Olive oil price stabilizes as production rises in the EU

Following a steep decline in the last three months, olive oil prices stabilized, driven by increased olive oil production in the EU and optimistic forecasts for the next harvest. Concerns are voiced over competition and the recently negotiated trade agreement between the EU and Mercosur.After stabilizing in recent weeks, olive oil prices have rebounded from their lowest point at the end of October. As of January 17, prices reached €4.03 per kilo, reflecting a 22.1% increase.Despite this recovery, prices are still significantly lower compared to last year, having dropped by 53.8%, reaching levels last seen in 2022.The fall in olive oil prices was likely driven by both an increase in the production of the EU on harvest 2023/24 and an expected increase in olive production for the 2024/25 harvest.Olive oil production increased in the EUWhile global olive oil production for the 2023/24 harvest declined by 7% year-on-year to approximately 2,564 thousand tons (according to the International Olive Council), the EU experienced a contrasting trend.EU production rose by 10%, driven by strong harvests in Spain, Italy, and Portugal, though Greece saw a decline in output.Higher production projected Harvest 2024/25 depicts a more favorable outlook for olive oil production in the world and the EU. The International Olive Council (ICO) forecasts a production of 3,376 thousand tons in the world, an increase of 32% from the previous year.Within the EU, production is expected to grow by 29% to 1,973 thousand tons, primarily driven by increased yields in Spain, Greece, and Portugal. However, Italy’s production is forecast to decline.Spain, the main olive oil producer and exporter of olive oil, forecasts an increase in both production and exports for harvest 2024/25.While olive oil production is expected by the Spanish goverment to increase by 12% from the previous harvest, the projection for exports is up 10%.However, stocks of olive oil are expected to decrease, which relates to the increase in exports and local demand. In November, stocks were 13.3% lower than in the previous year.Increases in olive oil production have been related to advantageous weather conditions in producing countries. In Turkey however, the IOC estimates an increase in olive oil production in 2024/25 of 109% from the previous harvest.Producer organizations worried about trade agreement While it appears to be a promising year for olive oil production, the attention of producer organizations and exporters is drawn to the trade agreement between the EU and Mercosur.On December 6, the EU and four Mercosur countries (Brazil, Argentina, Paraguay and Uruguay) agreed upon the terms of the most ambitious trade deal struck by the EU, setting up the world’s largest free trade area. For the olive oil market, the agreement would eliminate the tariffs that need to be paid, 31.5% when exporting to Argentina and 10% when exporting to other Mercosur countries.Producer organizations in the EU are concerned about the competition with products developed under different regulations in terms of fertilization and plant protection products, protection of the environment, and labor law.On the other hand, the EU Commission has assured farmers and organizations that EU standards will not be compromised. “Our European health and food standards remain untouchable. Mercosur exporters will have to comply strictly with these standards to access the EU market”, said Ursula von der Leyen, President of the EU Commission.