Olive oil flowing freely after Spain’s drought finally relents

Spain’s hard-hit olive oil sector is set to rebound, boosting hopes among consumers that prices will finally ease after a period of sharp increases.
Olive oil prices had risen significantly after Spain, one of the world’s largest producers, was severely affected by droughts over the past two summers that resulted in a near 60 per cent decline in production last year.
The price rose by 183 per cent between December 2019 and August this year, according a report from Spain’s CaixaBank.
As production improves and costs stabilise, the bank has said that it expects a further easing of prices. Pedro Álvarez Ondina, an economist at CaixaBank research, said: “For the olive industry the major drag was the lack of rain in the last two-and-a-half years. You also have the general increase in production costs because it’s pretty energy-intensive.
“We have seen the first signs that the sector is doing a little bit better because of a better weather situation.”
This year CaixaBank expects Spanish olive producers to have a moderately strong season, with the price at oil presses and at the till already starting to fall. In the first half of the year, Spain’s food industry reported a 1.9 per cent increase in production, the first growth in the sector since 2021.
More than 80 per cent of Britain’s olive oil supply comes from the Mediterranean.Researchers have previously warned that heatwaves and droughts in southern Europe could add billions of pounds to domestic grocery bills. In 2022, Britain took just over £16 billion of food imports from the Mediterranean, about a quarter of its total.
About 12 per cent of land in Spain continues to be affected by prolonged drought, yet this remains a significant improvement on October 2022, when the figure was 45 per cent.
“For the next season we expect the balance between supply and demand will be better, so we hope that will be seen in the prices,” Álvarez Ondina said. “[Previously] we had a huge imbalance between supply and demand. Supply was dragged by the lack of rain and increasing production costs.”
Olive oil is not the only product that has been affected by drought in Spain. Last year, the production of grains fell by 34.8 per cent as wheat and corn struggled with the lack of rain, while poor grape harvests resulted in a 21.1 per cent decline in the quantity of wine.
Spain is the fourth largest exporter of agricultural produce in the European Union after the Netherlands, Germany and France.
Global rice prices have fallen after India boosted its supply by lifting export controls.
India, the world’s biggest exporter of rice, lifted its ban on the export of non-basmati white rice, which had been in place for more than a year.
Its announcement led to a 11 per cent fall in the price of Thai white rice, an Asian benchmark. A new crop in India and increased inventories also pushed the price lower.
India has experienced an above-average monsoon season, which is expected to boost crop yields. Its annual monsoon provides nearly 70 per cent of the rainfall required for farming and refilling reservoirs.
“Suppliers from Thailand, Vietnam and Pakistan are responding to India’s move by lowering their export prices,” Himanshu Agarwal, executive director at Satyam Balajee, a rice exporter, said.
The Indian government removed the minimum export price of £950 per metric tonne for basmati rice last month. India and Pakistan are the only countries that produce and export the long-grain rice, which originated in the Indian subcontinent.
Global rice prices climbed to their highest level in 15 years after India’s decision last year to ban the export of white rice and implement a 20 per cent export duty on parboiled rice.
In 2022 India was responsible for more than 40 per cent of the world’s rice exports, shipping a record 22.2 million metric tons. In the 2022-23 fiscal year India reported more than $11 billion in rice sales, with 4.5 million tonnes of exported basmati rice generating $4.7 billion in revenue.
The restrictions reduced its rice exports by 20 per cent to 17.8 million tons in 2023. Exports in the first seven months this year were 25 per cent lower than a year earlier as buyers switched to rice from Thailand, Vietnam and Pakistan.