Olive oil becomes the latest economic and agricultural casualty in the Israel-Hamas War

Olive oil has a place of honor in Israeli culture, and over the years, and thanks to the drop in prices, its consumption in Israel has only increased. But now, given the harsh reality of the war, the concept of buying locally produced products has been shattered.

On one hand, some think that at a time of national crisis, protecting local “blue and white” products from foreign competition is necessary, despite the lack of manpower and destruction of agricultural land due to rocket fire.

On the other hand and especially for times of emergency like these, there are those who believe the moment has come to open Israel up to a variety of available, inexpensive, import and production options.

According to the Consumers’ Council, the price of olive oil in Israel jumped by 39% this year, more than any other food product. The Central Bureau of Statistics also reports a significant price hike, though closer to 25%. The dramatic increase in the price of olive oil also pushed up prices for other vegetable oils. The rise is attributed mainly to a severe drought and a hot summer that left trees dehydrated, and led to an extremely poor olive harvest in Israel as well as globally, doubling prices worldwide.

The head of the Olive Oil Council of the Plants Production & Marketing Board of Israel (an executive arm of the Agriculture Ministry) has expressed concern that the groves have become an economic battlefield, and has blamed imports, which led to the displacement of olive trees and the decrease of local production, and ultimately to the increase in prices. Others, on the other hand, claim that harsh weather affects Israel the same as anywhere else, and see imports as a lifeline for consumers burdened by the high cost of living.

Meanwhile, consumers are faced with a dilemma: should they choose the more expensive bottle of local oil, or should they take the cheaper imported option? Their selection is significant not only for their own household budgets, but also for the future of Israeli agriculture.

Customs duties exemptions did not affect consumers

Olives for oil have, for millennia, been a traditional crop in the Land of Israel, but were not mass produced until 2010, the first year in which Israel produced more than 10,000 tons of oil. Israel, along with the world, has experienced an increase in demand for olive oil, and, together with improved agricultural capacity, boosted olive oil production to a peak of 19,000 tons in 2019.

However, local olive oil has never dominated the Israeli shopping cart, which has always included both local products and imports. “On a multiyear average, Israeli production represents only 50% of consumption,” says Adi Naali, CEO of the Olive Oil Council.

Due to high tariffs, imports were only possible through duty-free quotas, which limited competition. These quotas did not, for the most part, benefit the consumer directly: between 2018 and 2020, about 70% of the import quotas were for oil in bulk quantities of over 850 kg., and only 30% in “small” packages of up to 850 kg., including bottles for home use. Even this limited amount was imported almost entirely during the harvest season, before the locally produced olive oil of that year would go to market.

This bulk product is used both by industry, and for mixing Israeli olive oil with European olive oil. The Yad Mordechai and Saba Habib brands, for example, despite their external Israeli branding are, in fact, partly European. But which part? Is it 1% European oil and 99% Israeli, or vice versa? The consumer has no way of knowing, and the few details provided can only be found at the bottom of the back label. So, in fact, it could be that most of the olive oil we consumed was European – even if we purchased an Israeli brand.

Industry dispute: What caused the price increase?

Starting in 2020, the Economy and Industry Ministry began publishing tenders for the competitive import of olive oil, so that the lowest price offer would be permitted to import bottled olive oil, even during the harvest season. In this way, the ministry succeeded in importing olive oil at floor price: NIS 10-13 per 750 ml. bottle. But this enabled only relatively low-quality olive oil to be imported. Taman Food Marketing, which won some of the import tenders, even had to issue a product recall after it turned out the products contained 90% refined olive oil (lower quality) and only 10% virgin olive oil (higher quality).

The biggest change occurred in August 2023, with a decision to make an across-the-board reduction in customs duty: from 6% plus NIS 2.29 per kilogram, to just 1.2% plus NIS 44 per kilogram.

Naali says this dealt a severe blow to Israeli production: “We explained that when cheap European oil, subsidized by the European taxpayer, was imported, then local olive oil production was unable to find investment, and many trees have been uprooted in recent years. We told them this would be untenable, and that day has come. The global warming crisis has caused severe droughts over the past two years, and production has been cut significantly.”

