Wholesale prices of olive oil have surged to an all-time high, surpassing last year’s rates by more than double. The main cause behind this unprecedented price hike is a poor harvest resulting from severe drought conditions in Spain and other European Union (EU) countries, which collectively account for two-thirds of the world’s olive oil production. Industry analysts, including Jiří Tyleček from XTB, predict that these price increases will eventually trickle down to store shelves once last year’s stocks are depleted. In the Czech Republic, where a liter of olive oil currently sells for approximately 250 crowns, consumers may face a potential price surge of up to twice the current rate next year.

Despite the soaring wholesale prices, retail chains have been relatively slow to respond. At present, a liter of olive oil is trading on the wholesale market for around eight euros, equivalent to roughly 192 crowns. The dynamics of store prices going forward will depend on consumers’ shopping preferences, as they may choose alternative types of oils, and the possibility of better growing conditions in the upcoming year that could alleviate pricing pressures.

Spain, the world’s largest olive oil producer, has suffered significantly from the lack of rainfall, leading to much poorer crops. This Mediterranean country is the source of nearly 40% of the global olive oil production. Italy, the second-largest producer, has also been impacted by drought this year, while Portugal and Greece have experienced slightly better conditions.

The situation in Spain has been dire, with olive growers witnessing a drastic reduction in their production output compared to the previous season. Harvests have amounted to only about two-fifths of the usual yield, resulting in approximately 620,000 tons of olive oil. This represents the lowest production levels seen in the past three decades and has resulted in rapidly depleting stocks, which may reach critical levels even before the start of next year’s harvest.

Jiří Tyleček highlights other factors contributing to the surge in oil prices, including higher fertilizer costs for farmers and increased interest rates from banks, affecting investments in olive cultivation. Moreover, he warns that if climate change leads to more frequent droughts in southern Europe, necessary irrigation measures could further drive up olive and olive oil prices. Such conditions might ultimately force olive cultivation to shift to more northern regions with more favorable climates.

As the olive oil market faces these challenges, consumers and retailers alike will have to adapt to the changing landscape and consider potential alternatives to cope with the price hike and uncertainties in the supply chain.

Article by Prague Forum