Sunday, February 05, 2012

Too much oil

Already faced with a glut of olives equivalent to 95 million litres of olive oil, this exceptionally dry winter means the industry is braced for its second bumper crop in a row, which could see a further 285 million litres flood an already saturated market. Factor in a 70 per cent increase in production costs, the stagnation of prices paid to olive oil farmers in the past 15 years, (olive oil retails at over 10 times as much in supermarkets. People trying to come back to rural Spain from the building industry – which has collapsed – to what they thought was a sure-fire profitable job. But agriculture in its current state isn't profitable.

San Sebastian harvesting plant commercial director, Jose Antonio Caceres Ortega, agrees the industry is facing "a perfect storm". Its processing capacity increased sixfold to 30 million kilos of olives a year. "Over the next five to 10 years, 80 per cent of the small olive oil producers are going to disappear...Each year we've beaten the world record in terms of production, [and] there's too much on offer." Spanish supermarket chains constantly to use olive oil as a loss-leader, to tempt customers and keep prices low. "

"At the same time, the big purchasers of olive oil have created a monopoly. During this year's harvest, prices have already fallen by the maximum possible. Buyers exploit the fact the processing plants are full to bursting. So you get bad sales. It's the worst possible facet of the law of supply and demand."

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