Olive oil prices seen rising as import quotas expire

Olive oil
Olive oil

Duty-free imports of olive oil have brought about a fall in retail prices in Israel, but the quotas have been almost fully utilized.

Less than two months before the start of the Jewish holiday season, the quotas for imports of olive oil exempt from customs duties distributed by the Ministry of Economy and Industry are about to end, and the market expects prices to rise. Sources inform "Globes" that the quotas distributed at the beginning of 2019, and which came into force after the Passover holiday in April, leading to a fall in the average price of a bottle of olive oil, have been almost completely utilized, with the exemption period about to expire in September. Unless the Ministry of Economy and Industry and the Ministry of Agriculture hold a further tender next month, prices of olive oil will start to climb starting from October.

Quotas for imports exempt from customs duties distributed each year are a tool used by the government to bring about price reductions by local producers and retail chains as a result of price pressure from competing imports. The olive oil quotas about to expire were awarded to two companies, but the duty-free olive oil is actually sold by only one retail chain, Osher Ad.

According to the Ministry of Economy and Industry, food company Maya Food Industries, which sells olive oil to the Osher Ad chain, has completely used up its quota, while Osher Ad, which was awarded a quota in its own right, has utilized 75% of it. The quotas were for the import of 550,000 liters, or 733,000 750 milliliter bottles.

In the tender for the quotas, Osher Ad undertook to sell 250 tonnes of olive oil under its own label at NIS 16.90 per liter, and a further 300 tonnes at NIS 17.70 per liter under the Maya label. These prices are about NIS 10 below those of products sold under competing brand names.

According to figures from the Ministry of Economy and Industry, some 8,000 tonnes of olive oil are sold in the retail market in Israel annually. According to figures from Storenext, the duty-free import quotas have had an appreciable effect on prices. Between the first quarter of the year, before the duty-free olive oil became available, and the second quarter, when the quotas came into effect, the average price of a liter of olive oil at discount supermarkets fell by about 12%. In comparison with the second quarter of 2018, the price decline was similar. Retail market sources said that of the major Israeli olive oil brands, Zeta did cut prices in response to the competition from imports, but Yad Mordechai, owned by Strauss Group Ltd. (TASE:STRS), kept prices steady.

The Ministry of Economy and Industry stated in response to the report, "Maya Food Industries has used all of its quota, and Osher Ad has used 75%. There are quotas held by several other importers that have not yet been utilized. The customs duty exemption quotas have indeed brought about a substantial reduction in prices in the olive oil market. The responsibility for allocating a further exemption quota lies with the Ministry of Agriculture, while the Ministry of Economy and Industry is responsible for its distribution."

The Ministry of Agriculture said, "Olive oil prices are not expected to rise in advance of the Jewish holidays. Furthermore, it should be pointed out that prices of imported olive oil are very low, to the extent that even with the addition of full customs duties, imported olive oil is still cheaper than the local product."

Published by Globes, Israel business news - en.globes.co.il - on August 5, 2019

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