Olive oil price hikes imminent
The increases are thanks to major supply constraints and demand rising to all-time highs
live oil prices are set to rise over the coming months, despite an expected decent harvest in South Africa, which means consumers of the oil described by the Greek poet Homer as “liquid gold” will have to become accustomed to forking out more than R300 per litre at retail level.
With reports of another sharp price increase on the cards for mass-market olive oil, global production has dropped to the lowest level in more than a decade.
Spain, the world’s largest producer of both bulk and quality oils, has suffered three consecutive poor harvests because of drought and extreme heat, linked to climate change, which has hit other Mediterranean producers such as Italy and Greece equally hard.
The European Commission says olive oil prices have consistently increased in recent years, rising by 75% across the European Union since January 2021.
The outlook is not good for Spain: its State Meteorological Agency says there has been a massive increase in heatwaves in that country since 2015.
Home to 40% of the global crop, Spain has seen output drop by up to 50% of its usual 1.3 million tonne harvests. Prices have also nearly tripled in that country over the past four years.
Climate change
OCompounded by outbreaks of bug infestations in Italy and Australia, and a raft of reports of supply chain issues, food fraud and theft, production has dropped to its lowest level in more than 10 years.
The International Monetary Fund says prices are double what they were just two years ago, to nearly $10,000 per tonne.
The Guardian reports that Spanish shoppers who paid less than €5 (about R99) for a litre of high-quality
extra-virgin olive oil in 2020 are now seeing prices of about €14 (about R278). And next month, prices in the UK are expected to jump to more than £16 (about R370).
Theft
Olive oil has also become the most stolen product in supermarkets in Europe. In the UK, some retailers have already begun locking olive oil bottles behind security box gates to deter theft, and other stores are fitting the bottles with security tags. In Spain and Greece, criminal gangs are targeting the oil to resell, The Guardian reported.
Gangs have also used chainsaws to steal heavily laden branches – and even chop up entire trees – from groves, which is forcing farmers to patrol their groves at night.
In December last year, police in Spain and Italy arrested 11 people and seized more than 5,000 litres of adulterated olive oil after breaking up an international gang that allegedly sought to profit by passing off cheap oils as more expensive equivalents.
Fraud
Olive oil is at high risk of adulteration, most commonly by the addition of other vegetable oils such as canola and soybean, and poor-grade oils are diluted with extra-virgin olive oil (EVOO) to hike profits.
The situation in South Africa
Despite South Africa’s reputation for producing world-class olive oil, its production is limited to about a quarter of local requirements, so most olive oil is imported, subject to the volatile commodity market.
South Africa imports about seven million litres of olive oil each year, predominantly of Spanish origin, and from around the Mediterranean. The worldwide shortage of olive oil has a ripple effect.
A number of domestic issues are affecting the price competitiveness of locally produced oils, says Wendy Petersen, the CEO of the SA Olive Association.
Yields are down, olive oil producers are not investing and planting new trees, input costs have risen, state infrastructure is poor, energy supply is unreliable and weather conditions are changing.
“Among all these challenges, there are positive highlights that we must celebrate. Sa-produced EVOOS have seen an increase in winning awards on a global platform. We are excited and proud about this movement and the recognition that SA [receives], especially among global peers.”
Mardouw Olive Estate’s general manager, Philip King, says local production is down, which has caused retail prices to go up as much as 55% and bulk prices by 100%. “You will notice quite a number of producers ‘out of stock on retail shelves.”
The increased fuel price, above-inflationary minimum wage increases and fertiliser prices have added to high input costs, but although load shedding is an issue, most producers have backup supply, which also comes at a cost.
Morne Botes from leading oil producer Southern Oil (SOILL), which produces the African Gold and B-well ranges of olive oils, says with prices so high, it’s affecting consumer buying decisions. “What’s happening now is a significant number of consumers who were on the fence between buying extra virgin and blended oil are now switching to a blend.”
SOILL’S main shareholder is a co-op, which is heavily invested in the farming community, which is why it created the African Gold brand, to give smaller farmers the opportunity to focus on farming and growing.
Natural cycles
Creation wines winemaker Gerhard Smith explains that olive trees have a natural cycle of alternating high- and low-production years, known as an “on-off” cycle. During an on-year, olive trees bear heavily, resulting in increased olive oil production, but in off-years, supply is curtailed.
“No one knows how to get an average crop. It’s a mystery why the trees do this. This year, we were expecting a big crop, but with the big storm and high winds that we had in September, we lost flowers, so our harvest is smaller than last year.”
Creation produces small batches of olive oil, which it sells through its tasting room.
Water is not the problem, as Creation has enough to irrigate, Smith says, and its trees are healthy, but the stormy weather limited pollination. “These factors have quite a big influence on the price. Some of the bigger producers in our area [the Hemel-en-aarde Valley] didn’t even start up their press because their crop was too small.”
Olive oil production is labour-intensive, olives are expensive to press and farmers operate on thin margins. Rob Still of De Rustica, whose Estate Collection Coratina was recognised as “best in class” at the Evooleum Awards in Spain for 2023, says producers could achieve much better prices abroad, but they need to market themselves internationally, while looking after their long-term domestic retail consumers.
“The bottom line is South Africa produces in the top 5% of the world’s quality but it gets paid in the bottom 5% of the world price range, because of bad marketing.”