W52 Olive & Olive Oil Update: Global Olive Oil Production Expected to Drop 6.3% YoY in the 2023/24 Season, and Brazil's 37% Price Surge

Brazil's Soaring Olive Oil Prices Amidst Global Turmoil

The International Olive Oil Council (IOC) projects a 6.3% year-on-year decline in global olive oil production for the 2023/24 campaign, estimating a total output of 2,407 million metric tons (mmt). The reduction is mainly influenced by decreased planned production in Türkiye and Syria. Despite this, the European Union (EU) anticipates a modest improvement, with Spain contributing to the positive shift through an expected increase of approximately 100 thousand metric tons (mt), overcoming drought challenges. However, Greece is projected to experience a decline in production.

For the second consecutive campaign, the IOC anticipates consumption surpassing production, leading to a decrease in the final stock. The projected demand for olive oil in 2023/24 is 2.69 million metric tons (mmt), down from the 2.83 mmt recorded in the 2022/23 campaign. This decline is attributed to reduced consumption in the EU, Türkiye, and Morocco, while the United States (US), the largest global consumer outside the EU, is expected to maintain stable consumption.

These projections highlight the intricate balance in the olive oil market, where regional production variations influence the global supply chain. Weather conditions, planned production changes, and consumption patterns contribute to the nuanced landscape of the industry. Stakeholders must closely monitor and analyze these dynamics for informed decision-making in the evolving market.

Brazil's Soaring Olive Oil Prices Amidst Global Turmoil

Brazilian consumers are reeling from a dramatic spike in olive oil prices, with inflation exceeding 37% year-on-year (YoY) in Dec-23. Brazil is grappling with a complex crisis that demands a thorough exploration of its roots and implications. On supermarket shelves has transformed into a landscape of exorbitant prices, frequently surpassing USD 8.1 to 10.1 per liter (L), with no immediate signs of respite. This alarming reality is reflected in the Dec-23 Broad National Consumer Price Index 15, a leading inflation indicator, which recorded a concerning 0.40% month-on-month (MoM) increase, with olive oil contributing significantly to the upward trend.

At the heart of the crisis is a convergence of global events. Europe, the main olive oil producer, faced a severe drought in 2023, reducing harvest yields. This, combined with disruptions from the conflict in Ukraine affecting fertilizer and fuel supplies, increased production costs in agriculture, including olive cultivation. Inflationary pressures compounded the impact of the supply shortage, particularly affecting import-dependent nations like Brazil. Brazil's near-complete reliance on foreign producers, with only 1% of national demand met domestically, leaves the country exceptionally vulnerable to international market fluctuations.

The 2024 outlook is uncertain due to the lingering impact of El Niño, associated with above-average temperatures. Ongoing threats of droughts may hinder European olive oil production, extending the supply bottleneck and delaying price normalization. However, a hopeful sign is the potential for an El Niño reversal in the second half of 2024, which could ease global supply pressures and bring relief to Brazilian consumers.