Vassilis Zambounis, an agricultural economist who knows the olive sector like few others in Greece, spoke to topontiki.gr about the high price of olive oil that is still observed in supermarkets.
Mr. Zambounis referred to the increases in olive oil prices which, as he explained, are largely due to an “unnatural – natural” phenomenon, while he also gave his assessment for the next season.
He also compared the situation in other Mediterranean countries (Italy and Spain), saying that “the Greek consumer is squeezed not only by high olive oil prices but also by his limited income”.
At the same time, he spoke about “profiteering”, pointing out that “it is relatively easy to speak out. To identify, measure and combat it is the difficult part”, and finally he sounded the alarm, saying that “the current crisis threatens our olive cultivation”.
Here’s what he told us:
Mr. Zambounis, as an agricultural economist, what do you think is the reason for this huge increase in the price of olive oil? According to Eurostat, the increase in our country now reaches 67%…
“The increase in olive oil prices is due to an “unnatural – natural” phenomenon. Specifically, for two consecutive olive growing seasons (2022/23 – 2023/24), adverse weather conditions for olive cultivation – i.e. drought, hot winters, spring heat waves – led to a reduction in global production, resulting in a shortfall of around 850,000 tons every year.
The problem mainly affects Spain, which accounts for 45% of world production, but also the rest of the Mediterranean. Last year, for example, Greece and Turkey had high production of 350,000 tons each, while this year it is a question of whether they will reach 130-140,000 tons.”
Do you anticipate that there will be further price increases? How can consumers “protect” themselves?
“Already producer (raw material) prices, after a slight retreat, have stabilized at the level of 7.20 – 9.20 €/kg, while consumer prices are rising due to the time lag, but at a decreasing rate. What will happen in the future is anyone’s guess as it depends on climatic conditions.
This winter has been extremely warm – the olive tree needs a few hours of cold to rest in order to bear fruit – but it is going well with a lot of rain. If we get through the spring then we may see the 2024/25 harvest slowly return to normal levels and therefore prices may start to decline from the winter of 2024. Otherwise, with a third consecutive poor production, then we are heading for a nightmare scenario for olive growers, the whole olive industry and therefore consumers.”
We see that the phenomenon of rising olive oil prices is European, as prices have also risen in Spain and Italy. Is climate change also responsible for this situation?
“The comparison with other countries is very interesting. All three start from roughly the same starting point of initial raw material costs. Italy has significantly higher producer prices than Greece. However, if we compare the final prices on the supermarket shelves we see that Greek consumer prices are much more expensive. VAT also plays an important role, 13% in Greece, zero in Spain, 4% in Italy.
So, for example, we can see that the average representative price in Spain is currently 9.605 €/litre (from 9.25 to 9.90 € extra virgin oil / litre), while in Greece it is 12.56 €/litre (from 11.34 to 13.22 € depending on the quality category), i.e. about 3 €/litre or 30% more expensive. The same applies to Italy.
This is only one aspect, which worsens if we add the purchasing power of the consumer to the equation. The Greek consumer – according to official figures – has one of the lowest levels of Average Purchasing Power in the EU. Combined with the different prices mentioned above, this leads to the fact that the average quantity of olive oil he can buy is much less. The Spaniard has an income that allows him to buy 14.3 litres, the Italian 11.3 and the Greek 7.8 litres. So the Greek consumer is squeezed not only by the high olive oil prices but also by his limited income”.
Could the government take some measures? Many people talk about profiteering, but also the role of intermediaries.
“To talk about ΄profiteering’ is relatively easy. To identify, measure and combat it is the difficult part.
First of all, we cannot blame anyone unless we have a ‘bushel’ (roadmap) an objective comprehensive costing, from the olive grove and the grower to the supermarket to compare if someone is getting away with it and profiteering by making unreasonably high profits. The Spanish Ministry of Agriculture has and publishes such a detailed cost list, Greece does not.
Is there such a thing as ‘profiteering’? Very soon we can say that the producer is facing ever higher costs, while his income depends not only on the price he sells but also on the quantity he produces. This year, for example, has been a disaster.
The seller is doing a very difficult job, picking scattered micro lots in a uniform quality for a fee of 0.02€/kg.
The formulator/processor is caught in the ‘Complications’ between the cost, which is constantly rising, without being able to pass it on to the shelf and to the final consumer, except with a time lag and partially.
Ultimately, the only link that can regulate its revenues/profits is the retail chains, which have a dominant position. We can often see olive oils bought 1-2 years ago with an expiry date of a few months, albeit at outrageously abnormally high prices, but these may have been imposed by the retailer, not the industry. There are reports of practices of charging their suppliers through refunds, credit invoices, promotions, as well as treating them differently depending on their size, turnover, other products (codes) handled, etc.
Everyone – with the possible exception of the retail chains – stands to lose from this crisis of unknown duration, especially consumers. If only were the explanation. Before any ‘policing’ measures that a government might take (market controls, shelf pricing), we need a framework of comprehensive policies. In the new forthcoming 106th issue of Olive & Olive Oil we present Spain’s ‘Charter’ for food trade.
The Greek market is very ‘shallow’, of 15,000 tons compared to Spain’s 300,000 and Italy’s 400,000. Unfortunately, we lack strong agricultural cooperatives, whereas in all countries they are healthy enterprises with a role as social ‘shock absorbers’ for regulating the market. In addition, there are increased costs, from electricity and packaging materials to bank charges, which are borne by everyone at every step until the final consumer pays for it.
Here in Greece one of the biggest problems is the deep-rooted habit of the 17-litre anonymous bulk “tin container”. A realistic proposal, without any budgetary cost, from which everyone would benefit, is the ‘producer’s five-litre’. In other words, the gradual implementation of the stamped, branded five-litre olive-oil drink, which would be packaged directly at the mill and could be marketed by the olive grower himself with legal documents. The olive cultivator would have the pride of his branded production without financial loss of a single cent, the cooperatives and mills would find a complementary profitable activity, consumers would find a controlled, safe product, easy to transport and easy to maintain at home, the mass catering industry an incentive to substitute some seed oils, the state an additional income to reduce VAT from the unbelievable 13%, the Ministry and ELSTAT more reliable statistics on the movement (‘traceability’) of olive oil.
So we need a long, calm discussion. There is a lack of institutional sectoral professional organisations, as there are from California to Pakistan, to work out an agricultural oil policy. Between serious and funny, like inviting communicators, financial advisors, football coaches, etc., it might be a good idea to invite a Spanish olive oil expert.
The current crisis threatens our olive oil industry. Let us not forget that olives and olive oil are our ‘national products’, indispensable for our good health in the context of the Mediterranean diet, the ‘economically exploitable forest, which protects the climate, and contributes around EUR 4 billion a year to our national economy’.