`Despite Falling Prices at Origin, Olive Oil Retail Prices Remain Elevated - Olive Oil Times
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Despite Falling Prices at Origin, Olive Oil Retail Prices Remain Elevated

By Ofeoritse Daibo
Jul. 18, 2024 17:13 UTC

High olive oil prices have cap­tured the public’s atten­tion across Europe.

According to European Commission data, aver­age olive oil prices at retail across the European Union’s 27 mem­ber states were 45 per­cent higher in June 2024 than the pre­vi­ous year. By com­par­i­son, aver­age food prices increased by 1.3 per­cent over that period, while the broader fats and oils cat­e­gory increased by 13 per­cent.

Meanwhile, price tracker data pub­lished in April by The Grocer, a United Kingdom-based trade pub­li­ca­tion, show the aver­age cost of white-label olive oil brands in the country’s largest super­mar­kets reached £7.38 (€8.60) per liter, a 42 per­cent increase com­pared to April 2023.

See Also:Bank of Spain Attributes Ongoing Inflation to Soaring Olive Oil Prices

Further data from the International Monetary Fund’s bench­mark com­mod­ity tracker, deter­mined by the largest exporter, show olive oil prices at $9,157 (€8,530) per ton in June, 27 per­cent above last year.

Rising olive oil prices have been fueled by two con­sec­u­tive poor har­vests across the Mediterranean basin, espe­cially in Spain, paired with resilient demand.

While some ana­lysts are con­cerned that high olive oil prices could resem­ble regres­sive taxes, dis­pro­por­tion­ately impact­ing low-income house­holds, Lisa Paglietti, an econ­o­mist at the United Nations Food and Agriculture Organization (FAO), dis­putes this notion.

“The term ​‘regres­sive tax’ car­ries sig­nif­i­cant polit­i­cal and social weight, so it might be more pro­duc­tive to focus on the over­all impact rather than fram­ing it as a regres­sive tax issue,” she told Olive Oil Times. ​“Analyzing per capita con­sump­tion in rela­tion to income lev­els could pro­vide valu­able insights.”

“Understanding the dis­tri­b­u­tional impact of the price increase on dif­fer­ent income groups is cru­cial to deter­mine whether it con­sti­tutes a regres­sive tax,” Paglieti said. ​“If the rise in olive oil prices dis­pro­por­tion­ately affects lower-income indi­vid­u­als, it could be regres­sive.”

“However, if the price increase results from fac­tors impact­ing all income lev­els equally, such as a global olive oil short­age, it might not be con­sid­ered a regres­sive tax but rather a gen­eral rise in the cost of liv­ing,” she added. ​“I believe it has hap­pened at all lev­els, affect­ing all income lev­els.”

Some gov­ern­ments have taken action to mit­i­gate the effects of expen­sive olive oil on house­holds.

Authorities in Turkey and Morocco enacted bulk export bans to increase the domes­tic olive oil sup­ply and pro­mote indi­vid­u­ally pack­aged exports, which com­mand higher prices. However, pro­duc­ers and con­sumers in both coun­tries have ques­tioned the effec­tive­ness of these mea­sures.

Meanwhile, the Tunisian gov­ern­ment announced plans to cap the price of olive oil on the domes­tic mar­ket at 15 Tunisian dinars (€4.45) per liter in December and put 10,500 liters of extra vir­gin olive oil aside for this ini­tia­tive.

However, some con­sumers have dis­puted the effec­tive­ness of these efforts and alleged that they are not well enforced.

In Spain, author­i­ties took a dif­fer­ent approach, remov­ing the Value Added Tax, sim­i­lar to a sales tax, from olive oil and other kitchen sta­ples to help house­holds cope with ris­ing liv­ing costs.

This deci­sion was made in response to major retail chains’ price increases for olive oils, which have caused frus­tra­tion and protests among the Spanish peo­ple who heav­ily con­sume this ingre­di­ent.

While olive oil prices at ori­gin in Spain have fallen by 25 per­cent from the record-high lev­els reached in mid-January, prices at retail have not fol­lowed suit.

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This is mainly due to pre­vail­ing mar­ket dynam­ics. Many retail­ers pur­chased the olive oil they were cur­rently sell­ing between November 2023 and January 2024 when prices at ori­gin were approach­ing their record high.

As a result, they need to sell the olive oil at a higher markup to make a profit, even as prices at ori­gin have fallen.

Other dri­vers of high retail prices are com­pa­nies hedg­ing against poten­tial losses from another poor har­vest and spec­u­la­tion by com­pa­nies that buy olive oil and hold onto it before reselling it at a higher price later on.

As retail prices remain high, con­sumers may reduce their con­sump­tion or switch to cheaper alter­na­tives. This can decrease demand, low­er­ing retail prices as the mar­ket adjusts.

Changes in global demand for olive oil may also impact olive oil prices at European retail.

As the appetite for olive oil grows in non-tra­di­tional mar­kets, pro­duc­ers and exporters will divert more of their prod­uct there, where they can habit­u­ally charge higher prices, leav­ing less for tra­di­tional mar­kets.

“It’s impor­tant to rec­og­nize that non-tra­di­tional olive oil-pro­duc­ing coun­tries, out­side of the E.U., now account for a larger share of total olive oil con­sump­tion,” Paglieti said. ​“Producers and dis­trib­u­tors should embrace the chal­lenge of prod­uct dif­fer­en­ti­a­tion and mar­ket devel­op­ment, espe­cially for those olive oils mar­keted based on qual­ity rather than price.”

“While every mar­ket and niche is unique, pro­duc­ers may need to adapt their strate­gies in newer mar­kets,” she added. ​“Without mar­ket devel­op­ment efforts, there might be a higher degree of price elas­tic­ity of demand, and non-tra­di­tional mar­kets could present greater growth poten­tial in the future.”

Consumer agen­cies, such as Spain’s Organization of Consumers and Users (OCU), a non-profit con­sumer price watch­dog, have offered valu­able advice on cost-effec­tive meth­ods for pur­chas­ing olive oil with­out com­pro­mis­ing its ben­e­fits.

Recommendations include buy­ing larger for­mats (which decreases the price per unit), prop­erly stor­ing olive oil to last as long as pos­si­ble, tak­ing advan­tage of pro­mo­tional dis­counts, reduc­ing the amount used in each prepa­ra­tion and sup­port­ing local pro­duc­ers.

Paglieti rec­om­mends buy­ing dif­fer­ent grades of olive oil for var­i­ous pur­poses. For exam­ple, keep the expen­sive bot­tle of extra vir­gin olive oil for fin­ish­ing dishes such as sal­ads while using a vir­gin or non-vir­gin for sauteéing and bak­ing.

“A high-qual­ity fruity oil, with its strong sea­son­ing power and dis­tinct sen­sory char­ac­ter­is­tics, can be used in smaller quan­ti­ties and reserved for spe­cial occa­sions or spe­cial dishes, thereby reduc­ing the eco­nomic impact since it is gen­er­ally more expen­sive,” she said.

“More ordi­nary and less costly extra vir­gin oils can be used for cook­ing and as a base prepa­ra­tion for dishes,” Paglietti added. ​“Another sug­ges­tion is to buy smaller pack­ages of high-end prod­ucts to reduce the check­out amount and ensure a high rota­tion stock, con­sid­er­ing these prod­ucts are con­sumed in smaller quan­ti­ties.”

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