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What will become of you, liquid gold?

Olive oil/ Prices

What will become of you, liquid gold?

September 22, 2023 By Sol Deli

Last year we ran into articles predicting the significant price increase of olive oil (which more or less came true), and this year it has continued: with news almost every week about the fact that after a brutally bad harvest in 2022, we can expect a hellishly bad harvest in 2023, which will bring with it an inevitable price rise and olive oil will be sold at a price worthy of its name: liquid gold.

What is the reason for the dramatic tone? Is our favourite food really in danger? Will olive oil become prohibitively expensive?

These are questions that have been on our minds, so before this year's olive harvest (that happens between October and January) we asked our producers what their harvest will be like and how they see the market for olive oil.

To help us answer these questions, we had the help of one of our favourite producers, Daniel Martins, who manages a family olive grove in northern Portugal and has an excellent insight into production and market trends.

First, let's look at how the olive oil market works: basically, like the market for any other product, if there is too much oil relative to demand, prices fall, if there is too little, prices rise. This part is simple. But here we are looking at a globalised market.

Now imagine that Portugal had a bad harvest and Spain had a terrible harvest. What happens? The price of olive oil in Spain goes up a lot, the Spanish start buying in Portugal (too), so prices go up there as well.

This is exactly what is happening now. In Spain, still the world's largest olive oil producer, production fell by 50% last year due to heat waves and extreme drought. The same is happening this year and a further drop in production is predicted. Italy is not much better off, with olive groves burning in Greece alongside drought-induced forest fires.

Such an unfortunate combination of events is very rare, especially in two consecutive years, so the rise in the price of olive oil has now spread to all countries.

In previous years, consumers had become accustomed to buying a bottle of extra virgin olive oil relatively cheaply. The farmer could produce high quality oil, the market would not pay him more and he would sell quietly with a shrug. He did not think this was fair, but the cooperative did not pay him fairly either. Some, the more thoughtful, were compensated in the form of subsidies and thought no more about it.

The same global market that has kept prices steady and low for so long is now raising them at a gallop.

This situation is not good for anybody, distribution margins are already tight and perhaps even shrinking, producers are making serious losses, prices for raw materials, packaging and logistics have risen significantly, and consumers are finding it increasingly painful to pay for products that have become much more expensive.

The good news is that not all parts of the Iberian Peninsula have been equally devastated by the weather, for example in Portugal the northern areas are much better than the central and southern parts of the country, so we can expect a relatively good harvest on the more sheltered farms. In the central part of Portugal, in the Alentejo, also known as the country's breadbasket, the situation is much worse, but still better than in neighbouring Spain, where brutal heat waves (often reported in the news) have taken a large part of the harvest.

Specific prices for 2023/24 will be known after the harvest (around the end of November), but in the meantime we advise olive oil lovers to buy from our still in stock producer oils: these are delivered at unchanged prices and directly from our domestic warehouse - while stocks last!