markets have been hit by the rising price of olive oil, and have switched to cheaper vegetable oils in the last five years, said Rabobank.
Meanwhile, consumption has been rising steadily in markets such as the US and Japan, as well as those in northern Europe. Demand in the US has risen almost 40 per cent in the past decade, while that of Japan has doubled. Demand from emerging countries is also growing at a fast pace albeit from low volumes. Russian consumption has doubled while Chinese demand has almost tripled since 2008/09 although the numbers have fallen over the past few years thanks to local currency weakness.
For the current 2017/18 harvest, which started in September, forecasters at the IOC are expecting another bout of poor weather and pests hitting supplies. Spanish production is expected to retreat 1 per cent, while Italy is expected to decline 30 per cent, Greece down 19 per cent and Tunisia losing 29 per cent.
In 2012, a flowering frost combined with severe drought hit Spain, the largest olive oil maker accounting for just under half world production. Two years later, extreme drought caused a sharp fall in olive supplies in Spain and Italy. Italy particularly recorded the worst harvest for 25 years after Apulia, a key olive oil producing region, was hit by a bacteria outbreak that devastated the area’s trees.