Indeed, over the last year, as mentioned, the price of olive oil jumped dramatically, by 39% according to the Consumers’ Council, raising the price of all other oils by 7.6% during this period.

Others question this version of events: “Olive oil prices started rising already with the Russian invasion of Ukraine,” claims Ehud Soriano, an olive oil expert who advises production facilities in Israel and Spain. “Ukraine is the largest producer and exporter of sunflower and canola oil in the world. As soon as the Black Sea ports closed, prices rose for all vegetable oils, which also increased demand for olive oil, and prices rose along with it.”

US Federal Reserve data also prove the world price of olive oil jumped nearly 40% in the year after the outbreak of the Russia-Ukraine war.

The most dramatic impact, says Soriano, came from the weather events of the past year: “For the last three years, as of 2021, we’ve been affected by ‘La Niña,’ which is a phenomenon related to the Earth’s magnetism, and not precisely to climate change. La Niña brought heavy rain to Europe in the summer of 2023, which affected the olive crop. Spain, the largest exporter in the world, was also affected, as well as the Mediterranean basin, which we’re part of. This resulted in particularly dramatic price increases.”

The peak was in early 2024, when the price of olive oil was 139% higher than in September 2021. Although it has decreased slightly since then, the price is still double what it was three years ago. This rise, as mentioned, is also represented on Israeli supermarket shelves, where olive oil is especially expensive.

What is the reason for the increase in price? According to Soriano, “The price increase isn’t related to the lowering of the customs duty. That’s a coincidence which couldn’t have been anticipated.” Opening up to imports had bad timing in terms of public perception, he says, “But prices would have gone up in any case, because even before the customs reduction, imports only accounted for 50% of consumption.”

Moshav Tzipori-based grower and olive oil producer Ayala Noy-Meir, who has 6,000 olive trees in nine varieties, adds, “We’ve harvested tons of local Syrian olives, but instead of 50% oil, only 15% or 20% oil comes out.” The long, hot summer left its mark on the trees. “They’re in trouble,” she explains. “They lack resources. We saw that last year as well.”

In other words, the same weather conditions that affected crops in Spain also affected Israeli crops. Therefore, even if the market had relied more on local production, it probably wouldn’t have been able to avoid the significant price increases.

'Someone came in today. I was stunned'

The last few years have given rise to hard feelings. “In two words: crazy anxiety,” says Noy-Meir. “This is our only livelihood, and we support quite a few people here economically. These businesses are also based on tourism, and many of the small oil farms, including ours, also depend on tour groups and visitors from abroad. Most sales take place during the harvest season, when customers go around the production facilities and buy directly from the manufacturer. COVID was a very difficult period. Last year there were quite a few people, and this year there are literally zero. There’s no one. Today, someone came in by chance. I was stunned,” she says sadly.

Noy-Meir says competition is fierce and not easy to withstand when customers sometimes care only about price. “Most of the public doesn’t understand about the differences in quality and buys inferior oil, also because of the economic situation and the price increases, without knowing that cheap oil may harm their health. There have been many recalls, including oils below VOO [virgin olive oil] level, and even the kind that is only good for lighting lamps.”

She also worries about the future, saying, “We also don’t know if the public will go back to buying olive oil, and many of us depend on restaurants, which are also having a hard time. It’s impossible to know if they’ll be able to pay for their orders, of if they’ll place additional orders.”

There are also conflicts with the government, Noy-Meir says, as above-ground bomb shelters have not yet been delivered to protect field workers. “Ask people to risk their lives olive-picking in the Upper Galilee? There are millions of trees,” she says.

Another olive grower, who requested to remain anonymous, mentions problematic internal industry politics, including envy of the European growers’ organizations, “where they are given assistance to acquire equipment and training, services are made available to them, and they are helped in dealing with European Union institutions. There is a sense of unity. And with us... we pay membership fees to the council and don’t get much. There’s a conference once a year. There’s no training sessions. They knew there were no Palestinian workers to do the harvest, they had a whole year to deal with it, and only two weeks before did they remember to publish articles looking for volunteers. In reality, very few have come.”

