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Lack of Regulatory Oversight Slowing Investment in U.S. Olive Oil Production, ITC Finds

Monday, September 16, 2013
Sandler, Travis & Rosenberg Trade Report

The International Trade Commission issued Sept. 12 a report examining conditions of competition between the U.S. and major foreign suppliers of olive oil. This report provides information on production, consumption and trade, with an overview of the international market for olive oil, overviews of the commercial olive oil industries in the U.S. and other major supplying countries, analysis of the factors that affect the competitiveness of these countries, and an assessment of the role of imports and other factors, such as standards and pricing, on U.S. consumption. Highlights of the report include the following.

- Although U.S. production of olive oil remains small on a global scale, the U.S. is among the nontraditional producing countries that are responding to higher global demand and output has risen quickly in recent years. But recent investment in U.S. 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. These standards are widely unenforced, with mandatory testing and penalties for noncompliance existing only in Canada and the European Union. Broad and unenforced standards lead to adulterated and mislabeled products, weakening the competitiveness of high-quality producers, such as those in the U.S. who try to differentiate their product based on quality.

- EU government support programs contribute to high overall supplies of olive oil, reducing global olive oil prices. Many small growers in the EU 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 Common Agricultural Policy has the indirect effect of increasing total global olive oil supply and reducing prices.

- The U.S. olive oil industry produces high-quality extra virgin olive oil, mostly through highly mechanized and intensively managed groves. U.S. farm level production costs for olive oil are competitive, but lack of scale and high capitals costs result in higher prices in the retail market.

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