Agri-food Cooperatives of Andalusia has alerted this Friday about the "complicated situation that many olive farms are currently going through, as a consequence of the combination of high production costs and prices at origin that, in many cases, make it difficult to reach the profitability threshold," which, on the other hand, "once again demonstrates the uselessness of the Food Chain Law."
Through a statement, the Andalusian federation of cooperatives has reminded that "the sector has been enduring a strong increase in costs linked to agricultural activity over the last few years, from fuels and energy to fertilizers, machinery, irrigation, or labor." This pressure, they add, "continues to significantly condition the margins of farmers and forces an analysis of the market situation, not only from the point of view of the volumes marketed but fundamentally from the profitability of the farms. In fact, according to the recent study published by the Spanish Association of Olive Municipalities (AEMO), the average production costs of olive groves have increased by around 57% over the last six years."
In its analysis, Agri-food Cooperatives of Andalusia emphasizes that "the differences are significant, depending on the production system, but in traditional olive groves, costs can range between 4.18 and 5.31 euros per kilo of oil, while even certain intensive systems present costs exceeding three euros per kilo. This reality contrasts with the recent evolution of prices at origin." Thus, "the available data during the month of August places olive oil prices at levels that, depending on the category and the exploitation system, leave a significant part of the olive grove with very reduced margins or directly below their production costs."
The federation qualifies the situation as "especially striking," because this price scenario "coincides with a market that maintains an important pace of commercialization," since "during the month of July, the estimated exports reached 135,312 tons, almost 20,000 tons above the July average of the last five campaigns." At the same time, total stocks stood at 31 July at about 568,700 tons, after decreasing by more than 113,000 tons compared to the previous month, which, in the organization's opinion, "evidences that there is commercial activity and that olive oil continues to find an outlet in the markets."
However, the entity insists that the debate should not focus solely on sales figures, warning that "the true indicator of the sector's sustainability cannot be how much oil is marketed, but whether the farmer can cover their costs, obtain adequate remuneration for their activity, and have the economic capacity to continue investing and maintaining their farms." For this reason, it considers it essential to strengthen the joint work of the entire production fabric, in coordination with professional agricultural organizations and with the various administrations.
Demands to Brussels and the Central Government
In this context, Agro-food Cooperatives of Andalusia has been demanding from the central government and the European Commission "greater control and monitoring of olive oil from third countries entering the community market, both through tariff-free quotas and through operations covered by the active improvement regime (RPA/TPA)." In its view, it is "essential to ensure that all olive oil that accesses the European market strictly meets the same regulatory, quality, traceability, and food safety requirements applicable to community production, as well as to reinforce transparency regarding the volumes and destinations of these operations."
The purpose of these demands is "to preserve balanced competition conditions and to prevent these commercial instruments from being used in a way that distorts the normal functioning of the market or introduces artificial downward pressure on prices at origin, both in Spain and in the entire European Union (EU)."
More concentration and negotiating power
The federation recalls that, in an "increasingly globalized market dominated by certain links in the chain, the producer needs to increase their negotiating capacity" and that, for this, for decades it has been promoting "a strategy focused on the concentration of supply, on business integration, and on the creation of increasingly powerful cooperative commercial structures." The key, they emphasize, is not only to increase production but to "sell better," and "position Andalusian agri-food cooperatives in national and international markets," while seeking to "gain dimension as a key to directly access new countries and audiences," while making "investments in R&D+i, internationalization, and promotion," and betting on "developing brands, advancing in transformation and packaging, and, ultimately, getting closer to the final consumer."
From the organization, it is highlighted that the Spanish olive oil sector has "a privileged productive position," given that "Spain is the world's leading producer of olive oil and Andalusia concentrates approximately three-quarters of Spanish production. However, this productive strength must also translate into business and commercial strength."
The key role of the cooperative model
In this scenario, the federation argues that "the olive oil sector must know how to take advantage of those business opportunities that allow it to strengthen its position in the markets, gain dimension, and advance in the value chain. Growing, both horizontally and vertically, incorporating commercial muscle, accessing new distribution networks, and having recognized brands is strategic to bring the producing sector closer to the final consumer, and it is especially so in a cooperative model like ours."
It also recalls that "behind a cooperative, there is not only a business structure but hundreds or thousands of professional farmers and families who have decided to unite their olive production to market jointly and better defend their interests. Cooperatives allow the value generated by agricultural activity to remain in the territory where it is produced."
In the same line, they emphasize that these entities "generate employment, maintain economic activity in numerous rural municipalities, provide services to their members, and contribute decisively to the maintenance of the productive and social fabric of a large part of Andalusia. It should not be forgotten that 65% of the surface area of the community is classified as rural and, in these territories, agro-food cooperative companies play an essential role for the future of the olive grove," which "depends on the value generated by the Andalusian olive grove reverting to those who make it possible."