The European Commission is set to pay up to €20 million ($26.5m) to subsidise the temporary storage of 100,000 tons of extra virgin and virgin olive oil.

It’s hoped that taking the oil off the market for up to four months will bolster below-cost farm-gate prices in Spain, the world’s biggest producer and the EU’s olive oil price leader.

EU Agriculture Commissioner Dacian Cioloş foreshadowed the move while in Madrid on Friday and it was voted on yesterday by an EC management committee.

Spain’s producer groups welcomed the step, saying it would help the sector at least break even, but should have come sooner.

Rafael Sánchez de Puerta, a spokesman for EU farmers’ lobby Copa-Cogeca, said the aid would prop up producers at a critical time. He said the EC would be pushed to extend it beyond 100,000 tons and to also cover lampante oil, which would have more influence on the market.

Spain’s plunging prices

According to a statement released by Cioloş’s spokesperson, the price of extra virgin olive oil (EVOO) in Spain is for the second consecutive week below the EC private storage aid (PSA) threshold of 177.90 €/100 kg.

For the week January 23-29, the producer price for EVOO in Spain was 174.29 €/100kg, well down from 199.84 €/100kg at the same time last year. In Italy it was 236 €/100kg, down from 306 €/100kg, and in Greece 184 €/100kg, down from 196.50 €/100kg.

The trigger price for virgin olive oil is 171.00 €/100kg, a level which both Spain and Greece are below, with respective prices of 165.28 and 154.00 €/100kg.

Cioloş promises shake-up

The first of two rounds of invitations for PSA is scheduled for February 23 and both will cover up to a maximum of 150 days. According to Cioloş’s spokesperson, it is the first time that the private storage aid will be provided for EVOO.

In October, the EC approved PSA for producers in Greece, Spain, France, Italy, Cyprus, Malta, Portugal and Slovenia to take up to a total of 100,000 tons of virgin olive oil off the market for up to six months. However, just 44,338 tons were thus stored and the price of virgin olive oil in Spain is again below the PSA trigger.

The PSA implementation regulation in October said, “The prospect of a consecutive good harvest and the accumulation of stocks in Spain create an imbalance between supply and demand which exerts a downward pressure on virgin olive oil prices and causes a serious disturbance on the Spanish market.”

At the time, Cioloş said he had decided to allow the aid “in order to help the sector address some of its short-term problems.”

“We will have to look at the more medium to long-term structural problems, and I will be coming forward with a concrete action plan on this in the coming weeks,” he said.

However he now says he will present concrete proposals in the coming European spring.

PSA may be opened from time to time by the European Commission for the following products: butter, sheep and goat’s cheese, white sugar, olive oil, beef, pigmeat, and sheep or goat meat.

In January, PSA was introduced to cushion the impact of plunging prices in the pigmeat sector, which has struggled after a a global shortage of cereal saw feed prices surge.

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