Southern Europe drought could raise Finland’s olive oil prices

Exceptional heat and drought in southern Europe could reduce harvests and push up food prices in Finland this autumn, Yle reports. The greatest pressure is expected on olive oil, as well as fresh fruit and vegetables.

Jyrki Niemi, a research professor at the Natural Resources Institute Finland, said fresh produce would be affected first, while the impact on grain harvests appeared limited so far.

France recorded its hottest July since measurements began in 1900. The month was also exceptionally dry, with rainfall nearly 70 per cent below average, according to the French weather service. Spain, Italy and Greece have also been affected by heat and drought, with wildfires destroying residential areas and farmland.

Olive oil faces the greatest pressure

Spain, Italy, Greece and Portugal produce most of the world’s olive oil. According to the European Commission, EU countries account for 67 per cent of global production.

A smaller-than-expected olive harvest in these countries could raise olive oil prices worldwide. Olive trees can withstand heat and drought, Niemi said, but conditions as exceptional as this summer’s are already affecting harvests.

Olive oil is particularly vulnerable to price increases because there is little replacement production elsewhere in the world. Other agricultural products, including fruit and grain, can be sourced from different regions if southern European harvests fall short.

Rain has eased conditions in some European countries. Romania, for example, has received rainfall, while Italy’s wheat harvest appears to have performed well despite the drought. Finland has had more typical summer weather, without prolonged heatwaves or drought.

August weather will determine the price impact

Olive oil and fruit and vegetables grown in drought-affected countries are already expected to become slightly more expensive in Finnish grocery shops. Niemi estimates that the weather shock could currently raise prices by less than one per cent.

If the heat and drought continue well into autumn and August also brings little rain, harvest losses and price pressures could be greater than one per cent, he said.

Harvest conditions are not the only factor affecting consumer prices. Transport, energy and labour costs, as well as how price changes move through the food supply chain, will also have an impact.

Niemi said climate change is making heatwaves more frequent and longer-lasting. Increasingly extreme weather, including both drought and excessive rainfall, is contributing to greater fluctuations in food prices and making future price trends more difficult to predict.