A prolonged slump in olive-oil prices is whipping up discontent among farmers in southern Europe and North Africa.
After growing steadily higher for several years, wholesale prices of extra virgin olive oil - the purest kind, typically in demand from high-end restaurants - have fallen in 2019 by a quarter in Spain and by almost a third in Italy.
A rich olive harvest in Spain, the world's dominant producer, has left the market flooded with olive oil. The glut comes just as demand is set to slow in the U.S., the biggest importer of the product, after President Trump in October imposed a 25% tariff on olive oil coming from Spain. The tariff was part of a package of levies designed to retaliate against the European Union for giving subsidies to plane-maker Airbus SE.
The decline in olive-oil prices has hit European farmers hard, prompting a protest in Madrid in October and leading the EU to take emergency measures to support the market for the first time since 2012. It has also eroded revenues at Deoleo SA, the Spanish bottling company behind olive-oil brands such as Bertolli and Carbonell.
"There's a looming crisis in olive oil, not just in the States but around the world," said Joseph R. Profaci, executive director of the North American Olive Oil Association. Improvements in cultivation methods over the past decade have enabled farmers to produce more from each piece of land, he said, "but demand is not keeping pace. The tariffs may come and go, but this is a systemic issue that really needs to be addressed.”
Olive oil has been made and traded around the Mediterranean for several thousand years, and the region still dominates production despite efforts to grow olives in the U.S., Argentina and elsewhere. Spain churned out a record 1.79 million metric tons of olive oil in the 2018-19 season, which ended in September - or 53% of all the oil made world-wide. Olive farms in the southern region of Andalusia are considerably larger and more advanced than the family-run groves that dot the hills of Puglia in Italy and the Peloponnese mountains in Greece.
The cost of 100 kilograms (221 pounds) of extra virgin olive oil dropped to EUR213.50 (AU$346.92) in early November in the wholesale market in Spain. That is 24% cheaper than at the end of 2018, and 33% less than the average for this point in the season, according to EU data. In Italy, where olive oil tends to be more expensive, prices dropped 29% this year to EUR412 per 100 kilograms.
The new tariff hasn't yet made olive oil more expensive in the U.S., Mr. Profaci said. However, he expects importers to start buying less oil in bottles and more in bulk, because the tariff applies to containers that weigh less than 18 kilograms.
This would be a blow to Spanish companies that have been promoting their brands in the U.S., said Teresa Pérez, director of the Interprofessional Spanish Olive Oil organization.
"There are no longer bad harvests," said Hilari Jaime, a farmer who manages around 47 hectares of olive-tree fields in Canet lo Roig, a small village in eastern Spain. "There is a structural problem of overproduction and the market hasn't swallowed it up.” More