Mediterranean drought sends olive oil prices surging

It is not just crude oil that is having a turbulent 2017.
 
The price of extra virgin olive oil has surged by almost a quarter this year, as drought afflicts production at major producers around the Mediterranean. Output in Greece, Italy, Tunisia and, to a lesser degree, Spain is forecast to fall sharply this year.
 
“Italy is terrible, Greece is terrible, and Tunisia is terrible. Can you imagine if Spain had also been down sharply?” said Panayotis Karantonis, director of the Athens-based Greek Association of OIiver Oil Processors and Packers.
 
World production is forecast to fall 14 per cent, with Italian output expected to almost halve in the 12 months to September, according to the International Olive Council. Greece is likely to see a 20 per cent fall, Tunisia by 17 per cent, while production in Spain, known in the industry as the Saudi Arabia of olive oil because of the size of its output, predicted to decline 7 per cent.
 
The squeeze in supply and the rise in prices have tempered European demand for olive oil, known for its vitamins, nutrients and antioxidants, but demand elsewhere remains robust. Australia, Brazil and China are among the markets where imports are growing rapidly, according to the IOC.
 
Adverse weather events have been affecting olive oil production in countries on the Mediterranean more frequently, agricultural and weather experts have noted.
 
”We have had bad weather affecting production three years out of the last five,” said Vito Martielli, a grains and oilseeds analyst at Rabobank, the Dutch bank that is one of the largest lenders to the agribusiness industry.
 
While the production level is higher than that of 2012 and 2014, when a drought in Spain and pests in Italy were the culprits, the more frequent declines in output and lower inventory levels have left the market more vulnerable to spikes in price. The wholesale prices for extra virgin olive oil have risen above $4,200 a tonne.
 
Mr Karantonis said that while production in Spain was lower than initially expected, it was still significantly higher than in 2012-13.
 
The jump in wholesale prices has put upward pressure on what consumers are having to pay. Retail olive oil prices across Europe have risen an average of 26 per cent in the two years to 2016, with those in Spain recording the steepest rise of 36 per cent, according research group IRI.
 
This year’s advance in wholesale prices has yet to reach supermarket shelves because of a time lag, but industry executives, warn it is likely to happen. “Over the next coming months the prices in the supermarkets in the US and UK will be higher than 2-3 months before,” said Mr Karantonis.
Courtesy of msn.com

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