Why Is Olive Oil So Expensive Now?

Olive oil prices have surged worldwide in the last 3 years. Many consumers wonder about the reasons behind this. In this article, we will go through the factors behind why olive oil has become more expensive:

1. Climate Change and Droughts

The main reason behind this price hike is the impact of the climate on the main oil-producing regions of Europe. Spain, Italy, and Greece among others have been hit hard by severe droughts and heatwaves.

These climate challenges have led to reduced olive oil output. For instance:

  • Spain saw a 62% drop in production in 2023 compared to previous years[1].
  • Global olive oil production fell from 3.3 million metric tons in 2021/22 to just 2.31 million metric tons in 2023/24[2].

Experts attribute these to be the effects of climate change, highlighting the vulnerability of olives to these environmental stressors[1][2].

2. Supply and Demand Imbalance

This reduction of olive oil production has produced a shortage, which fails to meet the growing consumer demand. The main factors behind this imbalance are:

Increased Demand

Rising demand for natural foods and healthy lifestyles have raised the demand for healthy oils for cooking and raw consumption. Olive oil and the Mediterranean diet have been shown to be very healthy[2].

  • Olive oil’s numerous health benefits have made it increasingly popular as a substitute for traditional cooking oils[2].
  • Alternative uses of olive oil like in haircare and skincare[2].

Limited Supply

  • Spain’s production dropped to around 610,000 tons, less than half of its usual 1.3 to 1.5 million tons[1].
  • Greece and Italy, the second and third-largest producers, suffer from water scarcity, which further limits the global supply[1][2].

As reserves get depleted, analysts warn that prices may increase even more[2].

3. Market Dynamics and Price Speculation

The olive oil market’s structure and behavior are also contributing to the price surge:

Market Concentration

Large corporations dominate the olive oil market, with some producers describing them as “cartels”[1]. This concentration of power allows these companies to control the supply, limiting it and therefore profiting more for every bottle[1].

Hoarding and Speculation

Due to the long shelf life of olive oil, some producers and traders are hoarding their inventory in anticipation of higher prices[2]. Speculators are entering the market to hoard and resell in the future for a higher price[2]. This behavior limits the supply of olive oil worldwide thus increasing prices[2].

Cautious Buying Behavior

Buyers are responding to this by purchasing the minimum amounts for their needs. This tit-for-tat between buyers and sellers keeps the market stagnant and prices high[2].

4. Concerns Over Demand Destruction

There are concerns that consumers are beginning to opt for cheaper alternatives for cooking, weakening the demand for olive oil[3].

Looking Ahead

Experts are not optimistic about a solution very soon. The complex interplay of climate change, supply shortages, increased demand, and market dynamics makes it difficult to predict when prices may stabilize or decline[1][2][3]. Consumers may have to continue paying a premium for olive oil or consider alternatives[1][3]. However, it’s important to remember the many benefits and unique flavor of olive oil[1][2].

Let’s make this crisis a reminder of the importance of the climate and having a robust food system, and the importance of sustainable agricultural practices[1][2][3].

Ensure the Best Quality for Your Business with Balcón del Sur!

At Balcón del Sur, we offer the highest quality olive oil from Córdoba at competitive wholesale prices. Despite market challenges, we are committed to maintaining a constant and reliable supply. Contact us today for a personalized quote and discover how we can help you meet your customers’ demands.

Stock your business with the authentic taste of Andalusia.

References

  1. BBC – Why olive oil prices are soaring and what to do about it
  2. Arlotta Food – Navigating the Olive Oil Price Surge: Understanding the Dynamics Behind the Increase
  3. Food Navigator – The rising price of olive oil: What’s causing it and how long will it last?
  4. DataWeave – How Retailers and Brands Can Navigate Skyrocketing Olive Oil Prices in 2024
  5. Manayi – The Surge in Olive Oil Prices Explained

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