Innovation, Volatility and Marketing, Main Challenges of the European Olive Sector

Innovation, Volatility and Marketing, Main Challenges of the European Olive Sector

2017/26/09 - Agricultural innovation, price volatility and marketing standards are some of the main challenges that the European olive oil sector is facing, according to a report published by the European Union Parliament's Research Service (EPRS).

Grown in the Mediterranean area since ancient times, olive groves have shaped the rural landscape of many EU regions. Beyond their productive value, they can also constitute a rural tourist attraction with the presence of ancient olive trees or outstanding olive plantation landscapes. Their main product, olive oil, is widely recognised as being an icon of Mediterranean cuisine and as being healthy. Consumption has therefore increased in non-producing countries all over the world and the EU is the world's main exporter, as well as being the main consumer market. Nevertheless, the sector is facing challenges that need to be addressed if it is to avoid disruptive effects on its future development.

A primary challenge, also common to other agricultural activities, is the pace of farm structural development into a more efficient and modern production system. This is often linked to the idea of increasing farm size and introducing mechanisation in the production processes. This evolution has taken place in parts of Spain and Portugal, while in general production systems remain very traditional and cohabitation between large and modern and small and traditional productive units is typical. Nevertheless, a Spanish research article on the sustainability of olive tree cultivation notes that transforming traditional olive orchards into more intensive olive plantations is not a one-size fits all solution. This can be owing to the characteristics of the producing areas (e.g. a fragile environment or significant slope), production methods (e.g. traditional harvesting is preferred to avoid damaging olives), or the trees themselves (e.g. being a perennial permanent crop causes rigidity in adaptation to new productive schemes). This is why researchers suggest that the sustainability of olive production should not rely on production intensification in bigger farms only, but more on innovative harvesting solutions, new cultivars or better pest management, in order to grow olive orchards that are more profitable – and less exposed to market volatility – in smaller productive units too.

The olive oil market can fluctuate for several reasons, such as the cyclical alternation of good and poor harvests or the timespan before new plantations become fully productive. Other factors are less predictable and potentially more disruptive, such as extreme weather conditions or a plant disease outbreak. These elements create a highly volatile market, which means that producers are confronted with unstable prices and revenues and thus reduced capacity of investment plans for the upkeep of their olive plantations. A recent EPRS briefing analyses the risk-management instruments available for farmers under the CAP. The current debate on the future of EU agriculture policy is meanwhile focussing on their development as tools to address the challenges linked to volatility.

Another area of concern relates to marketing standards and trade. To prevent loss of consumer trust in the image of olive oil as a high quality product, a continuous effort is needed at EU and national level to set and implement appropriate rules and measures against food fraud. Indeed, olive oils are subject to regular monitoring and control to prevent fraud, especially in the category of extra virgin olive oils. To give an example, in its 2016 activity report the Italian watchdog for foodstuffs and agricultural products reports almost 7 000 controls on oil (second only to wine products), resulting in 193 seized products, for a total seizures value of more than € 1 150 000. These seizures are the consequence of infringements such as olive oil being falsely classified as extra virgin, organic or 100 % Italian, being obtained by mixing oils produced elsewhere,

belonging to the lampante category, carrying misleading designation of origin labels, or being subject to irregular recordkeeping. The EU also plays an important role in defending its products on the international market, in the framework of the IOC, for issues linked to the sector's products, and of World Trade Organization agreements, in cases of disputes on the application of commercial rules. One recent example is the US authorities' investigation of Spanish olive producers, following alleged dumping practices against US producers, on which a parliamentary question was addressed to the Commission on 14 July 2017.

Economic prospects and innovation

According to the Commission's latest medium-term agricultural outlook, the economic forecasts for the sector up to 2026 point to increased production in Spain (where the Commission's estimates show considerable growth of irrigated olive groves in the coming years) by about 10 %, and a less dynamic trend in Greece (+2 %) and Italy (-1 %). In these three main producing countries consumption trends should experience a certain stabilisation or minor decrease, largely offset by increased consumption in non-producing countries inside and outside the EU. This is the trend that has characterised recent years, according to the Commission's short-term agricultural outlook of July 2017. As regards international trade, the outlook for 2026 is a considerable reinforcement of the EU's leading role in exports (+45 % over the period) and a possible increase in imports from non-EU Mediterranean countries.

These predictions could be proved correct, especially if producers satisfy EU and world demand by offering the high quality expected from their products.13 In this respect, the EU is financing research and innovation work into new techniques so as to achieve more efficient and sustainable growing systems, better treatment of diseases and pests such as olive fruit fly, etc. By way of example of the many EU-funded research projects, it is worth mentioning a 2010 Commission report that describes EU projects focussing on cultivation practices designed to improve environmental performance in the olive oil sector. Earlier still, an olive growers' demand-driven research project initiated in 1979 resulted in large-scale adoption of integrated pest management innovation in Italian olive groves. More recently, besides the above-mentioned multidisciplinary research project on prevention, early detection and control of Xylella disease, another Horizon 2020 project seeks to improve the way olive oil quality and authenticity is guaranteed, by detecting and preventing fraud. Other projects funded by the rural development programmes meanwhile also address olive sector issues. Take for instance the innovative composting technique developed in a Spanish organic olive oil cooperative, which turns a polluting by-product (olive cake) into green fertiliser, or the innovative filtering prototype for olive oil production developed by an Italian olive oil mill enterprise in partnership with a university, chamber of commerce and private companies.

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