Olive trees at Finca Fuensantilla of the Green Gold Olive Oil Company in Pace del Segura, Spain, have suffered record temperatures and a lack of rainfall this year. (Alfredo Cáliz / Panos / Redux for CNN)
Manuel Heredia Halcón’s grandparents planted olive trees in his 1,200-acre orchard in Andalusia, Spain, nearly a century ago.
The trees are famous for their ability to thrive in even the driest soils, but this year, scorching temperatures and extreme lack of rainfall have taken a heavy toll.
“We are very concerned,” Halcon told CNN Business. “You cannot substitute the olive tree for any other tree or product,” he added.
Like many European farmers, Halcon has battled a severe drought this summer – and he estimates that the olive oil crop from his farm, Cortijo de Suerte Alta, will be down about 40% this year due to unusual weather conditions.
In July, temperatures broke records as high as 40°C (104.5°F) across parts of France, Spain, Italy and Portugal. By early August, extreme heat and lack of rain had pushed nearly two-thirds of the land in the European Union into drought conditions, according to the European Drought Observatory.
Olive oil producers have been hit hard. Kyle Holland, oilseed and grain price analyst at Mintec, a commodity data company, expects a “significant drop” of 33% to 38% in the Spanish olive oil harvest starting in October.
Spain is the world’s largest producer of olive oil, accounting for more than two-fifths of global supply last year, according to the International Olive Council. Greece, Italy and Portugal are also major producers.
Consumers are already paying more for olive oil. Retail prices across the EU rose 14% in the year to July. But producers and buyers told CNN Business that prices are set to rise further in the coming months.
“The drought is very severe. It is simply too dry. Some trees produce very little fruit, and some trees do not produce fruit at all. This only happens when soil moisture levels are very low,” Holland told CNN Business.
It’s a warning shot for an industry that relies on the predictable life cycle of olive trees. Farmers are accustomed to large fluctuations in the harvest over a 24-month period, but climate change is already disturbing this centuries-old rhythm.
Fallen olives are seen in dry soil during a drought at Villa Filippo Berrio in Vecciano, Italy. (Noemi Casanelli/CNN)
Paco Bugalans, president of the Cortijo de Suerte Alta Mill, displays olives in the company’s orchard in Albinden, Spain. (Alfredo Cáliz / Panos / Redux for CNN)
Impossible to eat fruit
Olive oil production depends on timing. The trees begin to bud in March before the flowers open in May. Olives grow during the summer months before harvesting in the fall.
Andalusia, the southernmost point of Spain, provides about a third of the world’s olive oil. It is used for temperatures up to 40 ° C regularly, but not in May, when the flowers begin to bloom.
“At that moment we may have lost 15% to 20% of the harvest,” he said.
Halcón expects to sell oil this year at 4 euros ($3.97) per kilogram to buyers, including those in Asia and America. This is a 30% increase over last year.
The heat wave coincided with a third consecutive year of poor rainfall. Water levels in the Guadalquivir River, which helps irrigate the surrounding olive groves, are very low. Halcon said he could only give his trees about half the usual amount of water this growing season.
“Next year will be worse because the dams will be completely empty,” he said.
Juan Jimenez, CEO of Green Gold Olive Oil Company, a family business located about 160 kilometers (100 mi) to the northeast, faces similar problems.
“[The issue] It’s not just about how hot it is, but when it’s hot.”
“The moment the olive flower lives, and [if it is] The flower lane itself is burning so it is impossible to get fruits.”
Jímenez’s olive trees cover 740 acres of mountainous and flat terrain. High temperatures in May are likely to reduce his crop by 35% to 60% of a normal year’s crop if the rains do not fall over the next few weeks.
If so, it would be “the worst harvest in the past 10 years,” Jimenez said.
Elsewhere in southern Europe, drought conditions have also caused severe headaches. Filippo Berio sells oil in 72 countries, and exports most of it from suppliers in Italy, Spain and Greece.
