Catalonia’s Watchdog to Study Falling Olive Oil Prices

Catalonia’s competition authority has agreed to prepare a public report on how olive oil prices are formed, after growers complained that ex-mill prices keep falling even though Spanish stocks are low. It is not a formal investigation, and the national regulator has already asked for harder proof. Here is what was agreed on Tuesday, what the growers are up against, and how to read a falling price in a short year.

What was agreed

The commitment came at Tuesday’s meeting of Catalonia’s olive oil sector table, the Taula Sectorial de l’Oli, in Barcelona. According to the farmers’ union Unió de Pagesos, the Catalan Competition Authority (ACCO) undertook to prepare a public report on relations between the operators in the sector, on how prices are set, and on any possible breaches of free competition. The union says it had asked for exactly that more than once.

An ACCO spokeswoman told Olive Oil Times that no formal request had been received yet, but that the authority was willing to consider one and could produce something like its January report on milk prices, which asked whether there were risks to competition in the Catalan dairy sector.

Why growers are angry

The union’s olive spokesman, Miquel Blanch, says many Catalan producers are in real trouble, above all on dry, rain-fed land where yields are low. The list of pressures is long:

• Crop insurance for olives has roughly doubled in cost this year, the union says, after cuts to the state subsidy from ENESA, the national farm insurance agency.
• The way Madrid proposes to apply the new Common Agricultural Policy would leave Catalan growers with much lower payments per hectare than growers elsewhere in Spain.
• Two drought-hit harvests in a row, and prices sliding since the 2008/09 season.

Figures from Catalonia’s farm accounting network, quoted by the union, show gross income on olive farms falling by about 30 percent between 2007 and 2009, from €1,338.37 to €1,009.57 a hectare, and the union expects the numbers since then to be worse.

The national picture

Catalonia is not alone. In May the COAG farmers’ union in Jaén asked Spain’s National Competition Commission to look into alleged price manipulation by olive oil distributors. Its general secretary in Jaén, Juan Luis Ávila, says the commission replied last week that it needs very concrete evidence before it will act. His point is that growers cannot supply it: the commission has investigators and legal powers, and proving collusion could mean proving “telephone calls between four people”.

What makes growers suspicious is the timing. Spain has just come through what COAG calls its worst harvest in 20 years, the season that halved the crop, and the Spanish Olive Oil Agency put stocks at just under 400,000 tons at the end of August, about a third below the average of the four previous seasons. Scarce oil and falling prices look wrong to a farmer.

They are not necessarily wrong to a buyer. The olive oil market prices the next harvest as much as the last one, and the forecasts for this winter’s Spanish crop are far bigger. Bottlers who expect cheaper oil in a few months buy only what they need. That can drive prices down without anyone breaking the law, which is exactly why a regulator’s report, with access to the contracts, would be worth more than either side’s opinion.

Sources

• Unió de Pagesos: L’Autoritat Catalana de la Competència elaborarà un informe sobre relacions dels operadors de l’oli (October 9, 2013, archived)
• Olive Oil Times: Catalan Competition Authority Considers Investigation Into Price Manipulation (October 10, 2013)