Producers: Spanish Olive Oil Prices Inconsistent With Market Conditions

Spanish farmers and growers have had to contend with sales prices well below the production costs for two seasons in a row. COAG is now demanding an official investigation on prices that have shrunk 37 percent since March 2018
May. 7, 2020 12:41 UTC
Paolo DeAndreis
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Spanish olive oil prices have fallen below pro­duc­tion costs even as demand has risen, leav­ing pro­duc­ers scratch­ing their heads while farm­ers find them­selves in an unten­able sit­u­a­tion.

This shows that there are oper­a­tors that are destroy­ing value from the field to the table.- Juan Luis Avila, COAG-Jaén

Since March 2018, prices at ori­gin have dropped by 37 per­cent to $2.30 per kilo­gram, leav­ing grow­ers to grap­ple with two con­sec­u­tive sea­sons in which pro­duc­tion costs have exceeded sales prices.

Official data from the Spanish Ministry of Agriculture show losses reach­ing more than $1.2 bil­lion, a fig­ure that indus­try rep­re­sen­ta­tives say is at odds with cur­rent mar­ket con­di­tions. Prices have fallen 15 per­cent since March 2019 even as demand has spiked, prompt­ing a call to action from key play­ers in the Spanish indus­try.

A press release from the farm­ers asso­ci­a­tion Coordinadora de Organizaciones de Agricultores y Ganaderos (COAG) noted that house­hold demand for olive oil had risen 31 per­cent, last sea­son’s pro­duc­tion was down 37.6 per­cent, and exports were con­tin­u­ing at a good pace. Given this data, COAG said, prices should be higher.

See Also:EU Olive Oil Production Estimates Release

This shows that there are oper­a­tors that are destroy­ing value from the field to the table,” said COAG-Jaén rep­re­sen­ta­tive Juan Luis Avila.

COAG is call­ing for an inves­ti­ga­tion into the sit­u­a­tion by the Spanish Food Information and Control Agency (AICA), request­ing that the gov­ern­ment agency ver­ify that olive oil sale con­tracts take into account the cost of pro­duc­tion.

It is intol­er­a­ble to main­tain such a crit­i­cal sit­u­a­tion any longer when there is an upturn in con­sump­tion that is ben­e­fit­ing all the oper­a­tors in the chain except the olive grow­ers,” Avila said.

COAG is not the only orga­ni­za­tion con­cerned about the seem­ingly unwar­ranted price drop. Interóleo Group has noted a con­sid­er­able increase in olive oil con­sump­tion in homes in Spain and in other coun­tries since the begin­ning of the Covid-19 pan­demic and the cor­re­spond­ing lock­down mea­sures.

The com­pany noted in a press release that data indi­cate prices should be ris­ing, not falling.

It is inex­plic­a­ble that the prices at ori­gin stay this low, even more so since the olive oil pro­duc­tion not only in Spain, but world­wide, has been lower than expected,” said Interóleo Group pres­i­dent Juan Gadeo.

The Ministry of Agriculture’s lat­est data showed that 88.9 per­cent of all olive oil sold is avail­able for pur­chase by domes­tic con­sumers. On paper, this should mean that olive oil sales ben­e­fit all of the chain play­ers.

Packaging and dis­tri­b­u­tion com­pa­nies have 1.1 mil­lion tons of oil stocked for the sea­son, enabling them to bet­ter weather depressed prices, but this is not true for the farm­ers.

In addi­tion to call­ing for an inves­ti­ga­tion of pos­si­ble mar­ket spec­u­la­tion, COAG pointed out that the European Union ini­tia­tive to reg­u­late sup­ply by pri­vately stor­ing sur­plus olive oil has not had the expected results.

The lat­est attempt, which held back 200,000 tons of olive oil from sale for six months with the aim of help­ing prices recover, did­n’t do much to boost sales fig­ures. To face the grow­ing uncer­tain­ties of the Covid-19 after­math, COAG has asked the European Union to con­sider fund­ing at least an addi­tional six months of pri­vate stor­age.


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