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Is olive oil in danger of becoming a luxury item?

2024-06-27 08:53:53Biznes SHKRUAR NGA REDAKSIA VOX

Is olive oil in danger of becoming a luxury item?

There has been a big push in Spain and across Europe to reduce VAT to zero on olive oil. Economists in the Iberian country believe that this will affect the public coffers, while producers point out that the heat has destroyed production with the result that despite the VAT reduction, prices remain at very high levels as demand has increased, but supply has decreased significantly. Amounts paid by consumers have tripled by 2021. The VAT cut is a financial incentive for some, but the key remains for the countryside to overcome drought and improve crops.

Olive oil prices are 130% higher than two years ago, according to the latest figures from the Spanish Ministry of Agriculture, Fisheries and Food. Despite the rains of the last months and the expected recovery of production, the data for this year show that the product will continue to become more expensive in the following months and although the reduction of VAT to 0% for this food will ease the pockets of consumers , in the long run only improving yields will put an end to rising quantities.

Farmers say the heatwaves of the past two years, with temperatures above 35 degrees in the spring, prevented olive trees from having a cool period to flower and produce fruit for the new crops. This caused a halving of production and an unprecedented increase in price both in the domestic and international markets.

From January 2021 to May this year, the 'green gold' has become more expensive by almost 199% in Spain, according to data from the National Institute of Statistics, i.e. they have tripled. In Europe, its value has not stopped increasing over the past three years, with year-to-year fluctuations exceeding 50% on more than one occasion.

The European Commission estimates that the total production of olive oil in the EU will reach 1.49 million tons in the current campaign, which represents an increase of 7% compared to the previous season. However, the figure is 28% below the five-year average and the product in storage has halved its usual figure – once around 500,000 tonnes, reflecting the poor yields of the past two years.

Spain, which produces about half of the world's olive oil, is the country that has seen the biggest drop in production due to drought and increased agricultural inputs such as fertilizers. The latest June figures from the International Olive Oil Council – IOC – show that refined oil prices were €727 per 100kg, 32.5% higher than in the previous campaign.

As the world's largest producer, Spain's supply is essential to the industry and affects market prices. In 2023, the extra virgin oil market lost 23.8% of purchase volume compared to the previous year. A sign that for many families, buying this product has become a luxury.


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