Olive oil prices surge as drought hits harvests

Oil prices have surged so far this year but this time we're not talking about the black stuff, but rather the type that comes from olives.

The price of olive oil is up around a quarter this year to more than $4,200 a tonne, says the Financial Times.

According to the Daily Telegraph, the cost of a litre bottle has risen six per cent to £5.16 "in the past six months alone". The price was £4.41 in 2009.

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While some of this could reflect the increase in import prices related to the slump in the pound following the vote for Brexit, it is more a reflection of reduced supply after drought affected harvests in Southern Europe.

"Italy is terrible, Greece is terrible, and Tunisia is terrible. Can you imagine if Spain had also been down sharply?" said Panayotis Karantonis, director of the Greek Association of OIive Oil Processors and Packers.

Vito Martielli, a grains and oilseeds analyst at Dutch multinational Rabobank, said: "We have had bad weather affecting production three years out of the last five."

World production is forecast to fall 14 per cent for the 12 months to September, with output from Italy to drop by 50 per cent, by 20 per cent from Greece and 17 per cent from Tunisia, according to the International Olive Council.

"Production in Spain, known in the industry as the Saudi Arabia of olive oil because of the size of its output, [is] predicted to decline 7 per cent," says the FT.