` Worldwide Study of Olive Oil Growers’ Production Costs


Worldwide Study of Olive Oil Growers’ Production Costs

Mar. 29, 2014
By Julie Butler

Recent News

How much does it really cost to grow olives for olive oil pro­duc­tion and how much does the cost vary around the world? The answers are often not known by olive grow­ers them­selves, accord­ing to Dr. Juan Vilar Hernán­dez, a sub-coor­di­na­tor of a 25-strong Inter­na­tional Olive Coun­cil-appointed expert group study­ing pro­duc­tion costs.

Since Decem­ber, the group has con­ducted an inter­na­tional sur­vey of olive oil pro­duc­ers and is now prepar­ing to deliver its analy­sis to the IOC by May 19. Their study focuses on the field costs of pro­duc­ing olives – up to when they have been har­vested and are ready to be taken to the mill – over the last four sea­sons. The project aims at shar­ing infor­ma­tion on the true range of costs in the sec­tor and aid­ing deci­sion-mak­ing on mat­ters such as changes to farm­ing inputs and processes, and busi­ness strat­egy design.

Juan Vilar Hernán­dez

Why the study is needed

Grow­ers using tra­di­tional cul­ti­va­tion meth­ods – which account for about three quar­ters of the total world area ded­i­cated to olive oil pro­duc­tion – stand to gain most from the study because they often lack thor­ough account­ing sys­tems and analy­sis of their results, said Vilar, CEO of GEA West­falia Sep­a­ra­tor Ibérica. (In 2012 Vilar wrote The Inter­na­tional Olive Oil Pro­duc­tion Sec­tor” — a com­pre­hen­sive book on the sec­tor.)

The study will serve as a strate­gic busi­ness tool, espe­cially for the dis­ad­van­taged and more tra­di­tional olive groves, help­ing with their opti­miza­tion, and thus the effec­tive­ness and effi­ciency of this social farm­ing which is immersed in the vor­tex of glob­al­iza­tion and faces very tight eco­nomic mar­gins. After all, inter­na­tion­ally, more than 30 mil­lion peo­ple make their liv­ing directly from this sec­tor, which has an annual turnover of €7 – 11 bil­lion,” he said.


Assess­ing global com­pet­i­tive­ness

An illus­tra­tion of the impor­tance of being com­pet­i­tive glob­ally was pro­vided in Novem­ber by Jaime Carbó, CEO of the world’s biggest olive oil bot­tler, Deoleo, who said that in the last year Deoleo had bought Aus­tralian olive oil, pack­aged it in Europe, and later sold it to Amer­ica. It sounds strange but the num­bers added up,” he said. In such a global mar­ket, grow­ers can’t know if they are com­pet­i­tive with­out know­ing their true costs of pro­duc­tion.

Vilar said that as a very gen­eral rule, to be prof­itable, the pro­duc­tion cost for 1kg of olives at the farm gate should not exceed €0.33-€0.45 – includ­ing all applic­a­ble expenses, such as self-employ­ment, depre­ci­a­tion of assets, and oppor­tu­nity cost. How­ever, it’s hard to pin­point such a value accu­rately, stressed Vilar, because prices in the olive oil mar­ket fluc­tu­ate and other vari­ables include the coun­try, olive vari­ety, farm­ing method, oil yield, time of har­vest, and ter­rain.

Study spans nearly 50 coun­tries, seven farm­ing sys­tems

The ambi­tious study has seen detailed ques­tion­naires sent to more than 400 con­tacts around the world, among them pro­duc­ers, pro­ducer asso­ci­a­tions, olive oil mills, tech­ni­cal staff and research cen­ters.

The study spans the now 47 coun­tries where olive oil is pro­duced, includ­ing new­com­ers Namibia and Arme­nia, ” said Vilar, who also men­tioned that Mada­gas­car and South Korea have field tri­als under­way with a view to join­ing them.

Grow­ers have been divided into seven cat­e­gories accord­ing to whether they use tra­di­tional (<180 trees/ha), inten­sive (180 – 800 trees/ha) or super-inten­sive (>800 trees/ha) farm­ing meth­ods, with the first two also divided accord­ing to whether the trees are rain­fed or irri­gated. The tra­di­tional farm­ing cat­e­gory is fur­ther divided accord­ing to whether the land has slopes of more or less than 20 per­cent.

Results to be made pub­lic, study could extend to milling costs

Vilar said once final­ized, the results of the study will be made pub­lic by the IOC.

It will be the most com­plete, in terms of con­tent and inter­na­tional rep­re­sen­ta­tion, ever car­ried out. It rep­re­sents an impor­tant man­age­ment and deci­sion-mak­ing tool for olive grow­ers,” he said,

The IOC said last year the study would also help, iden­tify what coun­tries need in terms of sup­port and tech­ni­cal assis­tance to allow olive grow­ers to weigh up and com­pare their pro­duc­tion costs and to iden­tify poten­tial room for reduc­tions in order to increase their earn­ings.”

A sec­ond stage cov­er­ing milling costs and ex-mill prices has not been ruled out but is a deci­sion for the IOC to make, Vilar said.


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