Olive oil prices hit decade-long high after terrible harvest in Europe

Supply in Italy and Spain has fallen dramatically after adverse weather this summer

Olive tree (Broker/Rex)

Olive oil prices have hit a decade-long high as poor harvests in the world’s two biggest producers drive up its scarcity.

Spain and Italy saw 54 per cent and 34 per cent falls in production respectively due to excessively hot and wet weather, constricting supply.

Pietro Sandali, head of the Italian olive growers consortium, Unaprol, told the Guardian newspaper that the 2014 harvest had been “the worst year in memory”.

The International Olive Council predicted last month that production at the end of this financial year would fall to its lowest level in 15 years.

Producers are expected to generate 2.39m tons of olive oil in 2014/15, compared to 3.27m tons of oil produced in 2013/2014.

Greek olive oil on sale (Getty Images)

Production is also expected to fall below consumption and eat into existing stock and reserves.

Wholesale bulk prices hit $4281.95 per metric ton, according to oliveoilmarket.eu, up from $3,613.35 at the end of 2013. This previous level which was itself a dramatic increase on prices in early 2012.

Two exceptions to the supply shortfall were in Tunisia and Greece.

In Greece, cash strapped producers have sold their product off at rock-bottom prices in order to raise funds to continue operating, industry publication The Olive Oil Times reports.

The fall in prices is tied to the economic uncertainty in the country, where banks are loathe to extend credit amid the spectre of the eurozone crisis.

Producers are using revenue from increased sales to fund expansion and production costs, which would normally be met by credit.

In Tunisia, a bumper harvest caused by perfect weather conditions has led to production twice the volume of last year’s haul. Producers in the North African country are looking to link up with European buyers.