Olive oil price forecast: No end in sight for remarkable rally

August 21, 2023 02:48 AM PDT | By Invezz

Olive oil price forecast: No end in sight for remarkable rally — Image source: Invezz

Extreme weather’s impact on olive oil

Concerns about climate change have spread in the past few years as countries around the world go through a prolonged drought. Europe has not been left behind in this crisis, with most countries going through extreme heat and Rhine river starting to dry.

As a result, agricultural production in countries like Italy and Spain has been deteriorating for a while even as demand rises. Olive oil is one of the struggling crops, which has helped push its price to a record high.

Recent data shows that temperatures in countries like Spain, Greece, and Italy have surged, reaching 40 degrees in some days. As a result, olive trees are shedding their fruits in a bid to conserve moisture.

Recent data shows that Spain production dropped to 620k tons, lower than the five-year average of 1.3 million tons. Spain is the biggest olive oil producer as I wrote here. And analysts estimate that European production will average 700k tons, a 30% decline from the five-year average. Globally, production is set to plunge by 20% this year.

Demand, on the other hand, is set to remain higher as the world economy recovers and the population continues growing. This is important since olive oil is a staple product that has different uses like cooking, salad dressing, baking, skincare, hair care, and medicine. Analysts expect that the extra virgin olive oil market is growing at a 5.30% CAGR even as supplies fall.

Further affecting the situation is that olive oil does not have close alternatives. And even these alternatives like coconut oil, sunflower oil, and almond oil are being affected by the strong heat.

Olive oil price forecast

The outlook for olive oil prices is still bullish because of the supply and demand imbalance. Therefore, the next important resistance to watch will be at $9,000. A break above that level will see olive oil prices near the crucial resistance at $10,000.

The post Olive oil price forecast: No end in sight for remarkable rally appeared first on Invezz.

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