Case Study:

Albania's olive oil industry struggles with overproduction, EU solution on horizon At the end of 2021, there were some 10.7 million olive trees in Albania, an increase of 30% from the decade before, according to the country's data agency INSTAT. But this led to overproduction in 2022, with 40% more oil produced than in 2021, equivalent to 26,000 tonnes. The amount of olive oil is increasing significantly, but supply is far outstripping demand, leaving farmers and producers in a difficult position, but EU funding could be set to give a helping hand. At the end of 2021, there were some 10.7 million olive trees in Albania, an increase of 30% from the decade before, according to the country's data agency INSTAT. But this led to overproduction in 2022, with 40% more oil produced than in 2021, equivalent to 26,000 tonnes. "Overproduction comes for two reasons. Firstly, due to the continuous increase of the area, and secondly, the last production season was characterised by high yield, or as it can be said in popular language, it was a "good year" of production," olive oil expert Drini Imami told Monitor Deputy Agriculture Minister Dhimo Kote added that new cultivation techniques, good weather, government subsidies and the realisation from farmers of the product's value have also contributed to the situation. But a lack of clients to buy the stocks of olive oil has meant that some plantations are being abandoned. One oil producer said he is currently sitting on reserves of around 160 tonnes, but the market is oversaturated, and sales in supermarkets remain low. Additionally, there is little profit margin between producing the finished oil and selling it in the supermarket at a price people can afford. Experts say that much is sold informally in plastic bottles, as much as 95% of the yield. To solve the situation, olive oil exports need to be increased as they currently remain very low. But it was not always the case. Between 1962-1967 during communist rule, Albania was one of the 15 largest olive oil producers in the world, according to the FAO. The government has now taken steps to consult with farmers on promoting olive oil production unions and creating certified brands of olive oil for each region of the country. Money to fund the scheme will come from the EU IPARD scheme and will take place in three municipalities at first. "The time has come for farmers to come together for production and sale as the only solution for creating a brand of olive oil outside of Albania. Regionalisation, the creation of the brand according to the regions, that is, the union of farmers, remains the only solution for increasing the export of olive oil", said Kote. Albania is a beneficiary of the IPARD III programme from the EU, which will see some 112 million being pumped into the country's agricultural sector. The programme covers 2021 to 2027 and seeks to support sustainable food systems by increasing the agri-food sector's competitiveness and aligning it with the EU acquis. In addition, it aims to improve the efficiency and sustainability of on-farm production to meet the demand for safe, nutritious and sustainable food and animal welfare. Albanian Prime Minister Edi Rama said the money would open doors for those that want to work in and develop the sector in Albania. "This massive EU funding paves an even wider path for all who want to develop their venture. What is happening is an extraordinary innovation in the rural life of our country, which has been delayed," Rama said.

Questions :

1. With the aid of a graph, discuss the possible factors contributing to the excess supply of olive oil. (20)

2. Speculate the steps that may be taken to increase demand in this market. (15)

3. Comment on the viability of the "EU solution" as highlighted in the article. (10