After extreme heat in southern Europe caused significant crop damage, olive oil prices are soaring further into record-breaking territory. This has led the cost of cooking a classic Pizza Margherita to remain well above the current Italian inflation rate.
Bloomberg calculations based on Istat and Economy Ministry data showed the cost of ingredients plus energy to cook a Pizza Margherita increased 14% in June compared to a year earlier. The good news is costs associated with pizza-making have subsided since late 2022 but remain twice that of overall Italian inflation.
"The cost of buying prepared pizza rose only 7% from a year earlier, making it more worth while to buy a ready-made version of the delicacy at the store," Bloomberg noted.
The five components of the pizza basket include flour, mozzarella, tomato, olive oil, and electricity.
Here's the cost breakdown:
- Flour consumer prices rose 6.8% Y/y but fell 0.6% M/m
- Mozzarella consumer prices rose 17.7% Y/y but fell 0.4% M/m
- Tomato consumer prices rose 12.8% Y/y but fell 10.0% M/m
- Olive oil consumer prices rose 26.7% Y/y and 2.4% M/m
- Electricity consumer prices rose 1.4% Y/y but fell 6.6% M/m
And a visual of the roller coaster in the price of the pizza basket cost index.
The good news is pizza making costs are coming back down to Earth. But one of the basket's components, olive oil, continues to soar to new record heights.
We penned a note in May titled Olive Oil Prices Soar As Top Producer Plagued With Drought, which outlined that severe drought and parched soils in Spain have sparked widespread olive tree crop damage.
Data from Bloomberg shows that Spanish extra-virgin olive oil prices have risen 282% since the August 2020 lows. Prices command 7,519 euros per metric ton -- the highest level on record with data going back to 2010.
"Output in Spain could more than halve this season due to the arid conditions, according to a Spanish farming industry group," Bloomberg wrote in May. Spain accounts for 40% of the world's supply, indicating that prices across Europe and other regions are set to increase further.
Declining olive oil production due to the devastating effects of heat waves in Europe offers a grim outlook for pizza lovers battered by high costs.
