U.S. olive oil production has risen quickly in recent years in response to higher global demand, but recent investment has slowed, in part because of concern among U.S. producers that their competitive position in the U.S. market is threatened by a lack of regulatory oversight, according to a new report from the U.S. International Trade Commission.
The ITC, an independent fact-finding agency, completed the report at the request of the House Ways and Means Committee.
The agency determined in its olive oil market analysis
that U.S. investment in olive oil production has slowed in reaction to lower global prices following a succession of bumper crops in Spain, and because of concern among U.S. producers that their competitive position in the domestic market is threatened by a lack of regulatory oversight.
Current international standards for extra virgin olive oil allow a wide range of oil qualities to be marketed as extra virgin. In addition, the standards are widely unenforced. Mandatory testing with penalties for noncompliance exists only in Canada and the European Union. However, testing in the European Union is only mandatory for a very small share of production (0.1 percent). Broad and unforced standards lead to adulterated and mislabeled products, weakening the competitiveness of high-quality producers, such as those in the United States, who try to differentiate their product based on quality, the ITC said.
EU government support programs contribute to high overall supplies of olive oil, reducing global olive oil prices. Many small growers in the European Union rely on costly traditional methods of production and have costs that are at or above global prices. Because some of these producers would likely cease production in the absence of income support from the EU, the subsidies have the indirect effect of increasing total global olive oil supply and reducing prices.
Olive oil marketers aim to differentiate their products by brand and level of quality, but price remains one of the most important factors in U.S. consumer purchasing decisions. This is due, in part, to a lack of consumer awareness of quality differences. U.S. consumers are generally unfamiliar with the range of olive oil grades and uses, according to the ITC.
The report says that U.S. olive oil tends to be more expensive because it lacks the scale to offset high capital costs for highly mechanized and intensively managed olive groves. - Eric Kulisch