Spain Invades the Italian Olive Oil Industry

Olive Oil

Germany

Portugal

Published Feb 13, 2020

Italy, the second-largest olive oil producer in the world, is importing products from Spain. This is due to new technologies that have brought mass production and caused Spanish and global olive oil prices to plummet.

Imports of Spanish olive oil have grown by 48% in Italy, a country that ranks second in olive oil production. Spain is the largest exporter of olive oil to Italy, currently taking over three-quarters of Italian sales.

Spanish olive oil exports to Italy were 280 million kg during the first eight months of 2019 alone. This is a direct result of how innovative production technologies in Spain, the largest producer, have drastically brought down the price of olive oil.

Italian Production Increases in 2019/2020

Production for 2019/2020 is looking better than 2018/2019, a disastrous year for Italian olive producers where only 175K tons were produced. The 2019/2020 season is expected to see 330K tons of olive oil, up 89% compared to the previous season. However, despite the significant increase, production levels in Italy are still much lower than the average of 402K tons annually between 2009 and 2019. Several Italian farmers also expressed trouble in contracting mills or hiring workers to help with the harvest.

Low Global Prices Due to Large Spanish Productions

The biggest concern for Italian manufacturers, however, is the low Italian market price resulting from low Spanish prices, which is why the country’s exports to Italy have been on the rise. The drop in prices is a direct result of how olive oil production is continuously increasing in mass-producing regions while demand is not growing fast enough. In Italy, prices of extra virgin olive oil fell by almost 50% in just ten months in 2019.

The oversupply stems from production in super high-density olive orchards, SHD, in Spain and in parts of Portugal. An SHD is a relatively new system, started in Spain, that places 600-1600 olive trees per ha in parallel rows and uses highly advanced technological tools to maintain productions. This method is thought to be three times more effective than the traditional way and even reduces harvest costs. In contrast, the minimum age of Italian olive trees is approximately 50 years and 42% of farms have less than 140 trees per ha.

This mass production method has brought down Spanish olive oil prices to a bare minimum and has caused global prices to decrease as well. It has also been intensified as an increasing number of large olive oil companies have been earning profits by selling products at an extremely thin margin, which is not an option that is available for small-scale farmers. Even in Spain, workers in the olive oil producing sector of Jaén protested along the Andalusian highways as the low prices caused hundreds of small businesses to be at risk of being out of business.

The Spanish Invasion Expected to Continue

Additionally, Italian farmers felt neglected by the European Union’s decision late last year to allocate funds to olive oil growers only in Spain, Greece, and Portugal despite low prices in the Italian market. They also expressed their concern about how Italian high-quality olive oil was becoming depreciated compared to its cheaper Spanish counterpart.

However, with Spain increasing its exports to top importers from Italy such as the United States, France, Brazil, Germany and Japan, all top importers, and even to Italy itself, Italian olive growers are expecting more hardships to come.