The olive oil market is navigating one of its most volatile periods in decades, as two successive drought-stricken harvests collided with resilient global demand. World production in the 2023/24 crop year fell to roughly 2.3 million metric tons, more than 20 percent below the five-year average, driven by poor flowering and water stress across the Mediterranean basin—the source of about 90 percent of supply.1 Even with some recovery expected in 2024/25, inventories have been drawn down to their lowest levels since 2015, keeping prices elevated and magnifying the influence of weather, irrigation infrastructure, and farmer financing.
Spain remains the swing producer and still accounts for about 45 percent of world output, yet its 2023/24 harvest reached only 770,000 tons after reservoirs in Andalusia dropped to record lows.2 Italy and Greece partially offset the deficit with their own rebounds to approximately 290,000 and 220,000 tons respectively, helped by better rainfall and targeted pest control.34 Portugal and Tunisia also recovered, but neither has the scale to rebalance the market quickly. Outside the Mediterranean, investments in high-density groves in California, Chile, and Australia are expanding capacity, though the combined non-Mediterranean share remains below 7 percent.5
Prices responded immediately to constrained supply. Extra virgin olive oil wholesale quotes in Jaén, the Spanish benchmark, surged above €8 per kilogram in late 2024, nearly triple the 2019 average.6 Retail shelves mirrored that path: EU consumer price indices show packaged olive oil inflation running at 50–70 percent year over year across Spain, Italy, and Greece, while U.S. grocery data report a 32 percent increase in average shelf prices.78 Food manufacturers reformulated some products to stretch use—particularly in ready meals and foodservice—but premium brands leaned into scarcity messaging, preserving margins even as volumes slipped.
Demand has proven stickier than many forecasters anticipated because olive oil straddles staple and premium positioning. In Europe and North Africa it is a culinary essential with limited substitutability; in North America and Asia it is still a premium health-led purchase for affluent consumers. NielsenIQ data show U.S. retail value sales rose 6 percent in 2024 despite a low-single-digit decline in volumes, indicating consumers shifted toward smaller formats and private labels rather than abandoning the category.8 In China and Japan, Euromonitor tracks compound annual value growth above 8 percent over the past five years, driven by e-commerce gifting sets and the link between Mediterranean diets and cardiovascular health narratives.9
Trade flows are being reshaped by the shortfall. The European Commission authorized temporary tariff suspensions to ease intra-EU movement, while Turkey maintained export quotas to protect domestic supplies.6 Morocco and Tunisia capitalized on the tight market, increasing exports to the EU by double digits, though infrastructure constraints at key ports limit how quickly these gains can scale.10 The United States, the largest import market outside Europe, has diversified sourcing among Spain, Tunisia, and Portugal to hedge against future climatic shocks, while also incentivizing domestic groves in California’s Central Valley through water-allocation reforms.5
Several forces will determine the market’s direction in 2025. First is climate adaptation. Growers are investing in deficit irrigation, regenerative soil practices, and heat-resilient cultivars, yet these measures require capital at a time when high interest rates and production insurance premiums are squeezing farm cash flows. Spain’s PERTE Agro grants and Italy’s NRRP-funded modernization programs aim to bridge that gap, but uptake is slow among smaller producers.23 Second is consumer trust. Adulteration risks rise when prices spike, prompting regulators to intensify authenticity testing and track-and-trace initiatives. The International Olive Council’s new physico-chemical standard revisions, due mid-2025, should tighten controls but could also raise costs for bottlers.1
Third, sustainability claims are moving from marketing to compliance. The EU’s forthcoming Packaging and Packaging Waste Regulation, combined with national eco-score labels, will reward companies that reduce glass weight, adopt recycled PET, or offer refill formats. Brands such as Deoleo and Filippo Berio are piloting lightweight bottles and carbon-labeled SKUs, hoping to lock in retailers’ sustainability-oriented planograms. Retailers, in turn, are using long-term contracts indexed to quality parameters rather than spot prices to ensure supply security.
Major risks center on weather, macroeconomics, and geopolitics. Another hot, dry summer in Iberia could trigger third-year production losses and further price spikes. A sharp global slowdown would erode premium demand just as new acreage from Argentina, Australia, and the United States comes online, creating a whiplash from scarcity to surplus by 2026. Finally, shipping disruptions in the Red Sea or Mediterranean port strikes could delay deliveries of bulk oil destined for North America and Asia, amplifying inventory risk for brands that run lean logistics.
For now, the market remains a tug-of-war between constrained supply and surprisingly resilient demand. If rains normalize in spring 2025, production could rebound toward 2.8 million tons, easing prices but keeping them well above pre-2022 averages because growers must recapitalize orchards and rebuild reserves. If drought persists, policymakers may intervene more aggressively through export limits, subsidies, or strategic stockpiles. Either way, the industry is being forced to modernize: precision agriculture, transparent sourcing, and premiumization strategies are no longer optional differentiators but necessities for navigating a structurally tighter olive oil economy.