It also produces its own oil from 25,000 trees in Italy. Walter Zaner, managing director of the UK division of Filippo Berrio, described the Tuscan orchard as “dry” this summer. In late July, a massive fire broke out near the company’s sole plant – where all its oils are mixed, refined, and packaged – engulfed in smoke and ash.
“We’ve been through droughts, but I think this is the worst anyone has seen in living memory,” Zannery told CNN Business.
It remains to be seen how bad the 2022 harvest will be. The US Department of Agriculture last month forecast a 14% drop in global production, while Mintec expects it could be similar to the 30% surplus loss projected for Spain.
Standard producer prices for Spanish extra virgin olive oil from Andalusia reached their highest level in more than five years at the end of August. And in the past two years, it has risen by nearly 80% – from €2.19 ($2.18) per kilogram in August 2020 to €3.93 ($3.90) this month.
Prices rose in early 2021 as buyers were concerned that bad weather could hamper supply, according to Mintech data. It spiked again in late February after Russia’s invasion of Ukraine, when a frightening drop in sunflower oil exports from the region led buyers to stock up on olive oil as an alternative.
Since June, signs that the upcoming harvest will be bad have sent prices up again.
So far, lengthy contracts between suppliers and retailers have shielded consumers from some of the worst price increases. But Holland said shoppers can expect a significant spike in the next four months, when retailers renew their supply agreements.
“Retailers will try not to pass on as much of these costs as possible,” he said, adding that producer prices could rise as much as 15% above already inflated August levels. Even a 10 percent increase would put producer prices at an all-time high, according to Mintech data.
Yassin Amor, director of Artisan Olive Oil Company, a UK wholesaler, told CNN Business that he expects the shelf price of a pint (18 fluid ounce) bottle of olive oil to rise by as much as 20% over the next day. few months. Inter’s clients are mostly supermarkets, takeaways and restaurants.
A tractor runs through an olive grove in Villa Filippo Berrio, Italy. (Noemi Casanelli/CNN)
Inside the olive oil mill room of Villa Filippo Berio. (Noemi Casanelli/CNN)
The price of the bottle has already increased in some major markets. In Europe, the world’s largest consumer of olive oil, the biggest increases were recorded in the Netherlands and Greece, where retail prices jumped by more than a quarter in July compared to the same period a year earlier.
A bottle of Filippo Berio extra virgin olive oil in the UK – the brand’s largest market outside the US – now costs £5 ($5.76) in some stores, up from £3.75 ($4.32) at the start of the year. This is the third most expensive.
Zanri’s biggest concern is how shoppers’ behavior could change as prices inevitably rise.
“Without a doubt, we are facing one of the most difficult periods in the olive oil industry ever,” he said.
The cost is going up everywhere
Olive oil producers have faced many storms in the past, but this year, a combination of extreme weather, supply chain bottlenecks and rising energy costs — fueled by the war in Ukraine — have caused unprecedented stress.
Halcon said the cost of electricity needed to pump water to his trees has doubled, while his glass bottles are 40% more expensive.
Also for Zanre, “Anything you touch [the] supply chain” in prices. He believes that some costs, such as shipping fees, are unlikely to come down at all.
“The pallet rose, the bottles rose, the labels rose, the caps rose, the power to run the plant increased. Everything. And then, moreover, at a price [the] Oil is rising.”
But Halkon said the crisis is generating opportunity. Higher prices for seed oils, including sunflower oil, have made olive oil more competitive.
“If a year ago, olive oil was twice as much [the] The price, or even three times more expensive than some [alternatives]Today we are probably only 20% and 30% more expensive than seed oils.”
Jimenez is also optimistic. He said olive oil still represents only a small part of the global edible oil market, a portion he is convinced it can only grow.
“But we have to be ready to understand that maybe this [drought] It will happen, not once every 20 years, but one in ten, or one in five, or one in four. And we have to be prepared to do that if we want to survive in a competitive market.”