W1 Olive and Olive Oil Update: 79% YoY Price Surge in Spanish Olive Oil, Consumer Shifts, and Strategic Trends for 2024
Extra Virgin Olive Oil Price in Spain Surge 79% YoY
In Spain, the economic landscape has been significantly influenced by inflation, with key sectors, especially olive oil, experiencing noteworthy shifts in consumer dynamics. In 2023, the average annual household shopping basket saw a substantial USD 877 year-on-year (YoY) increase, reflecting the impact of rising prices on everyday expenses. Within the olive oil sector, extra virgin olive oil faced a considerable 79% YoY price hike, contributing to a 41% YoY decline in demand.
Virgin olive oil witnessed a 69% YoY price increase, leading to a notable drop in consumer demand. The sector's response has been marked by a shift towards alternatives, with a significant 16% MoM surge in Dec-23 in demand for sunflower oil, accompanied by a 36% YoY price decrease compared to Nov-22. Intriguingly, despite an 18% YoY price hike, olive pomace oil experienced a robust 70% MoM increase in demand in Dec-23, indicating consumer reluctance to forego this iconic oil category completely. These trends underscore the evolving consumer preferences amid changing economic conditions. Despite an overall positive economic growth of slightly more than 1% in Nov-23, the food sector experienced a slowdown in sales growth, with a 7% YoY rise in average prices. The intricate interplay of rising prices, changing consumer preferences, and economic challenges presents a nuanced view of the Spanish consumer goods market, emphasizing the need for adaptability and resilience in navigating these evolving conditions.
As of early Dec-23, the latest data review from the Spanish Food Information and Control Agency (AICA) indicates an updated surge in olive oil imports, reflecting a robust performance in Nov-23. The revised figures reveal that Nov-23 imports amounted to 22 thousand metric tons (mt), surpassing initial estimates of 12 thousand mt. This translates to a total output volume of 89.76 thousand mt, compared to the earlier estimate of 79.12 thousand mt at the end of Nov-23.
Strategic Moves into 2024 - Spotlight on Spain, Italy, and Portugal
Concluding W1, the European olive oil market maintained a trend reminiscent of 2023's close, marked by a dearth of offers and transactions occurring at prices surpassing W52's levels. This trend, impacting both Spanish and Portuguese industrialists and packagers, where olive production shares a similar pattern, with no sales despite packagers' interest. Olive production shares a similar pattern, with no sales despite packagers' interest. This stance intensifies market dynamics and may pose a dual challenge as anticipated significant rains could further complicate the situation in the coming weeks.
The strategic decision to withhold sales for potential price increases may have ramifications, especially as market stability and source prices come into question, pending the final olive oil production confirmation expected around the end of Jan-24. If other countries like Portugal or Italy react nervously to abundant rains, initiating sales at prices below the current line, the market's heightened sensitivity could trigger an uncontrollable downward cascade. As the new year begins, olive oil prices at origin are already on the rise. The price of lampante base 1 olive oil as of January 5, 2024 experienced a 4.16% week-on-week (WoW) increase, reaching USD 8,947/mt. Additionally, extra virgin olive oil closed the first week of January at around USD 9,865/mt, reflecting a 0.94% WoW price hike, with reports of offers at USD 10,193/mt based on extra virgin olive oil quality and characteristics.