It is well known by the main players in the olive oil sector that this campaign will have to take Tunisia into account. When the European Commission announced its decision to change the limit of the monthly quota for imported Tunisian olive oil tariff-free, the news created special interest. How will this measure in home prices over the coming months? What is the real extent of this change? In the following article, we will clarify these and other issues. 

The decision of the European Commission

The EU allows imports into its territory up to 56,700 tons per year of virgin olive oil and extra virgin Tunisian, duty free (the so-called quota). However, to prevent this massive influx of oil during the months of campaigning, the European Commission set a monthly limit on import: thus, in the first months (November and December), the imports under this regime are restricted. In January and February, the limit is 1,000 tons, 4,000 tons in March, 8,000 tonnes in April and May to October, 10,000 tons.

The decision of the Commission is to expand the monthly limit during the months of February and March from 1,000 to 9,000 tons and 4,000 to 9,000 tons respectively, ie. 13,000 additional tons during that period. However, the total volume of the quota remains unchanged at 56,700 tonnes during the year. With others, the maximum monthly limit will be reduced during the months of May to October from 10,000 to 8,000 tons monthly. Therefore, we are talking about a rather narrow monthly change and not an extension absolute limits. 

Scope of raising the ceiling on imports 

What are the volumes supposedly doing within the territory of the Union? Given that, in recent years, the average consumption of olive oil in the EU was close to 1,820,000 tons per year, which come to be 150,000 tons per month (source: IOC), the new limit for months February and March only accounts for 6% of the average monthly consumption of all EU countries. 

In addition, importing oil within this customs regime is not an easy or cheap task and is subject to numerous limitations. First, it is necessary to obtain an import authorization for which, among other procedures, requires presenting guarantees worth 150 € per tonne requested import. To this should be added the complexity and additional costs themselves of an import operation, without forgetting the necessary indication on the label of oil extra-Community origin. All of this contributes to the reason why many packers are not interested to import oil within this regime. 

Finally, it should be kept in mind that this measure does not significantly affect large industrial exporting outside the territory of the EU and that precisely the Tunisian oil often used to supply those markets. In this case, packers prefer to import the oil under the customs inward processing procedure (RPA), which is much less restrictive and also can import duty-free oil, given that is subsequently exported outside the territory of the Union.

For all these reasons, it is conceivable that, despite the enlargement of the monthly limit on imports of Tunisian oil can cause increases in inputs, the immediate impact on the price of oil should be limited.   

A production record

However, the role played by Tunisia this year in the oil market goes far beyond mere contingency. Undoubtedly, the price trend of olive oil worldwide is marked in Spain. However, as the weeks go by, it is confirmed that the campaign in Tunisia will be extraordinary and very likely set a new absolute record of production (around 320,000 tonnes). Considering the small size of its domestic market (30,000 tons), much of that oil for export, covering the deficit somewhat in Spain and Italy. With a spread of currently close to 35 cents per kilo of extra virgin oil price are many packers and industrialists who are turning to Tunisia to meet its oil needs, which are the availability and good prices: first, Italian, but also Spanish, US and elsewhere as Turkey, Lebanon and China. And, this year, Tunisia is perhaps the piece that does fit the puzzle of the world oil market.

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