Olive Oil Economics

The Economics of Extra Virgin Olive Oil


The complex subject of the economics of extra virgin olive oil is effected by the European Subsidy to EU farmers, the currency exchange rate, the relatively high demand for and sale of inferior grades of olive oil, labor, land values, production cost, world wide crop production, marketing subsidies, world wide consumption, carry over from the previous year, mother nature, and good old fashioned politics to list a few.

The cost to produce one gallon of olive oil in California, as opposed to one gallon in the Mediterranean is still very far apart. Even without the European subsidy California producers are dealing with much higher land, fruit, labor, and production costs.

A well run modern mill in Tunisia, Turkey, or Morocco can profitably produce and deliver high quality olive oil to North America, (without any subsidy) for less than half the price it costs to produce a gallon of similar quality in California. The actual cost to produce olive oil in Spain, Greece, and Italy is lower still when the subsidy is taken into account.

The United States represents one of the largest and fastest growing markets for premium olive oil in the world. There has been a recent upsurge in interest and investment by small California farmers and producers attempting to bridge the gap between expensive domestic production and consumer demand.. In addition, Americans have begun to purchase and invest in olive oil mills abroad. There is no doubt that if current interest and demand continue to grow and foreign production peaks there will be a viable, competitive olive oil industry in California.

High quality olive oil does not necessarily cost a fortune. As prices fall consumption will inevitably increase. If consumption increases all olive oil producers will benefit.