Olive groves at Green Gold Olive Oil Company’s Finca Fuencentilla in Beas del Segura, Spain, have suffered record temperatures and a lack of rain this year. (Alfredo Callis/Panos/Redux for CNN)
Manuel Heredia Halcón’s grandparents planted olive trees in their 1,200-acre grove in Andalusia, Spain, nearly a century ago.
The trees are renowned for their ability to grow in even the driest soils, but this year, scorching temperatures and a severe lack of rainfall have taken a toll.
“We are very concerned,” Halcon told CNN Business. “You cannot replace an olive tree with any other tree or product,” he said.
Like many farmers in Europe, Halcon has fought extremely dry This summer – he estimates the olive oil harvest from his farm, Cortijo de Suerte Alta, will drop by about 40% this year due to exceptional weather conditions.
temperature in july broke the record Tops of 40 °C (104.5 °F) were reached in parts of France, Spain, Italy and Portugal. According to the European Drought Observatory, by early August, extreme heat and lack of rainfall had pushed nearly two-thirds of the land in the European Union into a state of drought.
Olive oil producers have suffered huge losses. Oilseeds and cereals pricing analyst Kyle Holland at commodity data company Mintec expects a “dramatic reduction” of between 33% and 38% in Spain’s olive oil harvest beginning in October.
Spain is the world’s largest producer of olive oil, accounting for two-fifths of the global supply last year, according to the International Olive Council. Greece, Italy and Portugal are also major producers.
Consumers are already paying more for olive oil. Retail prices across the EU rose 14% by July. But prices are set to rise further in the coming months, producers and buyers told CNN Business.
Holland told CNN Business, “Drought is very important. It is very dry. Some trees are producing very little fruit, some trees are not producing fruit at all. It only happens when soil moisture levels are severe. significantly less.”
This is a warning shot for an industry dependent on a predictable life cycle for olive trees. Growers are accustomed to big swings in harvest over a 24-month period, but climate change is already disrupting the age-old rhythm.
Olives fallen into dry soil are seen during a drought at Villa Filippo Berio in Vecchiano, Italy. (Noemi Cassanelli/CNN)
Paco Buzalens, millmaster of Cortijo de Suerte Alta, shows olives at the company’s grove in Albendín, Spain. (Alfredo Callis/Panos/Redux for CNN)
‘Impossible to get fruit’
Olive oil production is about time. The trees begin to bud in March, before flowering in May. Olives ripen in the summer months before harvesting in the fall.
Andalusia, Spain’s southernmost region, supplies about a third of the world’s olive oil. It is used to temperatures regularly reaching 40 °C, but not in May, when the flowers begin to bloom.
“In that moment we probably lost 15% to 20% of the crop,” he said.
Halcon expects to sell this year’s oil to its buyers, including importers from Asia and the Americas, at €4 ($3.97) per kg. This is an increase of 30% over the previous year.
Heatwave. coincides with the third consecutive year of little rain, The water level in the Guadalquivir River, which helps irrigate the surrounding olive groves, is critically low. Halcon said he can only give his trees about half the normal amount of water this growing season.
“Next year will be even worse as the dams will be completely empty,” he said.
Juan Jiménez, CEO of Green Gold Olive Oil Company, a family business located about 160 kilometers (100 mi) to the northeast, faces similar problems.
,[The issue] Not just how hot it was, but when it was hot,” he told CNN Business.
“In that moment when the olive flower comes to life, and [if it is] Hot, only the flower burns, so it is impossible to get fruit.”
Jiménez’s olive groves cover 740 acres of mountainous and flat terrain. If there is no rain in the next few weeks, rising temperatures in May will reduce his crop by between 35% and 60% of the normal year’s crop.
If so, it would be “the worst crop in the last 10 years,” Jimenez said.
Elsewhere in southern Europe, drought conditions have also caused heavy headaches. Filippo Berio sells oil in 72 countries, and sources most of it from suppliers in Italy, Spain and Greece.
