Olive oil prices jump after dry weather in Spain

A bumper 2013 crop and cheap prices have made Spain a popular destination for olive oil buyers, but more recently prices have started to rebound.

Over the past year, Spanish and Italian olive oil prices have followed very different paths. Spain enjoyed a bumper harvest, while Italian production was down sharply because of drought.

As a result, Spanish extra virgin olive oil has fallen 19% year on year to €2.20 a kilo, while Italian extra virgin has risen by 17% to €3.42 a kilo [Mintec 52 w/e 4 July].

This has meant buyers have increasingly turned to Spain, which was already the world’s largest producer. The bulk of the oil left in the Mediterranean from last season is Spanish.

However, over the past month, Spanish prices have edged up by 5%. Dry and warm weather in Spain’s Andalusia region has raised concern over the yield prospects for the 2014/2015 crop. As Andalusia ­produces 75% to 80% of Spain’s olive oil, the weather there has a big impact on the market.

“It is too early to be sure what the impact will be, and the plentiful 2013/14 crop is still meeting demand,” says Mintec analyst Loraine Hudson. “However speculation has driven the Spanish prices up.”

Some experts believe the dry weather is being used to justify price increases. “Our Spanish sources tell us the dry weather has caused concern over the next Spanish crop, but the forecasts have moved from abundant to a normal harvest,” says Walter Zanré, MD of Filippo Berio UK. The lack of supply from elsewhere in the Mediterranean has allowed Spanish producers to raise prices, he adds.

Once harvesting of the new crop starts in October, producers still sitting on stocks will be under pressure to sell. Until then, prices are likely to remain firm, Zanré warns.

Commodity prices: durum wheat edges up after European rainfall

Grain prices have been falling after a good harvest in 2013 and in anticipation of a good crop this year. Durum wheat and maize are both down by double digits year on year. 

Over the past month, however, their trajectories have differed, even though maize and wheat typically rise and fall in tandem. Maize has continued to fall, depressed by higher than expected stocks in Brazil and forecasts for a good crop in the US. Meanwhile, durum wheat prices have edged up, largely because of rainfall during early harvesting in Europe. 

Elsewhere, the cocoa market remains characterised by extremes, with butter up 49.7% year on year and up 8% over the past month, while powder is down 36.9% on a year ago.