Drought and frost in Spain reduce olive oil production by 30 percent, send prices sky-high
MADRID (Reuters) – A scorching drought in Spain has sent olive oil prices soaring as farmers in the world’s top producer estimate this year’s harvest could fall almost 30 percent. Extra virgin olive oil is being quoted at 3,000 euros ($3,643) a ton, some 20 percent above prices of a year ago, as the combined effects of frost and now drought ravage the crop. «Consumers won’t pay those prices… Everything has a limit,» said Oscar Lopez, market administrator of an olive oil futures exchange set up last year. Traders reckon that when prices reach three to five times sunflower oil prices, consumers start replacing olive oil with the cheaper substitute. But one broker said yesterday that was not happening this year. «We’re not seeing the switch into sunflower oil. (The olive oil) market is very strong worldwide.» The industry estimates people consume more olive oil each year. Even before the drought started, olive oil producers were trimming their estimates after serious frosts destroyed some trees. Spain has had below-average rainfall since September, and olive farmers are hoping for rain before the harvest starts in November. But even if the weather changes dramatically, farmers and traders do not expect the harvest to measure up to last year’s 981,000 tons – which in itself was weak beside the 1.4-million-ton crop of the previous year. «If it doesn’t rain the harvest will be a maximum of 700,000 tons, if it rains it could reach 800,000 to 850,000,» one broker in the olive-growing region of Andalusia said. Producers say it is too early to give precise forecasts but a cooperative official said it was expected to come in at about 700,000 tons, or possibly less. Benchmark lampante – the oil squeezed from the fruit after the virgin pressings which is then refined and mixed with a dash of quality oil to make a cheaper product – was quoted at 2,830 euros a ton for September delivery. Bottlers had 166,000 tons stockpiled in May and traders say demand remains strong as whenever they sell, they top up their stores. Spain consumes about 600,000 tons of olive oil and exports the rest, mainly to Italy. Italy is the world’s No. 2 producer, followed by Greece.
