ECONOMY

Drought abroad makes olive oil pricier at home

Retail olive oil prices are expected to rise steeply after this autumn’s harvest season, in line with the steady increase in producer prices. According to industry officials, firms are already planning increases of between 5.5 percent and 7 percent. «Producer prices have gone up 35-40 percent since July. If they remain at today’s level of 3.5-3.8 euros/kg, retail prices will be inevitably affected,» said Minerva Olive Oil company’s managing director, Giorgos Constianis. He estimates retail prices will rise by about 7 percent, but this will be clearer in November, when producer prices settle. He notes that manufacturing firms have a limited potential for putting up prices, being afraid of a shift in demand to other types of edible oils, as past experience testifies. «We cannot fully pass higher producer prices onto the consumer, otherwise we are likely to see a serious drop in the total consumption of standardized olive oil,» Constianis explained. «Under the present circumstances, our aim is not to lose market shares.» He added that falling standardized olive oil consumption is also causing concern in other European countries. Manufacturers in Spain, which, at about 500,000 tons annually, has the biggest market, are fearing a 15 percent slump in demand. But beyond the threat of consumers switching to other types of vegetable oils, manufacturers are also concerned at the increasing turn toward private labels, which now account for about 15 percent of consumption, and despite recent price hikes they still cost less than manufacturers’ brands. Although Greek olive oil production is estimated to be considerably higher this year, the rising producer prices are due to shortfalls in other countries, particularly Spain, due to drought. Spain is projected to produce between 800,000 and 1 million tons, Turkish production is feared to fall below half its usual level (at 110,000 tons), Syria is also seeing a drop to the same level as Turkey, while Tunisia is seen around its average of 180,000-200,000 a year. Greek market sources are saying that in the last three months producer prices have risen considerably above the considered «safety» levels of 2.85 euros/kg for extra virgin olive oil and 2.74 euros/kg for virgin, causing concern in Brussels, where the Commission, fearing a drop in exports, dealt with the issue earlier this month. If producer prices continue to rise, the responsible department of the Commission may allow the importing of duty-free olive oil from third countries in order to bring about a balance in prices, according to Community regulations.