Drought in Europe triggers demand in the Middle East

“Olive oil is gold”: Drought in Europe boosts demand in the Middle East

Middle Eastern producers “swimming in olive oil” smell opportunity as European harvests are reduced by the heat wave. As a result, the Middle East has a new product in high demand: olive oil.

In Tunisia, the price per kilo of extra virgin olive oil has increased by more than 100% compared to last year, and in Turkey, wholesale demand for olive oil is so high that the government has just introduced a $0.20 tax on each kilo exported abroad.

The market is so tight that even small producers like Lebanon are experiencing unprecedented demand for their oil. Last month, a Spanish company landed in the crisis-hit Mediterranean country and bought up all local wholesale supplies, raising fears of shortages for Lebanese-branded exports.

“If I had a large order from the US or Europe today, I wouldn’t be able to fulfill it. The Spanish diverted olive oil from Lebanon,” Christian Kamel, Fair Trade project manager in Lebanon, told Middle East Eye.

Rising temperatures in southern Europe are causing prices to skyrocket. Spain, which produces half the world’s olive oil, is suffering from a severe drought. It produced only 620,000 tons during the 2022-2023 harvest, compared to 1.5 million tons in normal times. Tunisia Sells 90% of Its Olive Oil
European producers have already turned to Tunisia, the largest olive oil producer in the Arab world, to fill the gap. Thus, Tunisia sells 90% of its olive oil wholesale to heavyweights such as Spain and Italy. It is blended with other oils and marketed abroad under Spanish or Italian labels.

Yields in the 2022-2023 harvest were low by historical standards, but the tight market is supporting export earnings, which increased by nearly 37%. Exports are expected to increase 30% to 200,000 metric tons for the 2023-2024 fall harvest, up from 155,000 metric tons last year.

“Tunisian [olive] varieties are more resistant to drought compared to Spanish ones,” Fahd Ben Ameur, marketing manager of Tunisian olive oil exporter Bulla Regia, told MEE.

But as Europe suffers an unprecedented heatwave and the autumn harvest approaches, there are fears of a global olive oil shortage. “By October and November, we could see a complete shortage of Spanish olive oil. That’s why these companies are turning to other parts of the region. They’re looking for olive oil wherever they can,” says Kyle Holland, an oilseed and vegetable oil specialist at Mintec, a food market data analytics company.

Lebanese Olive Oil
“The drop in production in Spain has opened up many opportunities for other players,” he adds. And the reliance on Lebanon for wholesale supply shows just how desperate the situation is. In Lebanon, the shortage of wholesale supplies shows how desperate the situation is. Olive groves account for about 23% of Lebanese farmland, but unlike Tunisia, production tends to come from smaller family-run olive farms. In 2021-2022, Lebanon produced only 15,000 metric tons of olive oil.

But the Lebanese harvest has not been affected by the drought plaguing the rest of the Mediterranean. “The species we have in Lebanon is very resilient and adapted to climate change,” says Assaad Saadeh, a fourth-generation producer who runs Maison Mazak in Shabtine. He began exporting his family’s olive oil three years ago, and now the UAE is his main outlet.

Lebanon is in the midst of an economic collapse, and its currency has lost 95% of its value against the dollar. The country is suffering from blackouts and its infrastructure is collapsing, and the crisis has increased bottling and production prices, says Assaad Saadeh, but it has one advantage: “Europe must irrigate, not us.”

Lebanon belongs to a region known as the Levant, or Bilad al-Cham in Arabic, which includes Syria, Jordan, Palestine, and Israel. Syrian olive oil was the fourth largest in the world before the civil war, and part of its harvest (Syria produced 143,000 metric tons of olive oil in 2020-2021) is still sold in Turkey, according to regional producers.

But few other Arab countries in the Levant have managed to enter exports to developed markets,Despite producing olive oil for thousands of years, most farms are family-owned and lack the economies of scale to compete with Tunisia or Spain. Furthermore, they have no desire to compete with Greece or Italy.

Olive Oil from Turkey

The same is true for olive oil exporters in Turkey, who enjoyed a record harvest last year, with oil production exceeding the estimated 420,000 metric tons. “When I send my olive oil abroad, I know I have to price my product more competitively on the shelves. My margins remain below those of Greece or Italy,” says Duygu Özerson Elakdar, owner of 60,000 olive trees in the province of İzmir.

The price per kilo of Turkish olive oil has more than doubled since the beginning of the year, reaching July prices of 185 Turkish liras per kilo (about 6.25 euros), the producer specifies.

Jordanian Olive Oil

The price increase comes at the perfect time for Jordanian producers: a consortium of four major farms, one of which belongs to King Abdullah II, plans to launch a private brand in the United States.

Jordan’s average production is small, around 25,000 metric tons per year, and is consumed primarily domestically. According to Khodari, the consortium, which has already received pre-orders for 50,000 bottles for next year’s harvest, intends to sell the surplus, or between 3,000 and 5,000 tons, in the West.

“Jordanian olive oil is very expensive, but it’s top quality. So there’s no doubt that the lower quantities in Europe are an advantage for Jordan. It’s great for us because we aim for the top of the range. Sometimes Allah just smiles on you.”

Nidal Samain, owner of Aljood Farms in Jordan and one of the region’s leading olive oil experts, believes the Jordanian olive oil sector is well positioned to take on climate change. The country is one of the most water-scarce countries in the world.

The local olive tree, the Nabali, is “perfect in times of drought. It thrives in the desert,” he told MEE. “The best olive oil in Jordan is produced in the desert without water supply.”

Any increase in olive oil exports would be good for countries whose economies are in very bad shape. Jordan faces sky-high unemployment and survives on US aid. Turkey, for its part, is facing a currency crisis and inflation close to 40%.

“We are suffering from hyperinflation, so Turkish olive oil is generally cheap compared to other producers,” says Duygu Özerson Elakdar. “But we are not seeing large gains in our profit margins. Producers are struggling to keep up with the devaluation of the pound.”

The Turkish government is also seeking to increase its revenue and encourage brand exports in this buying frenzy. He argues that the new tax on wholesale olive oil exports is a good reason to boost its brand’s overseas sales in this tight market.