Prices on slippery slope as olive oil output to rise

After three years of elevated prices for the staple of Mediterranean cooking, olive oil lovers may finally get a break on their grocery bills.

Deoleo, the world’s largest olive oil supplier, expects rising global output in the 2017-18 season will cut prices for consumers. That may help sales at the company, according to Chief Executive Pierluigi Tosato, who is completing a financial restructuring.

Bigger harvests of the fruit across much of the Mediterranean region will lift oil output by an estimated 12 percent, even as top producer Spain deals with a third year of drought, Tosato said in an interview.

“That will push oil prices downwards, giving new breath to the market,” he said in an interview.

In Jaen, a city in southern Spain that’s a trading hub for the oil used in salads and cooking, prices for the finest extra-virgin quality have held above $3.50 a kilogram or 35 ounces, for most of the past three years, after climbing from less than $2.36 in 2014, according to prices tracked by the European Commission.

Higher prices have pushed homemakers and restaurants to seek cheaper alternatives such as sunflower-seed oil, which trades at about 80 cents for a kilogram in Rotterdam.

“Many consumers in mature markets such as Spain and Italy have started buying cheaper seed oil. Once they shift, it’s really unlikely they’ll go back” at current prices, Tosato said.

Spain’s annual olive oil consumption fell by about 99,208 tons in the past five years, while sunflower-seed oil rose by 154,324 tons, according to Vito Martielli, a grains and oil seeds analyst at Rabobank in the Netherlands.

Italians now use around 176,370 tons less olive oil than in 2011, while sunflower-seed oil rose by about 220,462 tons, he said.

“If olive oil is not on the market, consumers have to find alternatives,” Martielli said. “We have some substitution in effect, and the oil that’s been winning, by far, is sunflower.”

Revived demand would help Madrid-based Deoleo. The producer of the Carapelli and Bertolli brands is forecasting a return to growth as it completes a restructuring.

Its shares have dropped 24 percent this year, the worst performance on the 26-member BI Europe Packaged Food Valuation Peer Group index. Its market value is about one-tenth the $2.4 billion it had in 2007.