North Africa to the rescue as Europe’s olive oil dries up

Reuters/Morgane Wirtz/Hans Lucas

• Drought and crop infection cut Spain’s production by 56%
• Producers in Tunisia and Morocco could benefit as prices rise by 80%
• EU export tariffs and inflated shipping costs still present obstacles

A caesar salad may be the ideal light meal on a summer’s day, but you might have noticed it is weighing heavier on your wallet. That is because the price of olive oil is at an all-time high.

Prices have jumped by nearly 80 percent in just one year, according to data from YCharts. 

European olive oil production has fallen off a cliff edge, with EU production estimated to reach 1,378,000 tonnes this season, compared with 2,272,000 tonnes in 2021-22. 

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Spain, which produces more than half the world’s olive oil and most of Europe’s, is suffering from a drought and bacterial crop infections that have caused a 56 percent drop in production. 

In the 2022-23 season, Spanish production will fall from the usual 1.5 million metric tonnes to just 663,000. A similar story is playing out in Italy and Greece.

While this is bad news for salad lovers, for North African producers in Tunisia and Morocco it may be an opportunity to close the gap with their European rivals.

“In typical years, when Spanish olive oil prices were considered too expensive, buyers would often turn to countries like Tunisia and Morocco for supply, as they could secure lower prices from these sources,” Kyle Holland, oilseeds and vegetable oils analyst at commodities research firm Mintec Global, tells AGBI.

The same is happening this year, as buyers scramble to make up for the 40 percent decline in European production.

Holland says the industry expects Tunisia to produce between 200,000 and 230,000 metric tonnes of olive oil this season, and Morocco 150,000 to 180,000 — both favourable crops, especially when compared with the precipitous drop in European production.

“Market players we’ve spoken to believe that the challenges faced by Spanish producers in the olive oil market could lead to a lasting shift in buying patterns, as the coming crop is expected to be poor as well,” Holland said.

Producers in Tunisia, which makes the most olive oil in North Africa and exports the majority of it to Spain and Italy, are somewhat insulated from the challenges facing the Spanish industry.

Spanish producers largely use just one type of olive tree: picual. This monoculture helps the spread of the tree-killing bacteria xylella fastidiosa.

Tunisia has more than 36 varieties of olive trees, according to Ahmed Hamza, CEO of Tunisian olive oil producers Olyfo.

And while firms such as Hamza’s are expecting to export more olive oil to neighbouring Europe, their own work faces challenges, too.

“The sector is not as organised as in Spain or Italy,” he says, adding that it suffers from EU import restrictions designed in a time of Spanish olive oil abundance.

Much of the North African crop could be exported to the EU, which is forecasting an increase in imports to 200,000 tonnes, up from 151,000 in previous seasons.

But Tunisia can only export up to 56,700 tonnes duty-free to the EU. After that limit is hit, the EU charges a regular tariff of €124.50 per 100 kg.

Global inflation in shipping costs is also putting the squeeze on North African producers, as is a drought that, while not as severe as in Europe, still makes growing olives more difficult.

Mazen Assaf, founder of the Olive Oil Guy in London, says that cost pressures have forced him to pause supply until 2024.

He worries that if he agrees on a price too early, he may be locked into a contract that is no longer economically viable down the line.

“That’s a big risk that no one should be willing to take,” he says. 

“In a few months, once matters are clearer, I predict the commodity price of olive oil will stabilise, albeit at a higher price compared to last year.” 

Even if Tunisian and other North African producers step in, the end result for consumers is unlikely to be different. Higher prices for olive oil on the shelves will persist, Assaf warns.

The UK retail price of olive oil was up 47 percent year on year in May, according to the latest figures from the Office for National Statistics.

“Current supply levels will become the new normal, and the retail price of olive oil will have to increase to reflect the increase in costs,” Assaf said.

“Olive oil is our lifeline, our passion, our love, and most importantly our heritage,” he adds.

“It is not something we will let go of lightly. The reality, however, is that any solution to these market conditions will likely take some time.”