Olive Oil Shortage in Spain Begins to Ease

Increased Production in Spain

Spain, which is responsible for approximately 40% of the world's olive oil production, has been experiencing a multi-year olive oil shortage. This has driven prices to record highs, contributing to global food inflation. However, recent reports from Bloomberg suggest that olive oil production in Spain is set to increase, potentially easing the supply shortage. According to the Spanish Ministry of Agriculture, Fishing and Food, the country is expected to produce around 1.26 million tons of olive oil this year. This represents a 48% increase compared to 2023 and would bring Spain's olive oil production back to its long-term average.

Causes of the Price Surge

The price of olive oil, often referred to as "liquid gold," has soared due to two consecutive years of poor harvests around the Mediterranean. These poor harvests have been caused by adverse weather conditions, including widespread drought, which led to record prices of nearly 9,000 euros a ton at the beginning of 2024. Spot prices for Spanish Olive Oil Extra Virgin reached a peak of 8,835 euros a ton in late January. Since then, they have entered a bear market, falling to around 7,000 euros a ton by autumn.

Further Details

Bloomberg reports that signs of a better harvest have caused the commodity to decline by more than a fifth from highs above €9,000 a ton. However, consumers are unlikely to benefit from lower prices immediately, as supply contracts are typically negotiated months in advance. The Spanish government has also indicated that weather conditions in the coming weeks could still affect production, as the harvest has only just begun. The surge in olive oil prices has also impacted other food crops, including cocoa, oranges, and other soft commodities, as well as beef. Last Friday, the Food and Agriculture Organization of the United Nations' Food Price Index, which monitors the international prices of a basket of globally traded food, experienced its largest increase in 18 months in September. This resurgence in global food prices has sparked concerns that supermarket prices are set to rise once again.

Global Food Inflation

Readers have been kept abreast of the increasing risks of global food inflation. Sara Menker, founder and CEO of Gro Intelligence, warned in a Bloomberg interview about a year ago that the current global food crisis is 'much worse than 2008'. In the US, the only solution proposed by the Harris-Walz campaign to address rampant food inflation has been 'communist price controls'. It has been suggested that it might be time to abandon de-growth 'climate change' policies in order to reduce inflation.

Bottom Line

The easing of the olive oil shortage in Spain brings a glimmer of hope amidst the ongoing global food inflation crisis. However, the situation remains volatile and dependent on various factors, including weather conditions and global policies. What are your thoughts on this issue? Feel free to share this article with your friends and discuss. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.