Why are prices of olive oil rising in Europe? Can it impact India?

Olive oil makes food tastier. But now think twice before you use it lavishly in your pasta or salad. A daily staple of Mediterranean cuisine and the life of many a salad throughout Europe, olive oil is seeing a staggering rise in price. It’s a prime example of how food still outruns overall inflation in the European Union. Olive oil has increased by about 75 per cent since January 2021, dwarfing overall annual inflation that has already been considered unusually high over the past few years and even stood at 11.5 per cent in October last year. And much of the food inflation has come over the past two years alone. But what’s driving these costs? We take a closer look. Climate change fuels olive oil prices In Spain, the world’s biggest olive oil producer, prices jumped 53 per cent in August compared to the previous year and a massive 115 per cent since August 2021. Drought has damaged recent harvests in Spain, the world’s largest producer of olive oil, and harsh weather has harmed olive crops in other important countries such as Italy, Greece, and Portugal. As a result, prices have risen to dizzying heights, exceeding $9,000 per metric tonne, resulting in more expensive bottles of the oil, which is a fixture used for cooking and drizzling on dishes associated with a healthy Mediterranean diet. According to IRI, a data supplier, a 750-millilitre bottle of Bertolli’s extra virgin olive oil that costs around $9 (Rs 749. 36) at the grocery store in October is now around $11 (Rs 915.77), a rough 22 per cent rise. [caption id=“attachment_13342172” align=“alignnone” width=“640”] Olive oil has increased by some 75 per cent since January 2021. AP[/caption] Rising costs of basic foods  Apart from olive oil, “potato prices were also on a staggering rise,” according to EU statistical agency Eurostat. “Since January 2021, prices for potatoes increased by 53 per cent in September 2023. And if high- and middle-income families can shrug off such increases relatively easily, it becomes an ever-increasing burden for poorer families, many of whom have been unable to even match an increase in their wages to the overall inflation index. “By contrast,” said the European Trade Union Confederation, or ETUC, “nominal wages have increased by 11 per cent in the EU,” making sure that gap keeps on increasing. “Wages are still failing to keep up with the cost of the most basic food stuffs including for workers in the agriculture sector itself, forcing more and more working people to rely on food banks,” said Esther Lynch, the union’s general secretary. Annual inflation fell sharply to 2.9 per cent in October, its lowest in more than two years, but food inflation still stood at 7.5 per cent. Grocery prices have risen more sharply in Europe than in other advanced economies — from the US to Japan — driven by higher energy and labour costs and the impact of Russia’s war in Ukraine. That is even though costs for food commodities have fallen for months. Challenges for the olive oil sector Even if ETUC blames the profiteering of big agroindustry in times of crisis, the olive oil sector has faced its own challenges. [caption id=“attachment_13342202” align=“alignnone” width=“640”] Drought has damaged recent harvests in Spain, the world’s largest producer of olive oil, and harsh weather has harmed olive crops in other important countries such as Italy, Greece, and Portugal. Pixabay[/caption] In Spain, for example, farmers and experts primarily blame the nearly two-year drought, higher temperatures affecting flowering and inflation affecting fertiliser prices. Spain’s Agriculture Ministry said that it expects olive oil production for the 2023-24 campaign to be nearly 35 per cent down on average production for the past four years. More than half of the world’s olive oil is produced in Southern Europe, which is comparable to West Asia in terms of crude oil production. Furthermore, the outlook for the forthcoming European harvest, which started this month, is not good. According to the European Commission, the 40 per cent decrease in olive oil production from the previous season will only be partially recovered by Spain, Italy, and other EU nations, which will restrict supply and drive up prices. The impact on India According to traders, the shortage of supply is worse than last year, and its effects are reverberating across food markets, restaurants, and households from Europe to the United States and India. “Prices of extra virgin imported variety in India have increased by 22 per cent. This is most likely to be passed on to customers by restaurants,” Abhishek Agrawal of Comtrade, a commodity trading firm, told Hindustan Times (HT). According to the Indian Olive Association, India consumes approximately 12,000 metric tonnes of olive oil per year, the majority of which is imported. The surging costs are making Indians rethink their choices. “I have stopped using olive oil for salad dressings and switched to canola oil for cooking,” Ritu Grover, a New Delhi-based banker who switched to olive oil years ago after developing high levels of bad cholesterol, told HT. Olive oil prices in Spain will remain at record levels at least until June, reports Reuters citing Deoleo, the world’s largest olive oil producer. And this will filter into all importing countries. As we are seeing  India is no exception. With inputs from AP