Olive trees at Finca Fuensantilla of Green Gold Olive Oil Company in Beas del Segura, Spain, have suffered from record temperatures and lack of rainfall this year. (Alfredo Cáliz / Panos / Redux for CNN)
Manuel Heredia Halcón’s grandparents planted olive trees in their 1,200-acre forest in Andalusia, Spain, nearly a century ago.
These plants are famous for their ability to grow even in the driest of soils, but this year, scorching temperatures and a severe lack of rainfall have taken their toll.
“We are very concerned,” Halcón told CNN Business. “You can’t replace the olive tree with any other tree or product,” he added.
Like many farmers in Europe, Halcón fought with severe drought this summer – he estimates that the olive oil harvest from his farm, Cortijo de Suerte Alta, will drop by about 40% this year because of unusual weather conditions.
In July, the temperature break record up to 40 degrees Celsius (104.5 degrees Fahrenheit) in parts of France, Spain, Italy and Portugal. In early August, sweltering heat and a lack of rain pushed nearly two-thirds of the land in the European Union into arid state, according to the European Drought Observatory.
Olive oil producers have been hit hard. Kyle Holland, oilseeds and grains pricing analyst at Mintec, a commodity data firm, expects a “significant drop” of between 33% and 38% in the West’s olive oil harvest. Spain starts 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 paying more for olive oil. Retail prices across the European Union increased 14% in the year to July. But prices are expected to rise further in the coming months, manufacturers and buyers told CNN Business.
Holland told CNN Business: “The drought is so severe. It’s simply too dry. Some trees produce very little fruit, some trees don’t.
This is a warning to an industry that relies on the predictable life cycle of the olive tree. Growers are used to large swings in harvests over a 24-month period, but climate change has disrupted that centuries-old rhythm.
Fallen olives are seen on dry soil during a drought at Villa Filippo Berio in Vecchiano, Italy. (Noemi Cassanelli / CNN)
Paco Bujalance, factory owner of Cortijo de Suerte Alta, displays olives at the company’s grove in Albendín, Spain. (Alfredo Cáliz / Panos / Redux for CNN)
‘Can’t have fruit’
Olive oil production is all about timing. The trees begin to bud in March before flowers bloom in May. Olives grow during the summer months before being harvested in the fall.
Andalusia, the southernmost region of Spain, supplies about a third of the world’s olive oil. It is used to temperatures that regularly hit 40 degrees Celsius, but not in May, when the flowers begin to bloom.
“In that moment, we could have lost between 15% and 20% of the harvest,” he said.
Halcón is expected to sell oil this year for €4 ($3.97) per kilogram to its buyers, including importers in Asia and the Americas. That’s a 30% increase from last year.
The heat wave coincides with the third consecutive year of little rainfall. Water levels in the Guadalquivir River, which irrigate the surrounding olive groves, are extremely low. Halcón says he can only provide his plants with about half the usual amount of water this growing season.
“Next year will be even worse because the dams will be completely empty,” he said.
Juan Jímenez, CEO of Green Gold Olive Oil Company, a family business about 160 kilometers (100 miles) northeast, has had similar problems.
“[The issue] He told CNN Business.
“In the moment when the olive flower comes alive, and [if it is] If it’s hot, the flowers will burn on their own, so there can’t be any fruit,” he added.
Jímenez’s olive trees cover 740 acres of hilly and flat terrain. May’s soaring temperatures will likely reduce his crop by 35% to 60% compared with a normal year’s harvest if rain does not subside in the next few weeks.
If so, it would be “the worst harvest in the last 10 years,” said Jímenez.
Elsewhere in Southern Europe, drought also caused major headaches. Filippo Berio sells oil in 72 countries, and most gets its oil from suppliers in Italy, Spain and Greece.
It also produces its own oil from 25,000 trees in Italy. Walter Zanre, chief executive of the UK’s Filippo Berio division, described the Tuscan forest as “arid” this summer. At the end of July, one forest fire broke out very close to the company’s only plant – where all of the company’s oils are blended, refined and bottled – engulfing it in smoke and ash.
“We’ve had drought situations before, but I think in living memory this is the worst that anyone has ever seen,” Zanre told CNN Business.
It remains to be seen how bad the 2022 harvest is. The US Department of Agriculture last month forecast a 14% drop in global output, while Mintec predicted it could be similar to the expected 30% loss for Spain.
Producer benchmark prices for extra virgin Spanish olive oil from Andalusia hit their highest levels in more than five years at the end of August. And, over the past two years, they’ve increased by almost 80% – from 2, €19 ($2.18) per kilogram in August 2020 to €3.93 ($3.90) this month.
Mintec data shows prices spiked in early 2021 as buyers feared bad weather would reduce supply. They spiked again in late February after Russia’s invasion of Ukraine, when a terrifying drop in sunflower oil exports from the region prompted buyers to stock up on olive oil instead.
Since June, signs that the next harvest will be poor have boosted prices again.
So far, long-term contracts between suppliers and retailers have protected consumers from some of the worst price spikes. But shoppers can expect a significant increase over the next four months, as retailers renew their supply agreements, Holland said.
“Retailers will try not to pass on these costs as much as possible,” he said. According to Mintec data, even a 10% increase would send producer prices to their all-time high.
Yacine Amor, director of the Artisan Olive Oil Company, a UK wholesaler, told CNN Business that he expects the selling price for a half-liter (18 liquid ounce) bottle of his olive oil to increase by as much as 20%. next time. months. Amor’s customers are mainly supermarkets, delis and restaurants.
A tractor drives through an olive grove at Villa Filippo Berio in Italy. (Noemi Cassanelli / CNN)
Inside the room of the olive oil factory at Villa Filippo Berio. (Noemi Cassanelli / CNN)
The price of a bottle has skyrocketed in several major markets. In Europe, the world’s biggest consumer of olive oil, the strongest increases were seen in the Netherlands and Greece, where retail prices rose by more than a quarter in July compared with the same time last year. .
A similarly sized bottle of Filippo Berio extra virgin olive oil in the UK – the brand’s biggest market outside the US – is now a record £5 ($5.76) in select stores row, up from £3.75 ($4.32) at the start of the year. That’s a third more expensive.
Zanre’s biggest concern is how shopper behavior might change as prices inevitably rise.
“Without a doubt, we are facing one of the most difficult periods ever in the olive oil industry,” he said.
Costs are rising everywhere
Olive oil producers have weathered many storms in the past, but this year, a combination of extreme weather, supply chain bottlenecks and soar Electricity bill – caused by the war in Ukraine – caused an unprecedented squeeze.
Halcón says the cost of electricity needed to pump water for his plants has doubled, while his glass bottles are 40% more expensive.
The same goes for Zanre, “whatever you touch [the] supply chain “have raised prices. He believes that some costs, such as shipping fees, are unlikely to come down.
“The pallets that goods move have increased, the bottles have increased, the labels have increased, the caps have increased, the energy to run the factory has increased. Everything. And most of all, us. has the price of [the] oil will go up,” he said.
But crisis begets opportunity, Halcón said. The price of oilseed increased, including sunflower oilhas made olive oil more competitive.
“If a year ago, olive oil doubled [the] price, or even three times more expensive than some [alternatives]today we can be only 20%, 30% more expensive than seed oil,” he said.
Jímenez is also upbeat. Olive oil remains only a small part of the global edible oil market, he said, a market share he believes can only grow.
“But we need to be prepared to understand that maybe this [drought] will happen, not once in 20 years, but in a tenth, or a fifth, or a quarter. And we need to be prepared to do that if we want to survive in a competitive market,” he said.