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
By Paolo DeAndreis

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.

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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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