This erosion in solidarity may be due to the diverse nature of the sector in Israel. “It is a complex industry, with Arabs, Jews, Druze, kibbutzim and moshavim. And even though some of us come from cooperative ideologies, we don’t like to share. If there was an organization that would distribute expensive equipment between 100 or 200 farmers, it would be much easier to set up small groves. It would be better if there was a strong organization with a different agenda. Keren Kayemeth LeIsrael-Jewish National Fund has 200,000 dunams [50,000 acres, 20,000 hectares] of olives, and they don’t always pay the council. There’s a lot of politics here.”

12,000 Palestinian workers missing

The war dealt another blow to the industry. “There are 12,000 Palestinian workers missing who worked in the olive industry and today cannot enter [Israel],” says Noy-Meir. Naali adds, “There aren’t really any replacement workers, either.”

“The war also has had a direct effect – the harvest season begins in October, and in October 2023, we couldn’t get to all the areas. This year, we don’t know if we can harvest in the Upper Galilee and the Galilee Panhandle, because the war has intensified in the north,” says Noy-Meir.

In addition, she says, “Many olive trees have been uprooted because of prices and competition, and there is no stability. Ideally, we could produce all of the olive oil for Israel, but there are no long-term plans. We have no idea what the price of water will be in two or three years, or whether or not there will be workers. I wish it would happen, but right now it’s not realistic, certainly not as long as the government doesn’t subsidize directly, like in Europe.”

Along with reducing tariffs, the Agriculture Ministry has promised to grant direct subsidies. It states, “As of the end of 2023, olive oil growers in Israel are entitled to specific direct industry support, as stipulated in the agreement signed with the Finance Ministry. The scope of this support stands at NIS 39.6 million for the end of 2023 and 2024.”

“The transition from indirect subsidies through import protection to direct subsidies to the growers is a good direction. The problem is, as usual, in the implementation,” says Oren Hexter, founder and manager of gourmet olive oil producer Masik Kibbutz Magal. “We haven’t seen any actual support yet.”

But, as he sees it, the very opening to competition encourages the industry to improve itself: “The situation requires the industry to upgrade, introduce a higher level of mechanization, increase output, look for new varieties and optimize the production houses.”

Naali says, “[The government] declared they would support the olive industry, and it didn’t happen. The agreement was signed in September 2023, according to which we were supposed to receive NIS 30m. a year. There have been plenty of statements, but in practice not one shekel has gone to the farmers.”

Noy-Meir adds, “They promised, but just then war broke out, and there were other urgent things to budget.”

In response to a Globes query, the Agriculture Ministry stated, “Support will be paid by the end of the year.”

Price drop is expected within six months

In Soriano’s view, the best solution is to fully open the market to imports, along with actually transferring the direct subsidies, as was supposed to happen from the start: “Opening to imports is a welcome move. Farmers will benefit directly because they will receive a subsidy straight to their pockets, and consumers will ultimately receive more attractive prices.”

What will really happen to consumer prices? Soriano says the weather improved significantly, and the upcoming olive harvest in late 2024 and early 2025, in both Spain and Israel, is expected to be much better: “My assessment is that supermarket prices will decrease in the next six months, because the food retail industry is very strong. In addition, expectations are already lowering global market prices. In two or three years, we will see a full correction.”

Naali is less optimistic. “Prices will stabilize, and maybe there will even be a slight drop. But we will not go back to previous prices.”

Nonetheless, foreign competition is encouraging the local olive industry to innovate. Naali believes the industry needs to switch to more intensive cultivation, mentioning a machine that enables a completely mechanical harvest, without the need for the Palestinian manual laborers the industry has relied on until now. It will lead, he says, “to a savings in per kilo of oil production costs, will enable significantly higher yields per area unit,” and will result in “a very high oil quality due to efficient processing, harvesting, and transportation to the production facility.”

According to Naali, the most suitable area for growing olive oil is the western Negev, that is, the Gaza border area. Cheap water is available in this area from the Dan Region Wastewater Treatment Plant (Shafdan), and moderate slopes can allow for efficient mechanical harvesting. The main disadvantage it presents is the high cost of planting and building the systems, which therefore requires government assistance.

“Olives are a local and sustainable crop. With proper management,” he says, “we will be able to satisfy local consumption and even export.”