Oil price hike hits agriculture - Analysis/ Product price hike and production decline expected
The increase in oil prices is bringing negative consequences to Albanian agriculture, in its most intensive period.
According to the latest analysis by ALTAX, oil has reached 179 lekë/liter due to tensions in the Middle East. And as a result, the cost of agricultural production is estimated to increase by 20-30%. Also, ALTAX emphasizes that due to the increase in production costs, a decrease in production by 10-20% is expected, as happened in the Ukraine crisis where there was a 15% decrease according to INSTAT, and inputs such as fertilizers, seeds and pesticides are also becoming more expensive.
The analysis highlights that first, field and greenhouse agriculture is affected more and faster than others, due to its massive role in the economy directly and interconnected with other sectors. In field agriculture, the increase in oil prices increases the costs for tractors, planting and harvesting machinery, as well as for transporting products to market. From the experience of the Ukraine crisis, where the price of oil doubled, Albanian farms saw an increase in fuel costs by 25–40%, leading to a decrease in the area planted with cereals such as wheat or corn, and a decrease in production by 10–15% in areas such as Fier or Korça.
In greenhouses, where energy is critical for heating and irrigation (often with pumps dependent on fuel or electricity indirectly influenced by oil), operating costs increase significantly, reducing profit margins and leading to higher prices for vegetables and fruits. The impact is strongest in greenhouses due to energy intensity, affecting seasonal production and exports.
The agri-food processing sector is affected by rising transportation costs for raw materials (such as grains or fruits) and energy for processing machinery (e.g., mills, canneries). This leads to higher prices for final products such as flour, oil or canned goods, amplifying food inflation and reducing consumer demand. From the inflation experience in 2022, when energy prices increased, flour mills in Albania saw a 30% increase in costs, leading to small bankruptcies and a 20% increase in bread prices. Livestock & aquaculture are also expected to see a decline in production of up to 25%.
For this reason, ALTAX proposes taking measures that amortize price increases, such as coupons/refunds for agricultural oil (20-30% of the cost); Grants for solar panels in irrigation and greenhouses; State reserves for fertilizers & seeds; Soft loans for modern/hybrid machinery; Improvement of rural infrastructure.
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