The sunshine that puts Spain on the map for tourists is now threatening to affect the country’s green gold, olive oil, of which Spain is the number one producer in the world. Widespread droughts across the Mediterranean, where countries such as Italy and Tunisia are other vital sources of olive oil production, paint a bleak picture for olive oil prices for the near future.

For 2022, Spain is forecasted to produce less than 50% of the olive oil that it managed in 2021, according to Walter Zanre, managing director of Filippo Berio UK, the best-selling olive oil brand in the country. 

“Spain is the dominant producer globally,” he says. “In a good year. Spain can represent up to 60% of global production, so the fact that Spain is down by so much is a real problem to the industry.”

Filippo Berio bottles all of its oil in Italy, but sources it from a wide array of Mediterranean countries. This is mainly because Italy does not produce enough oil to meet domestic production and then export, says Zanre. 

Right now, the western end of the Mediterranean seems to be suffering “much, much more”, says Zanre, with production down in countries such as Morocco, Tunisia, Italy and Portugal. However, he points out that in the eastern end of the Mediterranean, countries such as Turkey and Syria “are in a much better position, but don't produce enough to compensate for the shortfall from the western end”. 

Also, what happens is that countries such as Syria or Jordan tend to supply their end of the Mediterranean and the Middle East, he adds. 

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Temperatures up, prices up

Zanre explains that in his 22 years in the business, he has not seen olive oil prices jump so much in such a short period of time. This followed the announcement by Andalusia’s regional government of a decline in olive oil production forecasts, down by 49%. Andalusia in southern Spain is the biggest region for olive oil production in the world. 

At the time of speaking, Zanre said that extra virgin olive oil was trading at more than €5,000 per ton, the highest it has ever been. 

The price of liquid oil is not the only factor affecting prices, however, as costs have gone up elsewhere too. Zanre explains that Filippo Berio’s costs have gone up by around 35% already, and the company is going to have to put prices up. 

“This comes in a year where prices have already gone up quite considerably, partly because of raw material, partly because of all the associated costs that have gone up in terms of packaging and shipping and energy,” he explains. 

Olive oil production has been affected by drought and climate change for a long time

This is not the first time that droughts along the Mediterranean have caused olive oil prices to shoot up, as happened in the 2012/2013 and 2014/2015 seasons, all of which is increasingly pushing producers to adapt to survive. 

Johann Pepin runs an organic family farm, Les Pastras, in the south of France, which includes around 900 olive trees. 

“Olive trees are known for their hardiness and they are almost impossible to kill," he says. "Almost. Even the most robust tree can eventually perish without any water, which becomes more and more scarce every year.”

In fact, in 2017, the farm implemented an extensive irrigation system. “As droughts increasingly become the norm, olive farmers will have to invest or choose other crops, such as pistachios," says Pepin. "Spain is already replacing its groves of olive trees with pistachios and it is likely that France will follow, at least for those who cannot afford irrigation.”

Rafael Pico Lapuente, director of Asoliva, the Spanish olive oil and pomace olive oil exporters association, reiterates the importance of irrigation systems for olive groves. 

He explains that it is becoming increasingly common for olive trees to need irrigation systems, which means that drought does not affect all olive groves equally. Intensive and super-intensive olive groves with irrigation systems are not as affected by droughts, and it is traditional olive groves that do not have the support of external water sources that are likely to have a tougher future. 

“Droughts affect the olive trees in different ways," says Pepin. "A dry spring will cause the olive blooms to dry out, resulting in a very poor harvest in the fall. If the summer heat becomes too harsh on the tree, it will protect itself by dropping its cultivars. The surviving olives will have a low yield in oil, making the cost of transformation at the mills very expensive for the final product.”

He has no doubts that climate change is affecting production, and not just because of the droughts. In order to be able to label the olive oil as Provenzal, with its protected designation of origin, it must be made from a minimum of four different varieties of trees, he explains. “These trees flower at different times, so a rare storm might affect the production of one species of tree," adds Pepin. "Several storms throughout the flowering period, when the trees rely on wind to pollinate the fruit, can be a disaster to the entire crop if the timing is bad.”

As extreme weather events become increasingly common, growing food becomes more challenging, which leads to higher prices for consumers.

With high inflation already making things difficult for consumers, the timing of this drought (in terms of the subsequent impact on prices) for the olive oil industry could not be any worse.

“Olive oil will be the most expensive it has ever been in the UK at a time when consumers are probably going to have the biggest squeeze ever on their household budgets,” concludes Zanre.