Sector modeling for the prediction and evaluation of Cretan olive oil

Abstract

Greece is a major international olive oil producer. Olive oil varieties constitute the major crops for Greek farmers growing certain oriental olive oil varieties. Currently, the olive oil sector in Greece is undergoing substantial changes and the response of farmers and consumers to this will be a vital factor in its success. Throughout the application of the common agriculture policy (CAP), mechanisms, such as production aid, subsidies and marketing orders, were employed to support both producers and consumers. A possible reform of CAP aimed at eliminating or reducing production aid or any kind of subsidies could have a considerable effect on producer and consumer marketing behaviour. In this study a formulated mathematical problem for the olive oil sector on the island of Crete based on the welfare concept and the simulation of the olive oil market equilibrium, subject to specified policy interventions and circumstances was adopted. According to the results obtained, it was concluded that future olive oil policies should not impinge on mechanisms that influence olive oil farmers and consumer behaviour but should emphasize the greater cost effectiveness of production and marketing policies.