International Olive Oil Production Costs Study

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The average price of obtaining a kilo of oil in the world is of 2.63 euros, whereas the surface of each of the different producing countries. Specifically, the total cost of obtaining a kilo of oil on average regarding the importance of the production of olive field represents 84%, and based on transport and grinding, 16%.

These are some of the results of the International Olive Oil Production Costs Study, accesed by Mercacei, commissioned by the IOC Council of Members. It has been conducted under the supervision of IOC Former Executive Director Jean-Louis Barjol and Deputy Director Ammar Assabah and the coordination of the Head of the IOC Statistics Department María Isabel Gómez, with the support of José María Penco (agronomist and project manager, Spanish Association of Olive Growing Municipalities (AEMO) and Juan Vilar (President, GEA Westfalia Separator Ibérica and lecturer at the University of Jaen).

The objective of this study goes beyond merely determining the cost of producing one kilogram of olive oil in the IOC member countries. Its core aim is to help olive growers to identify the stages of crop management where they are less competitive than others and to encourage them to apply strategies to improve their competitiveness, for instance through technical assistance schemes.

In this study, data have been analysed for 15 member countries of the IOC: Albania, Algeria, Argentina, Greece, Iran, Israel, Italy, Jordan, Lebanon, Morocco, Portugal, Spain, Tunisia, Turkey and Uruguay. Therefore, seven cultivation systems have been defined into which all world olive orchards can be classified. Four of the systems are traditional (S1 to S4) and three are intensive (S5 to S7). Inside this chatacteristics, two categories of olive processing system are defined by modern centrifugation and traditional pressing.

Conclusions
The study concludes that the most frequent cultivation system in all the countries is the traditional rainfed system on steep slopes (33 %), followed by the traditional rainfed system on moderate slopes (30 %) and the intensive irrigated system (18 %). The least frequent systems are the traditional irrigated system on steep slopes (0.6 %) and the superintensive system (4 %).
The research done by this stury demonstrates that drip irrigation is the predominant irrigation system. Water consumption is higher in the southern Mediterranean countries than in the northern Mediterranean European countries.
It is clear that cultivation is less mechanised in the southern Mediterranean countries, with the exception of Israel. Thus, local and autochthonous varieties predominate in the traditional cultivation systems whereas new varieties are preponderant in the intensive systems.

Production
Regarding production, oil yield is greater in the traditional olive growing countries in the Southern Mediterranean region and much lower in the South American countries.
Olive crop production under rainfed conditions is considerably higher in the eastern Mediterranean countries – the cradle of olive growing – than in the western Mediterranean countries.
Otherwise, oil production per hectare increases with crop intensification and irrigation, showing a linear increase from S1 (370 kg./ha.) to S7 (1,579 kg./ha).
Average production, all systems and countries combined, works out at 816 kg. of oil/ha. The countries with the highest unit production are Israel, Albania and Algeria and those with the lowest are Italy, Iran, Morocco and Tunisia.

Costs
Cultivation costs differ sharply between both the producing countries and the cultivation systems. Therefore, the intensive and irrigated cultivation systems (S6 and S7) have the highest production costs/ha but also the highest production; as a result, unit costs are lower. Conversely, the more traditional and rainfed systems have higher unit production costs/kg olives, i.e. they are less profitable.
On-farm olive production costs account for 84 % of the total cost of producing one kilogram of oil; olive transportation and processing account for the remaining 16 %. Attention therefore needs to focus on optimising agricultural production where is there is more room for improvement.
At processing level, costs differ greatly between countries, ranging from 0.16 euros/kg. crushed olives in Uruguay to 0.03 euros/kg. in Spain, and are chiefly determined by average mill size.
As we have already pointed out the average total cost of production of one kilogram of oil, itemised by cultivation system, ranges from 3.45 euros/kg. in the traditional rainfed system on steep slopes (S1) to 2.05 euros/kg. in the superintensive system (S7). Costs vary linearly between these two figures as crop intensification increases.

The arithmetic average cost of producing one kilogram of oil in all countries works out at 2.78 euros/kg. Of this figure, 2.33 euros/kg. are on-farm costs and 0.45 euros/kg. are transport and oil processing costs.

Taking into account the significance of the participant countries in terms of olive crop area, the mean world weighted cost of producing one kilogram of oil comes to 2.63 euros/kg.

The countries where the average weighted costs are considerably above the mean are, in descending order, Iran, Lebanon, Algeria, Uruguay, Italy and Israel. Otherwise, the countries where average weighted costs are very far below the mean are clearly Morocco, Tunisia and Turkey.

There are very wide cost differences between countries. The highest mean price is recorded in Iran (6.26 euros/kg.) and the lowest in Turkey (1.93 euros/kg).

Costs in Jordan, Albania, Argentina, Spain, Greece and Portugal lie around the world average.

Generally, the countries where the cost of producing one kilogram of olive oil is the most advantageous are located in the southern and eastern Mediterranean region (specifically Morocco and Tunisia in North Africa, and Turkey). Olive cultivation can therefore be expected to expand in these countries in the future, either with domestic or foreign capital.

Costs are inevitably higher in some producing countries for clear, concrete reasons, for instance because of higher water costs in Israel and low oil yields in Uruguay.

There are major between-country differences in costs, even within the same cultivation systems. Apart from features specific to each country, this is due to differences in olive crop management practices. Hence, there is ample room for lowering costs in the countries where they are the highest through the transfer of technology and expertise and permanent training.

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