Regulation of supply in the olive oil market

The evolution of the Spanish olive oil market in recent years has been marked by profound price volatility and a marked impact on olive oil consumption. The report ‘Regulation of supply in the olive oil market’ examines this situation through a rigorous database and forecasting models, proposing a marketing standard under the protection of Royal Decree 84/2021, which would stabilise the market and protect the most vulnerable agents in the value chain.

One of the most outstanding findings of the study is the drastic increase in prices at origin from October 2021 to June 2024: 153% for EVOO (from 3.17 to 8.02 €/kg), 151% for virgin and 148% for lampante. This trend has been partially passed on to prices at destination, generating an average increase in price of between 121% and 146%. As a direct consequence, household consumption has fallen notably, especially that of EVOO (-22.87% in 2023 compared to 2022), while alternatives such as sunflower oil (+24.90%) or olive pomace oil (+119.85%) have gained market share.

The analysis of consumer behaviour reveals two phases: a first phase of resistance to substitution despite high prices, and a second phase in which, when certain price thresholds are exceeded and coinciding with a drop in sunflower oil, a more evident substitution effect is produced.

In this context, the report has developed a model for forecasting the price of EVOO at origin based on three key variables: national production, initial campaign stocks and a long-term trend. The model, with 87% accuracy, allows forecasting price scenarios and assessing the need to activate the marketing standard.

For the 2024/2025 marketing year, the forecasts estimate an average EVOO price of €6.14/kg. This value, above the profitability thresholds, would not justify the application of the standard in that marketing year. However, the study warns that in seasons with productions above 1.8 million tonnes and high carryover stocks, prices could fall below sustainable levels, recommending market intervention through compulsory withdrawal of product.

These measures, while effective in sustaining prices and farm incomes in the short term, have counteracting effects in the medium and long term: they make the product more expensive for consumers and exporters in the marketing year of application, and may put downward pressure on prices in subsequent marketing years if the storage of the withdrawn volumes is not properly managed. The report proposes as an alternative to diverting surpluses to non-food uses, although this would pass on part of the cost to producers, as no compensation is foreseen.

Another important part of the study deals with EVOO production costs in different types of olive groves, highlighting the vulnerability of many traditional and mountain farms. These olive groves have unit costs that, in some cases, exceed market prices, threatening their viability. Under low price scenarios, the report estimates losses of up to 960 million euros for this type of olive grove. Without public support measures, there is a high risk of abandonment of these farms, leading to a loss of biodiversity, social fabric and rural heritage.

Finally, it identifies the need to establish clear criteria for the effective application of the marketing standard, combining public policies to support vulnerable olive groves with sectoral self-regulation tools. This is the only way to ensure a sustainable future for the Spanish olive sector, balancing the interests of producers, consumers and exporters.