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Spanish farmers struggle as olive oil prices plunge

02 june 2011, 11:42
0
Bottles are filled with olive oil at the family-owned factory in the Andalusian village of Jimena. ©AFP
Bottles are filled with olive oil at the family-owned factory in the Andalusian village of Jimena. ©AFP
The sun-soaked valleys of Andalusia made Spain the world's top olive oil producer but plunging prices have turned the bounty into a farmers' curse, AFP reports.

At this time of year harvesting is over in this southern Spanish region, which produces 80 percent of Spain's olive oil. Tiny green dots on the branches point to the next crop in October.

But the idyllic view of olives trees, some more than 100 years old, stretching over the hills into the distance, belies an industry in crisis.

In the village of Jimena, nestled in the midst of the vast stretches of olive groves, is the family-owned factory of La Purisima, manufacturer of olive oil since 1893.

Factory manager Manuel Alfonso Torres Gonzalez lays out the mathematics: In four years the average price paid to olive oil producers slumped from 2.60 euros a kilo to 1.80 euros ($1.68 a pound to $1.17).

Olive grove farmers are squeezed on both sides.

"They give me their olives so I can press the oil and they ask me to stock it while waiting for prices to rise," Torres said, showing off the huge steel storage containers.

"But when they need to repay loans they call me and want everything sold within 24 hours," he said. When banks refuse to extend repayment deadlines or give new loans, the farmers are forced to sell their oil cheaply to finance their operations.

Spain produces 50 percent of the world's olive oil, a growing export. In 10 years, olive oil output leapt from 700,000 tonnes a year to 1.4 million tonnes, of which 800,000 is exported, Torres said.

Average production costs for traditional olive farming, the most common in Spain, are 2.40 euros a kilo, said Jose Maria Penco, an engineer in Spain's association of oil producing towns.

"It's terrible," Penco summed up.

There are 1,700 producers and only five distributors, creating a "major imbalance" that pushes prices down, he said.

And since olive oil is an essential ingredient in Spanish cuisine, supermarkets use it to draw in customers and sell it off at bargain-basement prices, Penco said.

In Spain's economic crisis, they cut the price even more.

Olive oil, known as "green gold" as consumption booms, generated an investment frenzy in past years far from the property boom that engulfed the rest of the country.

"Here, instead of building homes we planted trees," says Enrique Delgado, secretary general of the Spanish Oil Producers Federation.

The oil industry gives a living to 200,000 producers and 300 villages, so "the price slump has major consequences for the Andalucian region," where unemployment runs at nearly 30 percent, said Jaen University chancellor Manuel Parras Rosa.

To withstand the price collapse, producers should concentrate supply in big cooperatives, said Andalusian Federation of Agricultural Cooperatives president Rafael Sanchez de Puerta.

"We are working on it, but it is a slow process," he said.

Back at the Purisima olive oil factory, Torres believes survival lies in his youngest olive trees which have been planted closer together and in a pattern adapted to machine-harvesting.

"It is very important to cut costs to be competitive," he said, iPad in hand, as he combined his job as farmer with the writing of a thesis on olive oil financial viability.

This intensive farming method, already adopted in competing countries such as Chile, Morocco and Australia but only used by 25 percent of the Spanish sector, cuts costs to 1.50-1.60 euros a kilo, Penco said. "So, even with prices so low, yes, it is profitable."

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