Almost 200 thousand tons of oil still in storage, prices paid to producers have fallen by 50 percent and silos are occupied just as a new harvest is about to begin. The Italian olive oil supply chain is facing what sector associations define as the worst crisis in the last twenty years. A sector worth 3.2 billion euros a year risks being overwhelmed by competition from oils from Spain, Greece and other Mediterranean countries, sold at significantly lower prices.
What the national data say
The evidence, raised by many operators in the sector, comes directly from the data of the national agricultural information system. To give an example: at the end of July, 233,377 tons of oils were still present in Italian warehouses, 43.9 percent more than a year earlier.
Since then the stocks have decreased, but at the beginning of September there were still almost 200 thousand tonnes left in the silos, of which 88 thousand of extra virgin olive oil, 50 thousand tons more than the same period last year.
The problem of prices at origin and foreign competition
The growth in inventories is accompanied by a strong reduction in prices at origin. According to the national “Orgoglio Olivicolo” committee, commodity markets have recorded a decline of close to 40 percent for months. To produce a liter of Italian extra virgin olive oil, on average, at least 6 euros per liter would be needed, a figure which, according to the committee, recalling the Ismea production cost index, many farmers today are no longer able to recover through sales.
In the deposits of Puglia, Calabria and Sicily there would be over 110 thousand tons of DOP, IGP and entirely Italian oils: more than half of the production obtained in the last campaign in the three main olive-growing regions of the country.
The increase in supply from abroad has made it even more difficult to place the national product. Italian companies have higher production costs and often a fragmented structure, with small plots, traditional olive groves and harvesting that is difficult to mechanise. If competition is based solely on price, a significant part of the supply chain is unable to keep up.
The Committee speaks of a market without conditions of reciprocity between Italian producers and international competitors, both in terms of production rules and quality parameters. He also denounces the entry into the country of increasing quantities of oil sold at extremely low prices, a sort of agri-food dumping which penalizes (quite a bit) the entire Italian supply chain.
The request for a pact with large-scale distribution
And the point is always that of large-scale distribution. The producers ask the government to establish a permanent table with the five largest large-scale retail companies. The objective is twofold, on the one hand to promote an agreement with the five main large-scale retail chains. The objective is twofold: to encourage the disposal of stocks and to guarantee for the next campaign a purchase price capable of at least covering the costs incurred by farmers.
The role of large-scale distribution is in fact central, because around 70 percent of the oil sold in Italy passes through supermarkets. On the shelves, however, the national product must compete with EU and non-EU oils offered at significantly lower prices.
The companies are also calling for an end to below-cost sales, which are considered a distorting element for both producers and consumers. Other proposed measures include a moratorium on business mortgages, raising the “de minimis” aid threshold and tax relief for companies most exposed to the crisis.
On the control front, reports were presented to the prosecutor’s offices of Bari, Palermo and Catanzaro on the dynamics through which increasing quantities of low-priced foreign oil arrive on the national market. The accusations will have to be verified by the judicial authorities. However, the same committee recognizes a strengthening of controls in ports and points of sale to prevent fraud and misleading indications of origin.
What’s at stake and how much the Italian supply chain is worth
At stake is a sector that produces around 3.2 billion euros in turnover per year and includes more than 600 thousand olive growing companies, over 4,400 oil mills, 220 industrial companies and more than one million hectares of cultivation.
The risk is that the drop in prices, although it could favor a reduction in supermarket prices, makes the cultivation of the less productive and more difficult to mechanize Italian olive groves uneconomical. If companies can no longer cover their costs, the effect could be the abandonment of more land and greater dependence on imported oil. Just as tens of thousands of tons of Italian extra virgin olive oil remain unsold in silos.