Olive Oil Prices Explained
Olive oil prices, similar to the prices of other agricultural and food products experience fluctuations for various reasons.
Several factors contribute to the pricing of olive oil, including inventory levels, present and anticipated harvest forecasts, and quality considerations.
The top producers of olive oil globally are Spain, Italy, Greece, Tunisia, Turkey, and Morocco. Some factors that influence these price fluctuations include:
Why are olive oil prices fluctuating?
1. Weather Conditions
Weather events such as droughts, heavy rainfall, frost, or hail have the potential to harm olive trees and result in a lower olive yield.
With fewer olives available for oil production, the olive oil supply tends to decrease.
When demand remains steady, a reduced supply typically results in higher prices.
The interaction between weather conditions and olive production can create uncertainty in its market and olive oil price variations.
Producers, traders, and consumers alike closely monitor weather forecasts and conditions in major olive oil-producing regions to assess the potential impact on supply and, consequently, prices
2. Production Costs
Production costs affect olive oil prices because they play a crucial role in determining the profitability of olive oil production.
When production expenses increase, olive oil producers may opt to transfer a portion of the total of these added costs to consumers through a price increase.
However, the extent to which prices increase also depends on market conditions, competition, and consumer demand.
Additionally, high production costs can potentially lead to reduced profitability for olive oil producers which may influence long-term production decisions and the overall supply and price of olive oil in the market.
3. Supply and Demand
When there is an excess of olive oil on the market, its prices decrease.
Producers reduce prices to sell their surplus stock.
On the other hand, when there is a shortage of olive oil due to factors like poor harvests or increased demand, olive oil prices tend to rise.
Consumers may be willing to pay more to secure the limited available supply. The price of olive oil is determined by the intersection of supply and demand in the marketplace.
When supply and demand are in balance, prices remain relatively stable. However, when there is an imbalance between supply and demand, prices fluctuate.
4. Government Policies
Government authorities frequently set and enforce quality standards and regulations governing the production of olive oil.
These standards directly influence the grading and labeling of olive oil, subsequently shaping consumer perceptions and pricing.
Certified high-quality olive oils often come with a premium price tag.
The influence of government policies on olive oil prices is not uniform and differs from one country to another, it changes depending on the specific policies in place.
These policy variations can result in disparities in the cost and accessibility of olive oil across diverse regions and markets, ultimately influencing consumer preferences and price levels.
Which variables impact the price of olive oil?
- Weather Conditions
- Production Costs
- Supply and Demand
- Government Policies
- Market Trends
- Consumers Preference
Where does olive oil come from?
Olive oil primarily comes from the fruit of the olive tree. It is native to the Mediterranean region but is also cultivated in other parts of the world.
Additionally, it refers to a type of vegetable oil commonly used in cooking in various cuisines across the globe.
Olive oil is classified into different grades, each with different characteristics and qualities based on factors like acidity and processing methods.
Here are some of the most popular and widely recognized types of olive oil:
1. Extra Virgin Olive Oil – The highest-quality olive oil. It is produced by pressing olives without using chemicals or excessive heat.
This method preserves the olives’ natural flavors and nutrients, resulting in a superior and pure oil.
2. Virgin Olive Oil – It is made by cold-pressing olives, however, it has slightly higher acidity levels compared to extra virgin olive oil.
It still has a good flavor and aroma, but it’s considered a step below extra virgin in terms of quality. Additionally, it’s great for cooking, sautéing, and making salad dressings.
3. Pure Olive Oil – It is a mixture of two kinds: refined olive oil and light olive oil.
Refined olive oil is produced from lower-quality olives and goes through a process to remove unwanted flavors and impurities.
It has a milder taste and is suitable for high-heat cooking methods like frying and roasting.
Light olive oil is a refined oil with minimal flavor and aroma, making it appropriate for dishes where a strong olive taste is not needed. It has a mild flavor and a light color.
This type of olive oil is commonly employed in baking and cooking when a neutral oil is preferred.
4. Blended Olive Oil – A type of olive oil that is created by mixing various grades of olive oil such as extra virgin, virgin, and refined oils.
These blends are carefully crafted to achieve specific flavor profiles or to offer a cost-effective alternative.
Here’s an overview of the typical steps involved in olive oil extraction:
Harvesting – olives are harvested from the olive trees when they are fully ripe. The timing of the harvest can affect the quality and flavor of the resulting oil.
Cleaning and Washing – the harvested olives may contain leaves, twigs, and other debris. They are usually cleaned and washed to remove any foreign materials.
Crushing – the cleaned olives are then crushed or ground into a paste.
Traditionally, large stone wheels or hammers were used for this purpose, but modern olive oil mills use more efficient machines.
Malaxation – the olive paste is mixed or shaken to help break down the oil-rich cells in the olives.
This step allows the oil droplets to merge and separate more easily.
Pressing – in traditional olive oil production, the paste is pressed to separate the liquid from the solid material. Hydraulic presses are commonly used.
However, many high-quality olive oils, especially extra virgin olive oil, are now produced using a different method. This is known as the centrifuge or decanter method.
This method doesn’t involve pressing but instead uses a gear centrifuge to separate the oil from the paste.
Separation – the resulting liquid is a mixture of olive oil and water, as well as any remaining solid particles. The mixture is separated through centrifugation or other methods.
This process separates the oil from the water and sediment, leaving relatively pure olive oil.
Storage – the extracted olive oil is typically stored in stainless steel tanks or other suitable containers to allow any remaining water to settle and to help preserve the oil’s quality.
Bottling – once the olive oil is ready, it is bottled for distribution.
Quality extra virgin olive oils are usually bottled without any additional processing or refining to maintain their natural flavors and characteristics.
What are the uses of olive oil?
Olive oil has several industrial applications beyond its use in culinary and food products.
Some of these applications include:
1. Cosmetics and Personal Care Products – it is used in the production of cosmetics and personal care items, such as soaps, lotions, shampoos, and conditioners.
Its natural moisturizing and emollient properties make it a common ingredient in skincare and haircare products.
2. Pharmaceuticals – it is used as a carrier oil in the production of some pharmaceuticals, particularly in the formulation of certain medications and supplements.
3. Biofuel – it serves as an alternative source of biofuel when used as a feedstock for biodiesel production.
4. Leather Processing – it is used in some traditional methods of leather tanning as it softens and conditions leather, making it more pliable and durable.
5. Textile Industry – it is an essential component in some textile processes, such as dyeing and finishing, to improve fabric softness and texture.
6. Candles – it has been used historically in the production of candles, particularly in religious ceremonies.
What is the future price of olive oil?
The global market is primarily driven by the rapid product utilization as a healthier alternative to other cooking oils.
Olive oil is a rich source of natural antioxidants, such as vitamin E and phenolic compounds, with a good balance of saturated and unsaturated fats as well.
This can be attributed to the increasing awareness regarding healthier food choices among individuals among the masses.
With the rising awareness of the environmental and health impacts of synthetic ingredients, there is a shifting preference among consumers towards natural and organic products, resulting in a higher product uptake.
The global olive oil market size reached US$ 13.84 Billion in 2022. Looking forward, IMARC Group expects the market to reach US$ 18.28 Billion by 2028, exhibiting a growth rate (CAGR) of 4.60% during 2023-2028.
Overall, the price of olive oil in 2030 is expected to be between $10 and $12 per liter.