Olive Oil

Our Favourite Liquid Gold

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Olive oil consumers are becoming clearer as to why the Greek poet Homer referred to it as "liquid gold," now retailing at up to R300 a litre. Under current conditions, only an excellent harvest will stabilize the price, by permitting a greater availability of the commodity. Vittoria Castagnetta, director at Morgenster, a Chamber member and a leading South African company in olive oil and wine production, states that the availability and pricing of extra virgin olive oil worldwide will be influenced by the upcoming European harvest.

According to The Guardian, Spanish consumers who a few years ago were spending less than 5€ (R100) on a litre of high-quality extra virgin olive oil are now spending up to 14€ a bottle. In European shops, olive oil has been reported as the most frequently stolen item. Because of this, there's a greater effort to keep it secure, even using specialized anti-theft containers to make it harder for thieves to steal. A British newspaper has stated that there is an increasing number of criminal gangs focused on stealing the liquid gold, especially in Mediterranean Europe, in order to resell it at higher prices abroad. In December 2023, members of an international gang were arrested, primarily targeting profits from reselling high-quality Italian and Spanish olive oil. Eleven criminals were captured, and approximately 5000 liters of olive oil worth R1,500,000 were confiscated.

Those who have been able to produce olive oil have not necessarily had many complaints. As illustrated by the graph below, while the quantity exported has been decreasing over the last five year, the value of olive oil exports increased dramatically. This trend is primarily driven by higher prices resulting from increased demand and reduced supply, largely due to poor harvests and adverse environmental changes.

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Price rises are an inevitable consequence of decreasing supply when it comes to a commodity as much in demand as olive oil. Dramatic price increases such as that undergone by olive oil as a commodity causes a chain reaction throughout the oil sector and also affecting those goods that use it. In the face of this, farmers and exporters struggle to meet global demand, even leading to a tendency to lower quality and the spread of counterfeit goods in the market. This problem has arisen mainly due to environmental changes, which has therefore led to a decrease in the quantities of olive oil produced.

These climatic changes, such as temperature anomalies that are difficult to predict, have made the cultivation of olive trees (which take 25 years to mature), using traditional methods, much more difficult. This inconvenience that has occurred in recent years could worsen still, causing a considerable impact on the agricultural sector in the future.

Castagnetta also points out that while climate change certainly plays a significant role, there is also an increase in demand for extra virgin olive oil due to health and lifestyle trends. As evidence of this, during the 10 years before the recent price shock, global olive oil exports rose steadily with little effect on the price. This price buoyancy suggests a demand that kept up with increasing supply.

South African current Situation

The fluctuating prices of olive oil and its derivatives on our local shelves can be attributed to all of these reasons. In 2023, data shows that Spain (68.7%), Italy (25.9%), Greece (1.9%), and Portugal (3.1%) were the top exporters of olive oil into South Africa. Major export markets for South Africa's olive oil include during that time were, among others, Namibia (21.3%), Zambia (12.3%), Botswana (17.1%), eSwatini (6.8%), USA (6.7%), Mozambique (5.1%), and Zimbabwe (6.1%), therefore, primarily in Sub-Saharan Africa.

Due to its net importation of olive oil, South Africans are exposed to global price increases. However, Castagnetta highlighted the favourable conditions for South African exports in the coming years, where South Africa can plug the gap of other climate-hit suppliers. However, she also noted a substantial increase in local demand that must be met, particularly due to reduced imports of extra virgin olive oil. A Mediterranean-style environment is mostly used to grow olives and olive oil. Due to its Mediterranean-style environment, South Africa’s Western Cape region is the primary location for the production of olives required to make olive oil. As a result, it produces 95% of the olive oil produced in the country.

Production remains small-scale. Nearly half of the 200 registered olive growers in the SA Olive Association operate on farms that are smaller than 5 hectares, reflecting the country's continued reliance on small-scale olive farming. Nonetheless, despite their tiny size, South African olive oil has excelled in international competitions, winning top honors in categories that are often dominated by olive oils from Spain and Italy. For this reason, Castagnetta believes that in terms of quantity, South Africa remains a relatively minor producer. However, in terms of quality, South African extra virgin olive oils are already competing with some of the finest in the world.

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