Overproduction of olive oil in 2022 is predicted to turn into a boomerang for Albania. Factories have reduced their collection capacity, as olive oil is traded more informally at a low price.

Exports continue to remain in low quantities, due to drastic fluctuations in production from year to year and the inability of companies to pay the guarantees that large markets require. The lack of a market risks the farmer abandoning the growing of olives. The solution to investments in storage capacities.

Overproduction has created chaos in the olive oil sales market. Managers of processing plants claim that, if oil production is up to 40% higher than the previous year, it risks turning into a boomerang, as there is no domestic market for sales, while exports continue to be in low quantities.

In the domestic market, informality continues to remain high for the olive oil producing sector. Many farmers sell unpackaged olive oil on the black market. Sources from olive oil processors said that 95% of the product is sold informally, only 5% of it is sold in supermarkets.

The damage to competition from high informality, as well as high administrative costs, including packaging and taxes, has made the formalized product unaffordable.

Ylli Hajdini, the administrator of the "S.E.D - Borshi" company, one of the major producers of olive oil, claims that so far he has 150 to 160 tons of olive oil in storage from the olives he has bought from Albanian farmers.

Although it has the capacity to increase processing, Mr. Hajdini underlines that he cannot buy more quantities, as the market is oversaturated with farmer's oil, while the sales in supermarkets of Albanian packaged oil are at a minimum. The situation is created by the price.

"Farmers sell olive oil to processing factories at a price of 400 to 420 ALL per liter. By adding 360 ALL per liter to the purchased oil, the administrative costs (which include fiscal obligations, employee salaries, energy, fuel.

While 75 to 110 ALL varies only the cost of purchasing packaging, such as glass bottles and caps and labels). The other added cost is 160 Lek per liter and includes sales tax of 20%. With the removal of the creditable scheme, the entire burden of VAT is borne by the collector.

Based on these costs, the price of olive oil processing reaches 760 ALL per liter. The processor sells the oil in supermarkets at a price of 800 to 820 ALL per liter. From supermarkets, including their profit rate, it is sold for 980 to 1,000 ALL per liter.

In this situation, the consumer will want to buy olive oil at a price of 500 to 600 lek per liter that is being sold directly by the farmer or 1,000 lek per liter that is sold in supermarkets?".

Mr. Hajdini adds that there is no consumer power in the country for so much oil produced, due to the tradition of low oil consumption in the country, compared to its neighbors and Europe.

In Albania, due to high informality, the consumption of olive oil is immeasurable. According to estimates of 25,882 tons of olive oil produced in 2021, taking into account the population, the apparent consumption of olive oil per capita continues to be less than 1 liter per year.

In Europe, according to data from the European Center for Imports (CBI), olive oil consumption was estimated at 1.46 million tons in 2021, which is approximately half of the total world consumption. Italy and Spain are the largest consumers of olive oil in the EU, with annual consumption of around 500,000 tonnes each, while Greece has the EU's largest per capita consumption, with around 12 kg per person per year.

Per capita consumption of olive oil in EU countries excluding Italy, Spain, Portugal and Greece is expected to increase by around 4% per year, but will remain relatively low (1.3 kg/person until 2025) . At the same time, average consumption per capita in Italy, Spain, Portugal and Greece is expected to fall from 9.3 kg/person in 2021 to 8.9 kg/person in 2025.

(Source: Monitor)