Agricultural Situation Report of Cyprus and the Market and Trade
Policies for Fruit/Vegetable and Olive Oil2
Dr. Marinos Markou and Dr. Andreas Kavazis 3
Abstract. During the last decade the Cypriot agricultural sector has been
declining in terms of most indices in the economy, mainly due to the spiraling
growth of tourism, as crucial investment outlays were diverted from
agriculture to tourism; the most important factors of production being land
and labor due to substantially higher yields accruing to both. The Domestic
Resource Cost (DRC) revealed that the three products studied for the period
1997 to 2000, i.e. tomatoes, oranges and olive oil had a comparative
advantage. However, the opening of the European market with EU accession
led to the substantive undermining of competitiveness of agricultural
products and to the reduction of the value of exports. It is believed that DRC
ratios would be higher today that the ones reported, due to
unchanged/decreased border prices and increased costs of tradable inputs. It
is suggested that the tomato, orange and olive oil sectors will become more
competitive in the European market if factors that are affecting their
marketing, like differentiation of production and quality, are improved. New
concepts like organic farming and products of origin are very important and
may provide profitable outlets in the new globalized economy. Additionally,
favorable climatic conditions are vastly for and conducive to the production
of early season Mediterranean products with obvious premium attached in
the market place.
Keywords: Domestic Resource Cost, Competitiveness, Tomatoes, Oranges,
Olive Oil
1. Introduction
During the last decade the agricultural sector in Cyprus has been
declining in terms of most indices in the Cypriot economy. The most
important reason for the accelerated decline is the spiraling growth of
tourism in Cyprus since crucial investment outlays were diverted from
agriculture to tourism; the most important factors of production being land
and labor due to substantially higher yields accruing to both. Nevertheless,
Cypriot agriculture retains its importance in the overall economy as it
provides employment to a relatively large percentage of people in rural
areas; it is a strategic supplier of food, provides raw materials for
manufacturing and helps maintain the rural environment.
The broad agricultural sector is dominated by crop production, about
60% of value added, followed by livestock, about 30% of value added. Crop
production can be separated into two main features. These are irrigated
2 The present paper is part of the work contacted in the frame of the MEDFROL project
(Market and Trade Policies for Mediterranean Agriculture: The case of fruit/vegetable and
olive oil), funded by the SIXTH FRAMEWORK PROGRAMME. PRIORITY 8.1 “Policy- oriented
research - Integrating and Strengthening the European Research Area”. Proposal/Contract
no.: 502459.
3 The Agricultural Research Institute, Nicosia, Cyprus