What’s happened in Europe?

Global olive oil supply has dwindled after the world’s four largest producing countries – Spain, Italy, Portugal and Tunisia – have had olive crops impacted five times in the past decade. Spain alone – the world’s biggest olive oil producing country – had a 48 per cent reduction in its 2023 harvest year amid a drought.

“For the second time in a row, Spain is expected to harvest less than one million metric tons. In the last weeks, heavy rains and thunderstorms have also impacted Apulia, the most important olive oil production region in Italy, the second-largest olive oil producing country worldwide, causing damages to the upcoming harvest,” wrote Vito Martielli, Rabobank senior analyst – grains and oilseeds, in an October report.

As a result, olive oil prices have been steadily climbing for more than a year, reaching a record high of $US10,281.37 ($15,762.13) a tonne in January this year.

“In the medium term, climate volatility is a key concern that will likely continue to impact supply in key production regions and result in ongoing price volatility.”

Meanwhile, global demand for olive oil – seen as a healthy oil for its scientifically proven health benefits such as reducing cholesterol, inflammation, and cancer and heart disease – has steadily increased. At around 55 million litres a year, or 2.1 litres per person, Australia is the world’s biggest consumer of olive oil outside the Mediterranean.

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But olive oil is also joining a growing list of essential food staples and soft commodities that are becoming more expensive thanks to the unpredictability of climate change. Cocoa prices have had a vertical ascent since the beginning of the year as West Africa, which produces most of the world’s cocoa, experiences heavier rainfall that has caused disease in cocoa trees. Coffee prices are also increasing after Brazil suffered a climate crisis that wiped out harvests of coffee trees that were frozen to death.

‘We’ve been lucky’

Relative to the rest of the world, Australians are not bearing the worst of Europe’s supply shocks. While Australians are paying more for olive oil at the supermarket, Europeans have seen prices double. In Spain, it’s become the most shoplifted item.

“The imported oil is actually now more expensive than the locally produced. It was the other way around,” said Australian Olive Association chief executive Michael Southan. Roughly half the olive oil Australians consume is grown locally. “We’ve been lucky because we have we do have our own industry.”

ANZ executive director of agribusiness industry insights Michael Whitehead has already observed some changes to consumer behaviour, with some of his colleagues reportedly switching to canola, macadamia or avocado oil for cooking or in their salads.

“Already people are going to the oil section, they’ve got cost of living on their mind, arguably doing research on their phones, and choosing cheaper alternatives,” said Whitehead.

Australians will also feel higher olive oil prices flow through in overall inflation. For hospitality operators, it means yet another rising business cost – on top of mounting rent, energy, wage and ingredient bills – they will either need to absorb or pass onto consumers.

“[Olive oil] is such a central part of the way they run and everything they cook. So will they be looking at alternatives? Possibly. Will they be reducing the usage? They’d have to be looking at that. Will they be factoring it into an increase in their prices? Possibly,” said Whitehead. “A price rise like that can’t be ignored.”

Bright shoots

Greater demand for Australian olive oil could spell good news for the local production industry, according to Southan, who said the demand had been cause for optimism for growers – as well as those considering becoming one.

“We’re seeing a bit of a generational change in the industry at the moment, where a lot of the growers who planted groves 25, 30 years ago [are] at that stage where they’re looking to retire. We’re seeing some groves now coming onto the market for sale,” he said.

“It’s promoting opportunity for new people to come in … I think there’s certainly a lot of interest at the moment.”

John Symington left behind a career in computer software 15 years ago to become an olive grower and olive oil maker, and now manages multiple farms in Victoria’s Kialla East that produce around 700,000 litres of oil a year. As he goes into the harvest period, Symington has had to cut back on exports to fulfil more orders from local customers.

“We just can’t keep up with demand, really,” he said. “Normally this time of year, I’m getting calls saying, ‘Can you process our olives?’ This year it’s ‘We haven’t got enough olives! Can you sell us some oil?’”

Due to higher business input costs and the heightened demand, Symington has had to lift prices to nearly double what they were last year, but said he talks to his customers beforehand to understand what they can manage.

“The market’s the market, and everybody’s going to have to pay more. But we don’t want to see our customers put in a position of being squeezed out of business,” he said.

Symington believes the roaring demand for olive oil is a long-term trend, not a short-term spike, and hopes that Europe’s supply squeeze will mean greater interest locally in growing olives.

“We’re not producing as much olive oil as we could. I think that’s a shame.”

“There were a lot of olive groves in Australia that were abandoned … prices were being pushed down and supermarkets had a lot to do with that,” he said.

ANZ’s Whitehead believes the squeeze on global olive oil supply will also make institutional investors pay closer attention to Australia when considering long-term agricultural investment opportunities.

“What they see is likely to have a long-term return,” he said.

“We have the conditions to grow. We have the existing processing facilities, we have everything else that ticks the boxes, low political risk … If this continues or this current price spike could well make institutional investors look at olives in Australia as something of a good potential long-term crop.”

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Despite the record highs, the agribusiness expert said prices would likely stabilise and come back down once Europe experienced better weather and harvest yields improved.

Closer to home, Cobram’s Beaton said the olive oil giant didn’t plan to hike prices in the near future.

“We’re certainly not adding any in the short term,” he said.

“But again, things happen beyond your control … What we have to do is obviously provide the consumers with a product as affordable as possible. We have our own cost pressures with a lot of assets we have to maintain.”

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