Spain warns heatwave threatens olive oil production | food and beverage industry

Fierce heat waves and a lack of rain in Spain threaten to reduce olive oil production from the world’s largest exporter, the country’s agriculture minister has warned.

“If there is no temperature relief or rain in the coming weeks, this year’s olive harvest could be significantly lower than previous years,” Luis Planas told Bloomberg News. “The olive sector is concerned about oil production.”

Spain accounts for almost half of the world’s olive oil production. The setback, coupled with the ongoing disruption in supplies of sunflower oil from Ukraine, meant vegetable oil prices were likely to remain high, Planas said.

Refined olive oil prices in Jaén in southern Spain, the Spanish benchmark, rose 8.3% in June from the previous crop year to €327 (£274) for 100kg, according to the International Olive Council. In Bari, southern Italy, extra virgin oil cost an average of €419.7 for 100 kg.

Kyle Holland, an analyst at market research group Mintec, said his market sources suggest Spanish olive oil production could be reduced by 25% to 30% on a year-on-year basis.

“There is also a lot of concern in the market about the quality of the coming crop and what proportion of the crop will be extra virgin/virgin grades and how much will be classified as lampante [not fit for human consumption],” he said.

“As Spain accounts for the lion’s share of world olive oil production, these cuts would result in a significant shortage of global availability. Looking ahead, market participants expect prices to continue to rise unless the weather improves and gives harvests a pause.”

Olive oil supplies are threatened as northern Italy suffers its worst drought in 70 years. Market sources suggest that Italian olive oil production could be 20-30% lower than last year. The drought is also expected to result in reduced harvests of apricots, peaches and pears.

Hot weather across much of Europe also threatens to disrupt grain production at a time when global food prices are near record highs as a result of Russia’s invasion of Ukraine, which has sent wheat and other grain prices soaring.

Planas estimates that Spain’s total production of cereals, including corn, wheat and barley, could fall by 13% to 17.5 million tons this year due to high temperatures and low rainfall.

Ukraine and Russia reached a UN-backed deal in late July to allow millions of tons of grain to be exported from blocked Black Sea ports, which could help drive down prices and avert the threat of a catastrophic global food crisis.

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The aim of the agreement is to ensure the passage of grain and essential goods such as sunflower oil from three Ukrainian ports, including Odessa. Officials hope that if Russia sticks to the deal, pre-war levels of exports from Ukraine’s three ports — 5 million tons per month — could be reached within weeks.

Planas said Spain has received only a handful of shipments of Ukrainian grain via alternative routes since the invasion began six months ago.

On Monday, Ukraine made its first shipment of grain since Russia invaded the country at the end of February.

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