Worst drought ‘in human history’ threatens global olive oil supplies

(ORDO NEWS) — Manuel Heredia Halcón’s grandparents planted olive trees in his 1,200-acre grove in Andalusia, Spain almost a hundred years ago.

These trees are renowned for their ability to thrive in even the driest soils, but this year’s scorching temperatures and severe lack of rainfall have paid off.

“We are very concerned,” Halcon said in an interview with CNN Business. “You cannot replace the olive tree with any other tree or product,” he added.

Like many European farmers, Halcón has been battling extreme drought this summer – he estimates the olive oil crop at his farm, Cortijo de Suerte Alta, will be down by about 40% this year due to extreme weather conditions.

Temperatures broke records in parts of France, Spain, Italy and Portugal in July, exceeding 40 degrees Celsius (104.5 degrees Fahrenheit).

By early August, sweltering heat and lack of rain had left almost two-thirds of the European Union in a state of drought, according to the European Drought Management Observatory.

Olive oil producers have been hit hard. Kyle Holland, oilseeds and grains price analyst at commodities data firm Mintec, expects a “sharp decline” of 33% to 38% in Spain’s olive oil crop starting in October.

Spain is the world’s largest olive oil producer, accounting for more than two-fifths of the world’s supply last year, according to the International Olive Council. Greece, Italy and Portugal are also major producers.

Consumers are already paying more for olive oil. Retail prices in the European Union rose 14% in the year to July. But prices will rise further in the coming months, manufacturers and buyers told CNN Business.

“The drought is too big. It’s just too dry. Some trees produce very little fruit, some don’t. It only happens when soil moisture is critically low,” Holland told CNN Business.

This is a warning shot for an industry dependent on the predictable life cycle of olive trees. Growers are accustomed to large crop fluctuations over the course of 24 months, but climate change is already disrupting this age-old rhythm.

Olive oil producers were hit hard. Kyle Holland, an oilseeds and grains price analyst at commodity data firm Mintec, expects a 33-38% “drastic decline” in Spain’s olive oil crop starting in October.

Spain is the world’s largest olive oil producer, accounting for more than two-fifths of the world’s supply last year, according to the International Olive Council. Greece, Italy and Portugal are also major producers.

Consumers are already paying more for olive oil. Retail prices in the European Union rose 14% in the year to July. But prices will rise further in the coming months, manufacturers and buyers told CNN Business.

“The drought is too big. It’s just too dry. Some trees produce very little fruit, some don’t. It only happens when soil moisture is critically low,” Holland told CNN Business.

This is a warning shot for an industry dependent on the predictable life cycle of olive trees. Growers are accustomed to large crop fluctuations over the course of 24 months, but climate change is already disrupting this age-old rhythm.

The production of olive oil depends on time. Trees begin to bear fruit in March and flowers bloom in May. Olives grow during the summer months before being harvested in autumn.

Andalusia, Spain’s southernmost region, provides about a third of the world’s olive oil production. Here they are used to the fact that the temperature regularly reaches 40 degrees Celsius, but not in May, when the flowers begin to bloom.

“At this point, we may have lost 15% to 20% of the crop,” he said.

Halcon expects to sell this year’s oil for 4 euros ($3.97) per kilo to its customers, including importers in Asia and the Americas. This is 30% more than last year.

The heatwave coincided with the third consecutive year of low rainfall. The water level in the Guadalquivir River, which helps irrigate the surrounding olive groves, is critically low. Halkon said that during this growing season, he was only able to give his trees half the usual amount of water.

“Next year will be even worse because the dams will be completely empty,” he said.

Juan Jimenez, CEO of the Green Gold Olive Oil Company, a family business about 160 kilometers (100 miles) to the northeast, faces similar challenges.

“[The question] is not just how hot it was, but when it was hot,” he told CNN Business.

“The moment the olive flower comes to life, and [if] it’s hot, the flower itself burns out, so it’s impossible to get the fruit,” he added.

Jimenez olive trees cover 740 acres of mountainous and flat terrain. May’s temperature spikes are likely to result in a 35-60% drop in crop yields from a normal year’s harvest if no rains come in the next few weeks.

If so, it would be “the worst harvest in 10 years,” Jimenez said.

In other countries of Southern Europe, the drought has also caused a huge headache. Filippo Berio sells oil to 72 countries and receives most of it from suppliers in Italy, Spain and Greece.

The company also produces its own oil from 25,000 trees in Italy. Walter Zanre, managing director of Filippo Berio’s UK division, described a Tuscan grove that was “dry as ash” this summer.

In late July, a forest fire broke out just outside the company’s only factory, where all the oils are blended, refined and bottled, blanketing it in smoke and ash.

“We survived the drought, but I think it’s the worst thing I’ve ever seen in my memory,” Zanre told CNN Business.

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