1. Weekly News

Global

Olive Oil Prices Expected to Decline as Global Production Recovers

Over the past three years, global olive oil prices have surged by 77%, decreasing the number of one-liter bottles and prompting a shift to smaller containers to make pricing more affordable for consumers. The sharp price increase is primarily due to reduced production in Spain, Greece, and Italy, driven by two consecutive years of drought alongside a steady demand for the product. However, experts are optimistic about the 2024/25 production's return to average global production levels, which is expected to drive prices down. In Spain, prices have already begun to drop due to the government's decision to remove the value-added tax (VAT) on olive oil. This declining trend is expected to extend to France and other countries, although trade negotiations between manufacturers and supermarkets may present challenges in implementing these reductions uniformly.

Italy

Italy Faces Olive Oil Production Decline Amidst Severe Weather Challenges

During the 2023/24 season, Italy produced 328 thousand metric tons (mt) of olive oil, surpassing the five-year average of 307 thousand mt. The country also became the world's largest consumer of olive oil, with consumption reaching 410 thousand mt. Despite this increase in last season's production, Italy's olive industry faces severe challenges in the 2024/25 season due to abnormal heat and prolonged drought, which are expected to strain output significantly. Italian Olive Growers' Association Italia Olivicola predicts the country's olive oil production will fall by at least 23% year-on-year (YoY) in the 2024/25 season. In addition, the farmers' association Coldiretti Puglia warns that olive oil production in the Puglia region could drop by more than 50% YoY, highlighting the severe impact of climate change on the country's olive production.

Spain

Spanish Olive Oil Market Faces Price Decline

Traditionally known for its price stability, the Spanish olive oil market is expected to experience a price decline starting mid-Sep-24. The start of the early olive harvest in Spain and oil mills reopening in Portugal and Tunisia drive this anticipated drop. Farmers are carefully timing their olive deliveries to avoid the expected price cuts and capitalize on higher prices for early harvest olives. However, oil mills and cooperatives holding unsold stocks face a difficult choice: sell quickly to avoid the drop in prices or risk selling older oils at a lower value later on. This dynamic highlights the tension between maximizing profits and managing inventory in the current market climate.

Russia

Russia’s Olive Oil Sales Fell 22.8% YoY in H1-2024

In the first half of 2024 (H1-2024), Russia's olive oil sales decreased by 22.8% YoY. The share of olive oil in the vegetable oil market fell from 2.1% in H1-2023 to 1.6% in H1-2024. The sales decline was first observed in 2023 and has continued into 2024 due to the significant price increase attributed to high production costs and poor harvests in major producers like Italy and Spain. Despite the decrease in sales volume, the sales revenue increased by 13.7% YoY during this period, making it 12 times more expensive than sunflower oil.

Pakistan

Pakistan Promotes Domestic Olive Oil Production

The Pakistani government plans to plant 1 million olive trees by Sep-24 to increase local olive oil production. The country's olive tree count reached 5.6 million in 2024, thanks to plantation efforts in previous years. In Pakistan, around 800 thousand hectares (ha) of land are dedicated to olive cultivation, but only 250 thousand ha are considered reasonably productive due to the presence of other crops. Local producers will receive subsidies to purchase storage tanks to ensure quality and compliance with international standards. However, the primary focus remains on increasing domestic consumption, which currently stands at an average of 4.5 thousand mt annually, mostly from imports.

Morocco

Crisis in Morocco's Olive Oil Sector

Morocco's olive oil sector faces crises due to climate change and increased production costs. Prolonged droughts, insufficient cold hours, and heat waves have decimated the country’s olive harvests, leading to a price surge and threatening the sustainability of olive farms. The high costs of agricultural inputs, especially irrigation, have further strained the sector. The president of the Moroccan Interprofessional Olive Federation (INTERPROLIVE) calls for immediate measures such as increased water releases and deeper drilling, government aid, and the exploration of water desalination. While importing olive oil is considered a short-term solution to lower prices, INTERPROLIVE’s president emphasizes the importance of technological innovation and government support for the sector's survival.

2. Weekly Pricing

Weekly Olive Oil Pricing Important Exporters (USD/kg)

Yearly Change in Olive Oil Pricing Important Exporters (W35 2023 to W35 2024)

Spain

In W35, Spain’s olive oil prices decreased by 0.5% week-on-week (WoW) to USD 8.01 per kilogram (kg), reflecting a 3.76% month-on-month (MoM) rise and a 9.18% YoY drop. Spain’s olive oil prices are expected to continue declining due to global production recovery and the government’s decision to remove VAT on olive oil. Since 2023, Spain’s olive oil consumption has declined due to high prices, leading customers to switch to more affordable alternatives, such as sunflower and soybean oil. With the anticipated price decline, consumption may rebound due to olive oil’s health benefits.

Italy

Italy's olive oil price decreased by 0.77% WoW to USD 10.27/kg in W35, compared to USD 10.35/kg in W34. However, the MoM and YoY prices increased by 0.98% and 3.63%, respectively, reflecting long-term supply constraints due to production challenges in the previous two seasons. Despite anticipated global production recovery, Italy's olive production still faces challenges from drought and heat waves, especially in the southern regions, where the production could decrease by more than 50%. Farmers are implementing emergency irrigation to overcome this challenge. However, production costs will increase due to high fuel prices.

Tunisia

In W35, Tunisia’s olive oil price reached 8.36/kg, marking a 5.16% MoM rise and a 6.90% YoY drop. Despite climate challenges, Tunisia’s olive oil protection is expected to increase 11% YoY in the 2023/24 season. The olive oil market is closely monitoring the low reserves in Spain and the severe drought in Italy. The European Commission (EC) anticipates a 12% YoY decrease in EU olive oil stocks by the end of the 2023/2024 campaign, which may help to stabilize the prices in Tunisia.

3.Actionable Recommendations

Increase Market Competitiveness with Pricing Strategies

Olive oil producers and retailers in global markets should closely monitor production forecasts and adjust pricing strategies to remain competitive. As global production is expected to recover in the 2024/25 season, companies should consider introducing promotional discounts and bundled offers to attract price-sensitive consumers, especially in countries like France, where trade negotiations may slow down price reductions. Additionally, producers can explore ways to streamline production costs by investing in sustainable agricultural practices to maintain profitability as prices normalize.

Implement Drought-Resilient Farming Practices

Italian olive growers should adopt drought-resilient farming methods to mitigate the effects of extreme weather conditions. Investments in advanced irrigation systems and soil moisture retention techniques are essential to cope with reduced water availability. Collaborating with agricultural research institutions for drought-resistant olive varieties can strengthen long-term production resilience. Government subsidies and public-private partnerships should be expanded to support small-scale farmers implementing these measures. Promoting emergency irrigation could help stabilize production, but long-term solutions are necessary to prevent future yield declines.

Leverage Tax Relief and Market Promotion for Consumption Recovery

Spain’s olive oil industry should leverage the recent VAT removal on olive oil to revitalize consumer demand, particularly among those who have shifted to cheaper alternatives. A national campaign highlighting the health benefits of olive oil, coupled with targeted discounts, can encourage consumers to switch back to olive oil as prices decline. Producers and distributors should also work with retailers to ensure a smooth transition in pricing, minimizing supply chain disruptions. Expanding exports to emerging markets in Asia and Latin America could also help compensate for domestic market challenges.

Sources: Tridge, UkrAgroConsult, Bfmtv, OliMerca, Rosng, Agrimaroc