It also produces its oil from 25,000 trees in Italy. Walter Zanerre, managing director of Filippo Berio’s UK division, described Tuscan Grove as “tinder-dry” this summer. At the end of July, a forest caught fire Very close to the company’s only factory – where all of its oils are blended, refined and bottled – it is enveloped in smoke and ash.
“We’ve been through drought, but I think in living memory it’s the worst that anyone has ever seen,” Zanere told CNN Business.
Now it has to be seen how bad the 2022 crop is. The United States Department of Agriculture forecast a 14% drop in global production last month, while Mintec expects it to be similar to the more than 30% loss projected for Spain.
Benchmark producer prices for Spanish extra virgin olive oil from Andalusia hit their highest level in five years at the end of August. And, over the past two years, they have risen almost 80% – from €2.19 ($2.18) per kilogram in August 2020 to €3.93 ($3.90) this month.
Prices rose in early 2021 as buyers worried that inclement weather would cut supplies, shows Mintec data. They shot up again after Russia invaded Ukraine in late February, when fears of a decline in sunflower oil exports from the region caused buyers to stockpile olive oil as an alternative.
Since June, signs that the next crop will be bad have risen again in prices.
So far, lengthy contracts between suppliers and retailers have protected consumers from some of the worst price increases. Holland said buyers can expect significant growth over the next four months when retailers renew their supply agreements.
“Retailers will try not to incur as much of these costs,” he said, adding that producer prices could rise as much as 15% from August’s already increased levels. According to data from Mintech, even a 10% increase would bring producer prices to their all-time highs.
Yasin Amor, director of Artisan Olive Oil Company, a UK wholesaler, told CNN Business that he expects the shelf price of his half-liter bottle (18 fluid ounces) of olive oil to increase by 20% compared to the next one. A few months. Amor’s customers are mostly supermarkets, delis and restaurants.
A tractor drives through an olive grove at Villa Filippo Berio in Italy. (Noemi Cassanelli/CNN)
Inside the room of an olive oil mill at Villa Filippo Berio. (Noemi Cassanelli/CNN)
Bottle prices have already gone up in some major markets. In Europe, the world’s biggest consumers of olive oil, the Netherlands and Greece recorded the biggest increases, where retail prices in July rose by more than a quarter compared to the same period a year ago.
The same size bottle of Filippo Berrio extra virgin olive oil in the United Kingdom – the brand’s largest market outside the United States – now costs a record £5 ($5.76) in some stores, up from £3.75 ($4.32 initially) in some stores ) above year. It is a third more expensive.
Zanere’s biggest concern is how buyers’ behavior might change as prices inevitably rise.
“Without question we are facing one of the toughest times ever in the olive oil industry,” he said.
Costs are rising everywhere
Olive oil producers have faced a lot of storms in the past, but this year, a combination of extreme weather, supply chain bottlenecks and flying energy expenditure – The cause of the war in Ukraine – has caused an unprecedented squeeze.
Halcon said the electricity needed to pump water to their trees has doubled, while their glass bottles are 40% more expensive.
Same for Zanere, “Everything you touch [the] supply chain”. He believes that some costs, such as shipping fees, are unlikely to ever go down.
“The pallet on which the goods are moving has gone up, the bottles have gone up, the labels have gone up, the caps have gone up, the energy to run the factory has gone up. Everything. And then, on top of that, we is the price of [the] Oil is going up,” he said.
But crisis creates opportunity, Halcon said. Rising prices of seed oils, including sunflower oilhas made olive oil more competitive.
“If a year ago, olive oil had doubled [the] price, or three times more expensive than some [alternatives]Today we are probably only 20%, 30% more expensive than seed oil,” he said.
Jimenez is also optimistic. Olive oil is still only a small part of the global edible oil market, he said, a share he believes can only grow.
“But we need to be prepared to understand that maybe this [drought] Not once in 20 years, but one in ten, or one in five, or one in four. And we need to be prepared to do that if we want to remain in a competitive market.”