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There is something different lately about the olive oil Michelle Spangler buys, bottles and infuses with flavors such as basil and blood orange for her store in Dallas. It’s not the taste but the cost: Global olive oil prices have soared to record levels, more than doubling over the past year.
Spangler has an agreement with her store’s supplier that protects against such rapid price increases, but she still expects to pay up to 20% more. She plans to raise prices 10-15 per cent in her store, Infused Oils & Vinegars, early next year.
“It’s not a cheap product,” Spangler said, “and so that will probably price some of my customers out of that product line in my store.”
Like the oil that comes from the ground, olive oil is a globally traded commodity, with events in one part of the world reverberating far away. Drought in Spain, the world’s largest olive oil producer, has devastated recent harvests, and bad weather has hit olive crops in other major growers including Italy, Greece and Portugal. The United States imports almost all of the olive oil it consumes, primarily from Spain and Italy.
The result is prices climbing to dizzying heights, well over $9,000 per metric ton, which filters through to pricier bottles of the oil that have become a fixture in many American households, used for cooking and drizzling on foods associated with a healthy Mediterranean diet. A 750-millileter bottle of Bertolli’s extra-virgin olive oil that cost around $9 at the grocery store last October is around $11 today, a nearly 22 per cent increase, according to IRI, a data provider.
Southern Europe, which accounts for more than half of global olive oil production, is to olive oil what the Middle East is to crude oil. And things are not looking good for the upcoming European harvest, which began this month: The European Commission recently said olive oil production in Spain, Italy and other European Union countries would recover only slightly from last season’s 40 per cent decline, limiting supplies and pushing up prices.
Olive oil has become so dear that it has attracted criminal gangs, with some particularly brazen thefts at farms and factories in Spain and Greece.
The unpredictable and unusual weather patterns linked to climate change that have upended olive oil harvests in the Mediterranean have also afflicted French wines, Florida oranges and many other crops. The resulting rise in food prices has been a major factor in the recent surge in inflation, which has squeezed household budgets and tormented economies around the world.
“Consumers are just going to face higher prices,” said Shawn Addison, owner of the Olive Oil Source, an olive oil wholesaler in California that supplies grocery stores and restaurants.
In July, Addison got an email from his biggest supplier, which sources its oil from Australia and California, informing him that the price of wholesale olive oil was going up more than 30 per cent, effective immediately. Soon after, his second- and third-largest suppliers followed suit.
“Everybody jumped on the bandwagon and immediately jacked prices,” Addison said, noting that it showed how global markets work. On Tuesday, he issued a purchase order for olive oil at $39.50 a gallon, which until recently had cost him $29.50.
Some companies including Addison’s are looking to the Southern Hemisphere for more of their olive oil, but the impact of shortages in the Mediterranean may be hard to avoid, with a scramble for dwindling supplies making it trickier to get a deal on Chilean or Argentine olive oil.
Leah Bradley, chief financial officer of Veronica Foods, an olive oil supplier in California that counts Spangler’s Infused Oils & Vinegars among its clients, said South America and Australia had good crops last year, helping to mitigate some of the damage in Spain. “Relying on one hemisphere or one country or one region is not sustainable,” she said.
Because olive oil is produced in so many different parts of the world, the fear among sellers is less about a shortage and more about how much consumers are willing to pay.
At Olive Oil Source, Addison hasn’t noticed a drop in sales, which surprised him. In fact, he has seen a 20 per cent increase since July, even as he has passed along all of the “jacked” costs he pays his suppliers. He said he expected the business to remain lucrative.
The ability and willingness of consumers to shoulder the burden of higher prices have surprised economists and repeatedly defied predictions of a slowdown. But rising prices for some goods may be approaching the point where buyers eventually cut back.
Jesse Shapell, owner of Barboncino, a Neapolitan-style pizza restaurant in Brooklyn, New York, said he had really noticed the most recent increase in the price of olive oil in the past few weeks. If prices continued to rise, he may have to use less of it, he said.
“Being a small business already operating with thin margins, the rising cost of an essential ingredient like olive oil creates yet another challenge in bringing high-quality, affordable pizza and cuisine to our community,” Shapell said.
Gray Brooks, who owns Pizzeria Toro in Durham, North Carolina, said olive oil was crucial to giving the crust of his pizzas the flavor and texture that he described as a “hybrid between traditional pizza dough and focaccia.”
The soaring cost of olive oil, which Brooks sources from Italy, forced him to raise prices this month 5-10 per cent, he said, with about half of the increase due to the cost of olive oil. Most of his pizzas went up $1, with some going up $2, including the lamb meatball and venison sausage pies.
He’s not changing his recipe, but he said rising food costs had made his job more difficult, with olive oil just the latest headache.
“Lots of people like me are feeling the weight of it,” he said.