Severe weather conditions are driving olive oil prices to record highs, making it the latest commodity to experience a notable surge in cost.
As per the United States Department of Agriculture’s data, global olive oil prices reached an astounding $8,900 per ton in September. This remarkable price increase is attributed to the extremely dry weather conditions in the Mediterranean, which have heightened concerns of supply disruptions.
In August, the average price was 130 percent higher than the previous year, surpassing the prior record of $6,242 per ton, which was set in 1996. Regrettably, there are no indications of this price surge abating, according to the USDA.
Despite these soaring prices, the consumption of olive oil has been moderately impacted. The enduring consumer and cultural preference for olive oil makes it challenging to substitute with other vegetable oils, even though there are ample supplies of alternative options.
The surge in olive oil costs aligns with similar price hikes in various other food commodities, including cocoa, orange juice, wheat, and soybeans. This upward trend in commodity costs poses a potential challenge to the Federal Reserve’s efforts to curb inflation in the United States.
In August, the annual rate of consumer-price increases stood at 3.7 percent, significantly lower than the highs exceeding 9 percent seen in the previous year, following the central bank’s extensive increase of benchmark interest rates by over 500 basis points since early 2022.
The impact of this substantial price increase is expected to temper demand in the current season, but it is likely to lead to scarcity, especially in the European Union, the largest olive oil producer, consumer, and exporter.
This scarcity is predicted to keep prices elevated into 2023/24, particularly if the next harvest faces similar challenges due to adverse conditions, as suggested by the USDA.