A Mega Drought Is Threatening To Drive Up Olive Oil Prices

CREDIT: flickr/Sue Kellerman

Southwest Spain is experiencing its worst drought since record keeping began 150 years ago, and agricultural crops, especially olives, are suffering badly. With climate models and Spanish researchers both predicting that Spain’s droughts will get more intense and more regular than before, this is the second year since 2012 that heat and drought have threatened the country’s trademark olive harvest.

Spain produces around half the world’s olives and is the number one producer of olive oil. The drought has speculators, including forecasting agency Oil World, worried that olive yield could drop up to 40 percent year-over-year in 2014. Olive trees flower and start to bear fruit in the late spring and early summer which was an especially dry time in Spain’s main olive-producing regions this year.

“The drought in Spain and its impact on the olive market is potentially very significant,” Lamine Lahouasnia, head of packaged food at Euromonitor International, told the Wall Street Journal. “If the drought does end up adversely affecting Spanish yields, it is very likely that we’ll see rising consumer prices in 2014.”

European olive oil prices are already up over 30 percent since the beginning of the year, a phenomenon driven by above average temperatures and low precipitation across the Mediterranean olive-growing belt. According to the IPCC, the Mediterranean may be one of the most impacted areas of the world from climate change. Already a hot, semi-arid region, hotter summers and more intense and frequent droughts will threaten water supplies and agricultural production.

While Spain and Italy both produce and consume more olive oil than the U.S., since 2001 American consumption of the popular cooking oil has increased by over 50 percent. During the last drought-induced European olive shortage in 2012, the U.S. price of imported olive oil rose eight percent.

With California — know for its mediterranean climate — grappling with its own historic drought in which very little rainfall and record-setting temperatures have grabbed headlines all year, some have speculated that increasing olive crops could actually represent a silver lining in the otherwise abysmal agricultural scene. Olive trees are especially hardy and are far more drought tolerant than the almond trees that have become a primary crop in the state in recent years. Olive trees have small, waxy leaves that can react to drought and go dormant when rain is lacking.

However, the statewide drought is even imperiling California’s existing olive crop this year, and it was recently reported that the state’s table olive yield could drop by up to half compared to 2013. A hard freeze over the winter also contributed to the rough season.

“We just don’t see that much crop out there,” said Adin Hester, president of the Olive Growers Council of California. “A lack of water means serious trouble when you try to size a crop. When the fruit begins to grow, it stresses the trees.”