Econintersect: Consumption of olive oil in the southern Eurozone countries along the Mediterranean has plunged because of the austerity programs initiated to deal with the debt crisis. People just can no longer afford what has been a dietary staple for millennia. And the drop in consumption has coincided with a bumper crop of the oil in Spain, creating a glut and collapsing prices. This is adding to the unemployment problems in rural Spain where olives are a major crop. According to the Financial Times, the EU has started paying companies to stockpile the surplus oil because, even at lower prices, the rest of the world is not making up for the Greek, Italian and Spanish cutbacks in consumption.
Vegetable oil is displacing olive oil in Mediterranean diets because of cost. From the Financial Times:
Eroski, a popular supermarket chain in Spain, sells sunflower oil at €1.25 a litre, against average-quality olive oil at €1.99 and premium extra-virgin olive oil at €3.25.
The reason for the bumper crop is that Spain has had increased acreage planted to olives over the past decade as some of the profits from the Spanish housing boom were invested in that way. In addition the EU has subsidized the cultivation of olives.
The price of olive oil today is less than half of what it was before The Great Recession. With many Spanish growers operating on a profit margin of 15-20% the growers will not be able to continue operations. Spain has been producing about 70% of the world’s supply of olive oil.
Pictured below are olive trees in Cordoba, Spain.
- Olive oil price dip adds to European woes (Javier Blas, Financial Times, 17 May 2012)
- Squeeze hits Spanish olive farmers (Miles Johnson, Financial Times, 1 May 2011)