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The drought brings new pressures to the rise in the price of oil until the end of the year.

Date: May 19, 2024 Time: 14:49:37

The persistence of the drought and the high temperatures have affected the olive tree and lead to a panorama of additional tensions in the price of olive oil between now and the end of the year. This market is highly conditioned by the low production of the 2022-2023 campaign ionated with the drop in consumption. This is the reflection made by this newspaper Carlos Jiménez, director of Operations of Aceites del Sur (Acesur). The group, the main producer and packer of olive oil in Spain, is present in 110 countries and owns brands such as La Española, Coosur or Guillén, among others.

Official statistics add figures to its diagnosis of the current situation: while the INE certifies that liquid gold has become 38.8% more expensive in the last year, the Ministry of Agriculture notes that the consumption of this basic product in the diet Mediterranean has fallen well below, 13.8% (the latest data available is from April). All in all, it has been the second item in the shopping basket that has seen its consumption decrease the most, behind sugar, in a context in which households have had to face widespread and historic increases in the price of food.

Producers are not having an easy time either, since the high temperatures and drought have added to the rise in fertilizers, fuel and energy, as well as the increase in financing costs with the rise in interest rates for part of the European Central Bank. The situation is “extremely complex”, in the opinion of Cristóbal Cano, general secretary of UPA Andalucía. The employers of small farmers remind ‘La información’ that there is no precedent in which the sector has chained two “very bad” harvests. The olive grove is a neighboring sector, in which a medium-low production campaign is usually interspersed with a high-yield one.

His calculations suggest that the current campaign (2022-2023) will be around 660,000 tons and the perspective is that the figures for 2023-2024 are very similar. Spain, the world’s leading producer of olive oil, puts around 1.3 or 1.5 million tons on the market in an average campaign. Farmers fear staying below this amount by adding the production of this and the next campaign. This can generate more tension at the international level, since the situation is very similar in other large producers such as Italy, Greece, Portugal or Turkey. The latter has announced the most drastic measures, since the Government of Ankara has prohibited exports until October 31 to satisfy its internal needs.

The problem with the shortage of olive oil is that the price of its possible substitute (sunflower oil) is rising even more and that “we depend on Ukrainian production”, recalls the economist Javier Santacruz, while other products are it is being able to solve the internal shortage with more imports. This consolidates price tensions because it forces a high availability premium to be paid for this type of product, with which the country competes with a large number of applicants in the face of a scarcer supply. “September and October can be dramatic months in terms of olive oil prices. There will be no shortages, but there will be additional tensions,” he warns.

Prices will not drop below 7 or 8 euros per liter this campaign

Carlos Jiménez, from Acesur, expects future prices to be at high levels, never below 7 or 8 euros per liter on the shelves, so a drop is only foreseeable if the rains in September and October are abundant and the 2023-24 harvest improves the figures for the 2022-2023 campaign. Cristóbal Cano agrees that the prospects are bad in the short and medium term, since, although autumn is generous in rain and temperatures are good, the 2023-2024 campaign is, in his opinion, a “death wound”.

The reason is that the heat wave hit the tree in May, in the middle of the flowering stage, and affected above all the Picual olive variety, which is the main one in Spain (it is produced mainly in Jaén and in a good part of From Cordoba). More propitious weather in the coming months would serve to lay the foundations for a normal campaign for next year and the following. The field works the miracle between the end of August and the end of October or the beginning of November. It is when lipogenesis occurs, the chemical process by which oil is formed within the pulp of the olive, and to carry it out the tree needs enough water. Hence the importance of rain in the coming months.

As for prices, and although he prefers not to speculate about it, Cano acknowledges that the most reasonable forecast is that the tension in the markets will continue. When the harvest season arrives, around 10 million daily depend on the olive grove in Andalusia. This next campaign, employment will suffer from the drop in production. It is an “economic and social disaster” for many towns, he laments. Among them are those grouped under the umbrella of Ademo, the Spanish Association of Municipalities of the Olive Tree, to which more than 130 towns and councils whose economy is basically based on this crop belong.

More than 300,000 families depend on the olive grove in Andalusia

Its director, José María Penco, explains how when the price of oil is so high, one tends to think that the producers are charging a lot and doing business. However, if there is hardly any production -as is the case-, the consequences for the countryside are “catastrophic” no matter how high the price is. “We prefer medium harvests at decent prices” two euros per liter. In Andalusia alone, more than 300,000 families live from the olive grove.

Spain exports approximately two out of every three liters of the olive oil it produces. It sells around 1 million tons abroad and consumes 500,000, which is why, explains José María Penco, the price continues to increase. If there are few stocks, this has to be raised so that there is no shortage. From his point of view, Spain already has the potential to produce 2 million tons of oil. “What is happening and the response that the consumer has given has to serve so that when the weather allows it and production recovers, we do not return to the prices of hell, but rather that the farmers obtain a decent income and the consumer, to the time, pay a reasonable price for the oil”, ditch.

* This website provides news content gathered from various internet sources. It is crucial to understand that we are not responsible for the accuracy, completeness, or reliability of the information presented Read More

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.

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