The oil market is so broken that Spain already prepares its great weapon to fix it: remove oil via decree

They do not run easy times for the olive oil market. Or rather, they run paradoxical times. In recent years, farmers had to deal with bad harvests that raised prices and They punished consumption. Now they enjoy a good campaign that will overcome the 1.4 million tonsbut things are not much better. The prices they charge They have fallen so much that they have left them in a committed situation, with a Great hole In your income.

Given that scenario, the government has decided to move and endow A ‘Nuclear button’ That, if necessary, it will allow you to stabilize the market in the 2025-2026 campaign. As? Removing oil if the harvest is very abundant.

What happened? That the Ministry of Agriculture wants to anticipate a possible imbalance in the extra virgin olive oil sector. In view of The good prospects Of the 2024-2025 campaign and the fear that this abundance of fruit ends up impacting the Spanish market, the government has launched its administrative machinery to have a tool that allows it to re-may be rebuilt. As? Basically removing oil from the oil mills.

Remove olive oil? Exact. The community regulations allow states to activate a “marketing standard” for the olive oil sector that “improves and stabilizes” its market. That general framework moved to Spain with the Royal Decree 84/2021which in turn contemplates that “when the conditions justify it” it is withdrawn as a result of the markets, reserving it for the next campaign or even dedicating it to a different use to that of food.

The process, yes, is somewhat more complex and requires that the autonomies and organizations representing the sector be consulted before. And that is precisely what the Ministry of Agriculture has just done: open A public consultation so that those who want to comment on their order for the 2025/2026 campaign can do so. The observations can be sent until next Wednesday.

And why do you do it? For the data that arrive from the olive sector itself. Although the crops of 2022/2023 and 2023/2024 were rather Parcas (666,000 and 854,500 tons, respectively), which contributed to the price of olive oil to be triggered in the stores, the current panorama is quite different.

It is estimated that the current campaign, which started in October and will end in September, will leave More than 1.4 million of tons. In March the Minister of the Branch, Luis Planas, even He spoke of 1.42 million. There are who is even More optimistic and talks about major figures for the next campaign.

And how do prices respond? If in 2023 and 2024, coinciding with the bad harvests, the price of olive oil came to be around nine euros per kilo in the case of the Aove, now, with a generous campaign, that value has been reduced to 3.59 euros. And so It is a problem For farmers. Juan Luis Ávila, from COAG, warned In May that while the consumer pays about six euros for the liter of oil, the producers receive less than 3.5 euros for the AVE, which would be below the cost of production in the olive groves.

What is that fall? The million dollar question. Especially since farmers ensure that market prices are not those that should in current circumstances. “The data is overwhelming and alarming, since there is an unjustified lag of more than two euros per kilo between the real price at the origin of olive oil and the value it should have,” He warned in May Miguel Padilla, of the Coordinator of Agriculture and Livestock Organizations, COAG.

To reinforce its position, the collective even presented A report which estimated that the Aove should quote 5.55-6.14 euros per kilo in the current campaign, far from what the olivicultores perceive. “Speculation Campa at ease”, regrets UPA General Secretary, Cristóbal Cano, who believes that there should be “a different pricaries in the market, according to the law of supply and demand.”

What will the new standard be for? With its new order for the 2025-2026 campaign, the government wants to be prepared to “stabilize” the market with a clear strategy: withdrawing product. From the Ministry they advance, yes, that will only happen “if high production estimates are found that can generate imbalances.” I would be The first time That the Planas department activates the mandatory oil withdrawal mechanism to rebalance the market.

What does the sector think? The EFE agency has spoken with several organizations, such as ASAJA, COAG, UPA, UDU or agro-food cooperatives, which the initiative see with good entrance. “It is absolutely essential to have all the prepared machinery. Until now we had not needed, but before a predictable good harvest we have seen the convenience of activating it, as simple as possible, to avoid the sinking of prices,” comment In DCoop.

Not everyone is equally optimistic. In Murcia there are producers who They are suspicious that the oil withdrawal from the market to control prices is the effective solution.

Images | Government of Castilla-La Mancha (Flickr) and Deoleo

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