NAOOA Executive Committee Sees Signs of Stabilizing Olive Oil Prices

The rain in Spain during Holy Week that canceled festivities and disappointed vacationers is now being considered a miracle by some. The years-long drought decimated output of the world’s largest olive-producing country and threatened drinking water supplies. The reservoir in Cordoba in Andalusia, for instance, was at a perilous 14% capacity on March 25. After a week of heavy rains, it has exceeded 70%.

The rain and replenishment of reservoirs is good news and portends a potential return to pre-drought levels of production in Spain. This is helping pump the brakes on rising global olive prices, which were being fueled in part by fears about the 2024/25 harvest. Not all areas of Spain received equal relief, but the rain in Andalusia (the region responsible for approximately half of Spanish olive production) bodes well for next year’s crop—barring other risk factors that could impact fruit development in the coming weeks.

Of course, today’s high olive oil prices are also being driven by tight supplies and continued consumer demand. The price pressure coming from tight supplies also lessened somewhat last week following the latest release of data on the 2023/24 harvest from the Spanish Ministry of Fish and Agriculture (MAPA). The MAPA report confirmed that total production from Spain will be 845,000 metric tons, which is a 27% increase over the 2022/23 harvest—still far below the 2022/21 harvest, but much better than the most pessimistic predictions. In addition, Turkish exporters are hopeful that Turkey may lift its ban on exports after Ramadan given that Turkey has a good volume of oil in stock and the new crop is not far off, according to Don Griego, NAOOA executive board member with AMD Oil Sales.

As far as demand goes, many countries have seen a significant decline in consumption. As reported in the Olive Oil Times, Eurostat notes that olive oil prices were on average 50% higher in January 2024 than they were a year before. The increase in Italy, for example, was reported at 45%. As a result, the IOC is predicting that Italian olive oil consumption this year will drop 13%.

Demand in the U.S., however, remains relatively stable. According to Dusan Kaljevic, CEO of Filippo Berio USA, and NAOOA vice chair, “The U.S. market has been relatively resistant to pricing pressure and has moderated its demand of olive oil only slightly, which we believe speaks to the market's appreciation of the health and culinary benefits of high-quality extra virgin olive oil."

Another reason demand in the U.S. hasn’t softened much may be that consumers in the U.S. have been largely insulated from higher prices. According to syndicated data, olive oil prices in the U.S. have on average only increased 18% over a year ago. For instance, store brand olive oils, which cumulatively account for approximately 40% of retail sales, have increased only 17% over the past year, with most of that increase coming only in the last few months. Mouna Aissaoui, Executive Vice President and COO of Pompeian and NAOOA chair, says, “The NAOOA has been successful in helping increase demand for olive oil in the North American market to the point that the U.S. is now the world’s second largest consuming nation after Spain. But unfortunately, that U.S. demand hasn’t softened continues to put positive pressure on global market pricing.”

All in all, the latest news presents a somewhat rosier market picture than our last report. In the coming weeks, we’ll keep an eye on various indicators, including those that may impact the 2024/25 Northern Hemisphere harvest like the flowering season, and we will continue to monitor whether U.S. demand reacts to rising prices.