The Agronomic and Macroeconomic Forces Behind Olive Oil Prices in Italy

Olive oil prices in Italy have risen from 90 to 130 per­cent since September 2022, reflect­ing a com­bi­na­tion of agro­nomic and macro­eco­nomic fac­tors that have com­pli­cated the sit­u­a­tion for pro­duc­ers and con­sumers.

Climate change, olive fruit fly infes­ta­tions, infla­tion, labor and import short­ages have cre­ated a per­fect storm for the Italian olive oil sec­tor.

According to research pub­lished in the sci­en­tific jour­nal Agronomy, cli­mate change has impacted olive pro­duc­tion sig­nif­i­cantly over the last few years in Italy, mod­i­fy­ing the suit­able grow­ing areas for olive trees and exac­er­bat­ing extreme weather events.

While cli­mate change has made it pos­si­ble to cul­ti­vate olive trees in areas where it was not before – such as in many north­ern and moun­tain­ous regions of Italy – it has also made olive grow­ing harder and more unpre­dictable in tra­di­tional areas.

For exam­ple, last sum­mer and win­ter were very dry, caus­ing trees to suf­fer from drought. Then, dur­ing flow­er­ing, windy and rainy weather resulted in a poor fruit set and, in turn, a lower olive yield.

In gen­eral, the sea­sons are chang­ing faster than the trees can adapt, con­tribut­ing to the trend of declin­ing pro­duc­tion in Italy over the past three decades.

Climate change has also cre­ated favor­able con­di­tions for the olive fruit fly, the most per­ni­cious pest for the crop, and the spread of other pests and dis­eases.

Due to higher aver­age tem­per­a­tures through­out the year, espe­cially in win­ter, its sur­vival rate and repro­duc­tion cycles have sig­nif­i­cantly increased.

Moreover, this past sum­mer in Italy, the weather was more humid than in other years, facil­i­tat­ing the sur­vival of olive fly lar­vae, which are more likely to die in hot and dry weather.

Due to the impacts of cli­mate change, south­ern Italian regions are expe­ri­enc­ing more prob­lems with drought, while the areas most affected by olive fruit flies are shift­ing to the north.

“This sum­mer, it has been hot and dry here in Sicily, and this cre­ated an unfa­vor­able envi­ron­ment for olive fruit flies,” said Giuseppe Milano, an agron­o­mist at the win­ery and olive oil pro­ducer Donnafugata. ​“We used pheromone traps as a pre­cau­tion, but we didn’t need any addi­tional inter­ven­tion to pro­tect our olives, and this allowed us also to have a bet­ter har­vest than last sea­son.”

Olives attacked by flies lose most of their nutri­tional qual­i­ties because of pre­ma­ture oxi­da­tion. Besides a reduced yield in affected groves, there are also more risks of lower-qual­ity pro­duc­tion.

Along with agro­nomic chal­lenges exac­er­bated by cli­mate change, the high cost of liv­ing, but espe­cially the lack of avail­able labor, is caus­ing many issues for pro­duc­ers.

In Europe and espe­cially Italy, the cost of liv­ing has increased sig­nif­i­cantly due to ris­ing infla­tion, which has reached more than six per­cent in the past year, accord­ing to offi­cial data from the Italian National Institute of Statistics.

Rising prices have caused a series of chain reac­tions in the mar­ket. Moreover, wars and mar­ket spec­u­la­tion have made the eco­nomic sit­u­a­tion even more chal­leng­ing for small pro­duc­ers.

All the costs for farm­ers have increased, espe­cially fer­til­iz­ers, fuels and equip­ment. These soar­ing pro­duc­tion costs have sub­se­quently been trans­ferred to the con­sumer, com­pound­ing the rise in olive oil prices.

But the biggest issue for olive grow­ers is the lack of labor for har­vest­ing, cul­ti­va­tion and other spe­cific oper­a­tions such as prun­ing.

The labor short­age is because agri­cul­tural work has lost appeal among young peo­ple who pre­fer less phys­i­cal jobs. Still, it is fur­ther exac­er­bated by low and unsta­ble wages, mak­ing it chal­leng­ing to attract and retain the skilled work­force needed for spe­cific olive tree oper­a­tions.

“All the costs have increased for us due to infla­tion, and every year, it is harder to find spe­cial­ized work­ers,” said Eugenio Ranchino of Frantoio Ranchino in Umbria. ​“However, we can­not raise prices too much; oth­er­wise, we would have dif­fi­cul­ties sell­ing it to our loyal cus­tomers, who are mostly locals.”

The inabil­ity to main­tain a skilled work­force from one har­vest to the next is caus­ing many man­age­ment issues and increas­ing costs that, in the long run, could cause pos­si­ble land aban­don­ment.

There are sub­si­dies from the Common Agricultural Policy to sup­port tra­di­tional olive grow­ers and pre­vent aban­don­ment, but many in the sec­tor argue that these are not enough.

Aside from the impacts of cli­mate change and the macro­eco­nomic sit­u­a­tion, olive oil prices in Italy are also affected by the gen­eral lack of sup­ply domes­ti­cally and inter­na­tion­ally.

Italy is expected to pro­duce about 289,000 tons of olive oil in the 2023/24 crop year, exceed­ing last year’s yield by about 20 per­cent and the five-year aver­age by five per­cent.

However, this pro­duc­tion is insuf­fi­cient to meet demand from the domes­tic and export mar­kets. On aver­age, Italy sells one mil­lion tons of olive oil annu­ally, import­ing what it does not pro­duce domes­ti­cally.

Typically, Italian bot­tlers turn to Greece, Spain and Tunisia to meet the short­fall. However, Spain’s his­tor­i­cally poor har­vest last year and antic­i­pa­tion of another low yield this year mean bot­tlers have had to turn else­where, includ­ing Turkey and Morocco.

This reshuf­fle was fur­ther com­pli­cated when both coun­tries banned bulk exports ear­lier in the autumn to stem ris­ing prices at home.

“Not many peo­ple know that there are also the largest olive oil pack­ag­ing com­pa­nies in Italy,” said Giulio Mannelli, the pres­i­dent of the asso­ci­a­tion Aprol. ​“We pro­duce only around thirty per­cent of the national pro­duc­tion, and most of the olive oil comes from imports.”

“This prob­lem is exac­er­bated by a huge decrease in pro­duc­tion this year and increas­ing demand, espe­cially from abroad and through e‑commerce,” he added.

Adapting to the chang­ing cli­matic and macro­eco­nomic sit­u­a­tion in the olive groves will be crit­i­cal to the sec­tor. There are some solu­tions; one could be genetic research on new cul­ti­vars of olive trees that are more resilient to cli­mate change.

Another solu­tion could come from data col­lec­tion and land­scape analy­sis to find new, more suit­able cul­ti­va­tion areas, inte­grat­ing mete­o­ro­log­i­cal sta­tions in exist­ing areas and using pre­dic­tive mod­els to pre­vent dam­age from extreme weather and pest infes­ta­tions.

One solu­tion to the lack of a spe­cial­ized work­force and the rise in costs could be the train­ing of new migrant work­ers or tech­no­log­i­cal appli­ca­tions. New tech­nolo­gies could come from pre­ci­sion agri­cul­ture using drones, mech­a­niza­tion of many hand oper­a­tions, and adopt­ing super-inten­sive [high-den­sity and super-high-den­sity] plan­ta­tions to increase pro­duc­tion effi­ciency.

• Il Sole 24 Ore
• Agronomy
• Climatic Change