"People will pay more," said Michael Bradley, president of Oakland, California-based Veronica Foods, which imports more than 1 million gallons a year.
Intermediate-quality virgin olive oil from Spain, an industry benchmark, may reach 3.20 euros ($3.96) a kilogram in the next two to three months, Bradley said, an increase of about 65 per cent from this week.
The effect is already being felt by Laura Bevilacqua, who runs a farm and restaurant in Palombara Sabina, Italy. While she usually produces enough of her own oil for use in her kitchen and to sell a few bottles, she was forced to buy it this year. The restaurant hasn't raised prices because diners are less willing to spend in a shrinking economy, she said.
"This olive-oil crisis is really knocking us out," Bevilacqua said.
Olives trees, which can produce fruit for hundreds of years, are harvested in Italy from September through January. The average household in the country uses about 34 litres of the oil a year, or 9 gallons, according to data compiled by Bloomberg from Rabobank and the Organization for Economic Cooperation & Development.
Record prices
Prices for Italian top-grade extra virgin oil touched a record in November and are up 46 per cent at the mill in the past two months to 6,308 euros a metric ton. Spanish intermediate-quality virgin oil has risen 61 per cent from a low in May to 2,764 euros a ton.
"Some consumers will ration olive oil and switch to others, in particular, sunflower oil," according to Vito Martielli, an oilseed analyst at Rabobank in Utrecht, Netherlands.
Prices for olive oil are surging at a time when global food costs are the lowest in four years, including cooking oils made from crops. Global harvests of soybeans, oil palm, rapeseed and sunflower seeds have touched all-time highs in recent seasons, boosting output of vegetable oils to records this year, US Department of Agriculture data show.
Soybean-oil futures on the Chicago Board of Trade have tumbled 21 per cent from a year earlier, touching a five-year low this week. The contracts slid 0.4 per cent to 31.81 cents a pound as of 8:44 a.m. in New York.
For olive oil, Spain's output is forecast to drop to 750,000 tons from last year's record of 1.78 million tons, after the crop was hurt by hot weather and disease, according to an association of young Spanish farmers, known as Asaja. In Italy, production may fall to 302,470 tons, compared with 463,701 tons in 2013, according to Ismea.
Greece, Tunisia opportunity
While Italy and Spain are generating less, production is booming in Greece and Tunisia, the third- and fourth-biggest growers. Trees in Greece will probably yield 300,000 tons of olives, up 127 per cent from last year, and Tunisia may see output almost quadruple to 260,000 tons, according to the International Olive Council.
That won't be enough to prevent a decline in the Mediterranean region, which accounts for 97 per cent of world production. Combined output for Spain, Italy, Greece and Tunisia probably will slump 31 per cent to 1.69 million tons, the group said on December 2.
"This year creates an opportunity for Greek olive oil," Aris Kefalogiannis, the chief executive officer of Athens-based Gaea Products, a local food marketer that gets half its sales from olive oil. "We do expect an increase in exports."
The outlook is dimmer for Stefano Barbarossa, who has a grove of 1,000 trees in Sabina, Italy, and lost about 80 per cent of olive-oil production this year. He says he has none to sell and faces as much as 30,000 euros in lost income.
"My father, my grandparents say they have never seen something like this," Barbarossa said in an interview at the mill in central Italy. "Usually, this time of year, we wouldn't be able to get into this oil mill because of the crowd, the tractors, and people coming to press their olives. Now, as you can see, it's all dead."
- Bloomberg
