Loss of 600,000 tonnes of olives will force huge price rise on British shoppers

A fresh oil crisis is brewing. However, this time it won’t be hitting the garage forecourts but the nation’s kitchens.

The wholesale price of extra virgin olive oil has jumped 62% in three months after a severe drought in Spain, the world’s largest producer, wiped out an estimated 600,000 tonnes of production.

Filippo Berio, the UK’s biggest olive oil supplier, has warned that it will be forced to pass on the increase to consumers.

“The [wholesale] prices are going up rapidly daily,” said Walter Zanre, managing director of Filippo Berio, which sells 10m litres of oil a year in Britain.

“It’s very difficult to buy olive oil because they [the growers] are waiting for it to go up even higher next week. You’re looking at £2,800 per tonne [of extra virgin olive oil].”

Zanre said the extent to which the increase in costs is passed on to shoppers, is “the million dollar question”. He said: “I would say 25% now, but if we had had this conversation 10 days ago I would have said 10% to 15%.”

The average 500ml bottle of supermarket brand olive oil currently costs about £2, while a 500ml bottle of Filippo Berio oil sells for £3.39.

“We are torturing ourselves because our product will go over the psychologically important £4 barrier,” said Zanre. “This isn’t a 5% blip, we can’t tighten our belts and absorb it.”

Consumers who can’t bear the thought of going without olive oil are advised to stock up before the price rise hits. Zanre said supermarkets have a “virtual embargo on retail price increases” in the runup to Christmas, so now would be the time to get your supplies in for 2013.

Thomas Mielke, director of Oil World, a trade journal that tracks oil prices, said the staggering price rise results from an “unprecedented decline” in stocks, particularly in Spain.

Spanish olive trees have been hit by drought and an unexpected frost in the flowering season in spring. This has led to trees producing less fruit and the olives that have grown are less juicy than normal.

“The fruit can be shrivelled and not looking normal, much smaller in size, which means they produce less oil,” Mielke said.

The poor crop, due to be harvested in October, comes a year after Spain returned its best crop in years, causing an olive oil glut and a steep fall in prices that left many growers on the breadline.

Spain is by far the most important country involved in olive cultivation and accounts for almost half of worldwide supplies. “Whatever happens in Spain causes massive changes in the world price,” said Vito Martielli, senior oil seeds analyst at Rabobank International. “Last year, Spain had a very good season and produced 1.4m tonnes of olive oil, but this season it is expected to be less than 1m. The total global olive oil production is 3m tonnes a year.”

Martielli said the average price of olive oil of all qualities has increased from €2,200 a tonne in July to €3,200 a tonne last week.

The drop in supply comes as demand for olive oil is at an all-time high with new countries developing a taste for the Mediterranean staple.

Miekle said: “Olive oil consumption is in the middle of a long-term increase in consumption. While it has reached saturation point in Spain and Italy, countries like the US and Australia are relative newcomers and are using much more olive oil.”

A rising number of the British are also turning to olive oil, according to Zanre. “The appetite is growing continually,” he said. “There’s a bit of a love affair with it among the chattering middle classes, but other people are consuming it too.”

He said the average Briton consumes half a litre of olive oil a year, far below the 14 litres a head in Italy, the world’s biggest consumer.