Spanish olive oil prices rose by 54.6% year-on-year in December 2023, fuelled by drought-impacted harvests and a drop in production, marking a cumulative 165.5% increase in price in three years.
Spain, the world's top olive oil producer and a runner-up in per capita consumption, is facing major production challenges.
According to data from the country's Ministry of Agriculture, successive years of drought have crippled harvests, with the ongoing 2023/2024 campaign projected to yield just 765,300 tonnes.
While this is a 15% improvement from the previous year, it still falls 34% short of the average for the past four years.
The 2022/2023 campaign saw the smallest olive oil harvest in two decades, falling under 700,000 tonnes.
Olive Oil Reserves
Olive oil reserves are also dwindling, starting the current campaign 43% lower than last year and 52% below the average. Spanish farmers dedicated to olive groves paint a grim picture, calling the current situation unprecedented and the two consecutive years of historically low production 'dramatic'.
As prices reached record highs, Spanish olive oil consumption saw a significant 20% decline between November 2022 and November 2023.
Government Measures
Recognising the hardship, the Spanish government has temporarily reduced VAT on olive oil to 5%, and even pledged to drop it completely in the coming months.
While the immediate cause of the price surge is undoubtedly the reduced supply, other factors like inflation and global market dynamics also play a role. The future remains uncertain, as the 2023/2024 season is not yet guaranteed to bring relief.
Spain is the world leader in olive and olive oil production. Olive oil production in Spain represents 70% of the EU’s production and 45% of the total global production.
Olive groves in Spain cover 2.75 million hectares, with 80% of production concentrated in Andalusia, in the south of the country.
