Spain’s Traditional Olive Groves Struggle as Production Costs Surge

Between 2020 and 2026, average olive oil production costs in Spain increased by nearly 57 percent, with costs in the country’s most traditional olive groves now far exceeding market prices.

The findings come from the latest edition of the Olive Cultivation Cost Study, published by the Spanish Association of Olive-Growing Municipalities (AEMO). The report is widely considered a benchmark for the Spanish olive oil sector.

In a departure from previous calculations, the study accounts for the broader economic environment by including the opportunity cost of land and the depreciation of investments required for cultivation, including machinery.

Land value is often excluded from agricultural production-cost calculations. However, the study’s authors said it is relevant when comparing the profitability of olive cultivation with other potential land uses.

The researchers assigned a land cost of €500 per hectare for dry-farmed groves and €1,050 per hectare for irrigated groves.

They excluded this cost from traditional non-mechanizable olive groves, also known as mountainside groves, because the land generally has little potential for alternative agricultural or commercial use.

The study analyzed seven major olive-growing models, ranging from traditional cultivation to super-intensive farming.

The results present a stark outlook for traditional olive cultivation in Spain.

In traditional non-mechanizable groves, which account for 17.7 percent of Spain’s olive-growing area, the total production cost reached €5.31 per kilogram of olive oil.

The situation is less severe in mechanized and partially mechanized traditional groves, although costs remain above the average market price, calculated at the time of the study at approximately €3.26 per kilogram across all olive oil categories.

Traditional groves in which some mechanization is possible represent the largest share of Spain’s olive-growing area, at 32.6 percent.

Although mechanization may be limited in these groves, reducing dependence on costly manual labor has a significant effect on overall production costs.

AEMO calculated production costs of €4.18 per kilogram in traditional irrigated groves and €4.67 per kilogram in traditional dry-farmed groves.

Although irrigation substantially increases operating expenses, higher yields more than offset the additional costs.

The study estimated average yields of 6,000 kilograms of olives per hectare in irrigated groves, compared with 3,500 kilograms per hectare in dry-farmed groves, resulting in a lower production cost per kilogram of oil.

At the other end of the spectrum are intensive and super-intensive cultivation systems.

For intensive dry-farmed groves, the average production cost was calculated at €3.52 per kilogram. Although still above the prevailing market price, this was significantly lower than the cost of the most efficient traditional model.

Higher yields reduced the cost of intensive irrigated cultivation to €3.20 per kilogram.

Among super-intensive groves, production costs averaged €3.17 per kilogram under dry-farmed conditions and €3.08 per kilogram under irrigation, the lowest figure recorded in the study.

The findings are likely to intensify concerns about the long-term viability of traditional olive cultivation.

Using data from the previous season, the Jaén branch of the Spanish farmers’ union COAG calculated that growers operating traditional, machine-assisted dry-farmed groves incurred direct losses of 7.8 percent.

Losses reached 42.6 percent for growers operating traditional non-mechanizable groves.

In response, COAG Jaén took the extraordinary step on the final day of the tax filing period in July of formally notifying the Ministry of Finance that it disputed the assumptions used to calculate olive growers’ tax obligations.

The organization called for a major overhaul of the system to reflect the new financial realities facing Spain’s olive sector.