Spanish Olive Oil Prices Fall Below the EU Trigger
The average price of virgin olive oil in Spain has fallen to about 1.699 euros a kilo, just under the 1.71 euro level at which European rules allow the Commission to pay for oil to be taken off the market and stored. The Spanish government and the growers’ organizations say Brussels now has to act. Here is what the trigger means, what the current prices are, and why the mechanism is disliked by the people asking for it.
What the trigger is
Under the European Union’s single market rules for agriculture, private storage aid for olive oil can be opened when average market prices over a representative period fall below set levels: about 1,779 euros a ton for extra virgin, 1,710 euros for virgin and 1,524 euros for lampante. Those levels were fixed years ago and have not moved with costs.
The aid does not buy the oil. It pays producers to keep it in the tank, out of the market, for a fixed period, in the hope that the price recovers once supply tightens. It is a delay, not a rescue.
| Grade | Trigger level | Spanish price, week to 11 September |
|---|---|---|
| Virgin | 1.71 euros a kilo | About 1.699, down 0.64 percent on the week |
| Extra virgin | About 1.78 euros a kilo | About 1.90 in Córdoba and Jaén, 1.85 in Granada, 2.06 in Seville |
| Lampante | About 1.52 euros a kilo | About 1.62, down 0.33 percent on the week |
Who is saying what
Spain’s environment and rural affairs minister, Rosa Aguilar, said the evidence would be sent to the agriculture commissioner, Dacian Ciolos, who should then act accordingly. Rafael Sánchez de Puerta of FAECA, the Andalusian federation of agricultural cooperatives, called storage aid the only measure that could help the sector recover. Rafael Civantos of the COAG farmers’ union said Brussels now has no excuses.
Asaja-Jaén, the young farmers’ association, supported the request and added two complaints worth repeating. The trigger prices were set more than a decade ago and need revising. And the official price records, which are the numbers the mechanism runs on, are often higher than what growers are actually paid. If that is true, the market crossed the line before the statistics did.
Why this keeps happening
Spain has asked for this before, more than once, and been told that prices were low but not low enough and that there was no proof of a market disturbance. The deeper problem is not the mechanism. It is that Spain produces more oil than the market wants at a price that covers costs, sells much of it in bulk, and faces a retail trade that uses olive oil as a loss leader.
- Storage aid moves oil out of this season and into the next one. If the next crop is big, the problem returns with interest.
- The first estimates for 2011/12 point to another large Spanish harvest, which is why the market is falling now.
- Growers who sell at these prices are selling below the cost of picking in many groves.
For the background, see the last time the European Union turned to storage aid, and the season when Spain sold a record volume and still lost money. The same squeeze reached the table olive side in the Seville growers’ strike.
Nothing in a price crisis reaches the shelf. When Spanish virgin falls under 1.70 euros a kilo, the bottle in the supermarket does not get cheaper, because the oil is only a part of what you pay for and the retailer is not passing anything on. The people whose income moves with these numbers are the growers, and they have no say in what the label charges.
Sources
- Olive Oil Times: Virgin Olive Oil Prices Hit Trigger Level for European Aid, 19 September 2011 (archived copy)
- EUR-Lex: Council Regulation (EC) No 1234/2007, private storage of olive oil and trigger prices