Spain produces 50% of the olive oil for the world market and 73% of that comes from Andalusia in the south. Over the last 20 years, the demand for olive oil has increased by 60%, driven by the markets in China, the US, Canada and Australia. Britain lags well behind other countries with the average household only consuming 1 litre per year of the liquid gold.
Last year there was a bumper crop of 1.77 million tonnes in Spain. This year, predictions show that figure will be down by 40%. The reason is twofold; the trees are exhausted after last year’s record harvest and there has been too little rain this year for a decent crop.
Prices of oil will inevitably rise but therein lies a problem for the growers because supermarkets here sell olive oil as a loss leader and so will be reluctant to pay more per litre. When there is a glut of oil on the market, the prices drop sharply but when there is a shortage the prices only rise by a small amount. It is a no win situation for growers.
In a bid to capitalise on a shortage, some growers are hanging on to their supplies in the hope of selling at a higher price later in the year. In addition, speculators are betting on a price hike. Both of these factors are driving market values up now.
For those British who only buy the occasional bottle this is not an issue but here in Spain, where households buy oil in 5 litre bottles, it is akin to a price rise for bread in France.