MADRID, Spain (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 ($4,400 Cdn) a tonne, 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.
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Traders believe that when prices reach three to five times sunflower oil prices, consumers start replacing olive oil with the cheaper substitute. But one broker said 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, olive oil producers were trimming their estimates after serious frosts destroyed some trees.
Spanish Co-operatives Federation CCAE reckons about four percent of all Spain’s olive trees lost this year’s harvest because of the frosts. Some of those trees will have to be replanted, and so will not produce for about five years, CCAE’s olive oil expert Javier Lara said.
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 tonnes, which was weak beside the 1.4 million tonne crop of the previous year.
“If it doesn’t rain the harvest will be a maximum of 700,000 tonnes, if it rains it could reach 800,000 to 850,000,” one broker in the olive-growing region of Andalusia said.
Producers said it is too early to give precise forecasts but CCAE’s Lara said it was expected to come in at about 700,000 tonnes, 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 ($4,160) a tonne for September delivery.
Bottlers had 166,000 tonnes stockpiled in May and traders say demand remains strong as whenever they sell, they top up their stores.
