Olive Oil Prices in Spain "Unsustainable"

By Sarah Schwager

Feb. 16, 2011 20:10 UTC

Olive oil is on shaky ground in Spain as growers and producers demonstrate over record lows in olive oil prices and three consecutive years of selling below cost.

Olive growers across Spain have recorded €1.9 billion ($2.55 billion) of losses, €1.5 billion ($2.01 billion) of those in Andalusia, according to Spanish agrarian organization COAG.

COAG has called for the urgent implementation of private storage, which it said is the only instrument that will allow immediate recovery in prices, as it works to ensure unity among the entire production sector.

COAG anticipates further demonstrations due to the low prices, with olive sectors of the various regional unions holding special meetings last week. It said the situation is “unsustainable.”

The average price of oil has fallen to below €1.85 ($2.50) per kg in the past month, according to information system Poolred, far below the weighted average of €2.49 ($3.37) per kg, with some categories falling up to €0.18 ($0.24) per kg below last year’s values, according to the Ministry of Environment, Rural and Marine Affairs’ (MARM) Center for Food prices.

“We are finding ourselves with market rates that are well below the average values of oil production, which results in considerable losses by Spanish producers while the functioning of the market is fluid with record exports, showing a strong demand that is not reflected in the prices,” Gregorio López, head of COAG’s olive sector, said.

López said private storage needs to be activated immediately. When prices fall below the trigger levels, in order to help rebalance the olive oil market the European Commission can grant aid for private storage, which allows operators to keep certain quantities of extra virgin or virgin olive oil in storage for 180 days and request a certain amount of aid per tonne and per day.

“The Ministry must increase pressure on the European Commission and ensure the implementation of this measure,” Mr. López said. “All of this must be done without losing sight of the objective, absolutely vital, of setting prices for the activation of private storage that more accurately reflect the current reality of production costs and adjust system operations.”

Currently, the threshold that automatically activates private storage is €1. 77 ($2.39) per tonne for extra virgin olive oil, €1.71 ($2.30) per tonne for virgin olive oil and €1.52 ($2.05) for lampante oil, prices that are far removed from the actual costs of the sector.

COAG said it is important to remember that two years ago, even though private storage was activated very late (in July), the announcement of its launch caused a 26% rise in prices, from €1.61 ($2.17) per kg to €2.03 ($2.74) per kg.

Meanwhile, Spain’s Small Farmers’ Union (UPA) has called for a food marker on olive pomace oil in order to prevent fraud. The union is worried that some producers might mix olive oil with pomace oil in order to make up for the fall in prices of virgin olive oil.

UPA Andalusia Regional Secretary Agustín Rodríguez said while the practice is banned in Spain, some packers may be tempted to mix the oils in order to “minimize the continuing losses in a market in which generic brands are eating away at brand olive oil”. He said the “scandalously” low price of olive oil makes it difficult to compete and there is a risk of an increase in practices that go against the quality of the product.

Spanish supermarket giant Lidl said the practice is “commercial terrorism” and there will be protests if the government does not act urgently.

Olive Oil Prices in Spain "Unsustainable"

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