Why olive oil costs more, and the quality is lower

Via a recent edition of the Why Is This Interesting newsletter comes this from Eurof Uppington, a reformed finance guy turned olive-oil merchant:

“It’s a boom time for small farmers in the eastern Mediterranean, like Greece, Albania, and Turkey, who are seeing bumper harvests and sky-high prices. However, it’s a disaster in Spain, the biggest producer nation, where unseasonal heat early in the year killed the crop. The harvest is down by half. Spain makes 50% of the world’s olive oil. This is a big deal. No one remembers it being like this before. We might think this is just bad news for Andalucian olive farmers and shrug. But this harvest season is going to affect us all in ways we might not notice. Firstly, the price we pay for our olive oil is going to go up. This is on top of price rises for other cooking oils, like sunflower and canola, as Ukraine and Russia are key producers.

Because olive oil brands lack market power, they won’t be able to pass on the full cost increase. What they’re more likely to do is lower the quality of shop-bought olive oil. A dirty secret of the industry is that the amount of extra virgin olive oil produced in the world is less than the amount consumed. The big brands make “more” EVOO by diluting it. The magic number is 0.8%—that’s the maximum amount of free fatty acid (FFA) content an olive oil can have to be extra virgin. Brands will blend 250ml of an excellent EVOO of 0.2% FFA with 750ml of an oil of 1% FFA—a much cheaper “virgin” grade: hey presto! One liter of EVOO with a 0.79% FFA! This practice is likely to increase, but it’s not technically illegal.”

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