Why Olive Oil Prices Are Higher in Spain

Summary

Olive oil prices in Spain have surged to unprece­dented lev­els, despite being the world’s largest pro­ducer, with retail prices higher than in other Western European coun­tries. Reasons for the price dif­fer­ence include high demand in Spain due to cul­tural and gas­tro­nomic fac­tors, tim­ing of pur­chases by retail­ers, and tax­a­tion, with experts pre­dict­ing con­tin­ued price increases due to a drought affect­ing the 2023/24 crop year.

Olive oil prices in Spain have surged to unprece­dented lev­els since the mid­dle of 2020.

Despite being the world’s largest pro­ducer by a wide mar­gin – even after a his­tor­i­cally poor har­vest in the 2022/23 crop year – prices are far higher than in other Western European pro­duc­ing coun­tries.

A study pub­lished on September 8^th by Spain’s Organization of Consumers and Users (OCU), a non-profit con­sumer price watch­dog, con­firmed that Spanish extra vir­gin olive oil prices at retail remain higher than in France, Italy or Portugal.

Based on a study of 20 online super­mar­ket chains, the OCU found the aver­age price for white-label extra vir­gin olive oil in Spain to be €8.72 per liter, while the price reached €8.21 in Italy, €7.52 in France and €6.86 in Portugal.

Furthermore, the white-label brands included in the study from Portugal were Spanish extra vir­gin olive oils, mak­ing the find­ing that they cost 27 per­cent less even more sur­pris­ing for the researchers.

The OCU researchers and other experts have pro­vided sev­eral rea­sons why olive oil prices remain higher in Spain than other Western European pro­duc­ers.

One of the main rea­sons is the enor­mous demand for olive oil, which is deeply rooted in Spanish cul­ture and gas­tron­omy.

In the pre­vi­ous five crop years (from 2017/18 to 2021/22, the last year for which a com­plete data set is avail­able), Spain con­sumed an aver­age of 530,000 tons per annum, mak­ing the coun­try of 48 mil­lion peo­ple the world’s largest con­sumer.

Unlike other fats, olive oil is an irre­place­able ingre­di­ent in Spanish cui­sine, con­tribut­ing to con­sis­tently high demand.

According to Juan Vilar, a strate­gic con­sul­tant for the olive oil sec­tor, con­sumers do not seek alter­na­tives even when prices rise, instead opt­ing to reduce their olive oil con­sump­tion.

This results in a steady stream of demand for olive oil from retail­ers even as sup­ply dimin­ishes, cre­at­ing an imbal­ance that does not exist in other coun­tries.

Another rea­son for the dif­fer­ence in olive oil prices between Spain and other Western European pro­duc­ers is the tim­ing of olive oil pur­chases by large retail­ers.

According to Otilia Romero de Condés, the chief exec­u­tive of the World Olive Oil Exhibition, many retail­ers out­side of Spain made large olive oil pur­chases at the begin­ning of the 2022/23 crop year, when prices were much lower.

In con­trast, retail­ers in Spain make smaller pur­chases through­out the year directly from mills – instead of bro­kers – mean­ing that retail­ers have paid more for the olive oil cur­rently sold in stores.

“Spain is a very fast-rotat­ing mar­ket for this prod­uct,” Rafael Pico Lapuente, the exec­u­tive direc­tor of the Spanish Association of Olive Oil Exporters, Industry and Commerce (Asoliva), told El Periódico.

“That means that a bot­tle of oil will not be on the shelves for more than 15 days,” he added. ​“In other coun­tries, olive oil is not con­sumed as much. A bot­tle, a brick or a can of this prod­uct can spend more than a year on the shelf.”

However, one of the most sig­nif­i­cant rea­sons for higher prices in Spain, cited by the OCU, is related to tax­a­tion.

In Spain, extra vir­gin olive oil is sub­ject to a 5 per­cent Value Added Tax (VAT), sim­i­lar to sales tax in the United States. Meanwhile, Portugal has elim­i­nated VAT on olive oil, par­tially explain­ing the wide price gulf. In Italy, the VAT on extra vir­gin olive oil is 4 per­cent.

More gen­er­ally, experts expect global olive oil prices to con­tinue to rise as the Mediterranean basin’s unbreak­ing drought has cast a shadow over the 2023/24 crop year, which offi­cially began on October 1^st.

Officials in Spain expect pro­duc­tion to remain below 1 mil­lion tons for an unprece­dented sec­ond-straight har­vest.

Depending on how har­vests evolve in other major pro­duc­ing coun­tries, the world may again wind up where demand out­paces sup­ply, mean­ing prices could con­tinue to rise through­out 2024.

• Cadena Ser
• ABC Sevilla