Heat in Spain will reduce olive oil production, which will support sunflower oil prices

Spain's Ministry of Agriculture said the intense summer heat will lead to a sharp reduction in olive oil production in the country, which provides half of the world's production. "If in the near future the temperature does not decrease or the rains do not come, the olive harvest will be much lower than in previous years," the MSG reported.

A decrease in the production and export of olive oil from Spain against the background of long-term interruptions in the supply of sunflower oil from Ukraine will keep the world prices for vegetable oils at a high level.

Spain annually produces 1.3 million tons of olive oil, which is the country's third largest agricultural export. According to the International Olive Council, prices for refined olive oil from the Spanish producer Jaen rose by 8.3% in June compared to the previous harvest.

According to the forecasts of the US MSG, in 2022/23 the global production of olive oil will decrease by 11% to 2.9 million tons. This will support the prices of another premium vegetable oil - sunflower, whose production forecasts in the current season have also been reduced due to the decrease in the sunflower harvest in Ukraine by 60-70% due to Russia's military actions in the south and east of Ukraine.

During the month, the prices of sunflower oil for delivery to EU countries decreased from $1,600-1,800/t to $1,200-1,400/t under the pressure of falling palm oil prices to $880-900/t. At the same time, soybean oil prices remain at $1,300-1,400/t FOB US or Argentina, which keeps sunflower oil prices from falling further.

If in the last season the premium between palm, soybean and sunflower oils decreased significantly, in the new season the premium for sunflower oil relative to palm and soybean is increasing again, especially against the background of increased demand from the EU due to the reduction of olive oil production.