Italian Olive Sector Must Focus on Quality for Future Success, Report Finds

The Italian olive sec­tor lags largely below its poten­tial because of the lack of a shared vision and solid data upon which the future of the indus­try should be devel­oped, accord­ing to the lat­est report from the Institute for Services to the Agricultural Market (Ismea).

The report dis­sects the Italian olive oil sec­tor, analy­ses its costs and infra­struc­tures and high­lights the oppor­tu­ni­ties that lie ahead for grow­ers and pro­duc­ers in col­lab­o­ra­tion with the major agri­cul­tural asso­ci­a­tions.

Not by chance, the report comes ahead of E.U. nego­ti­a­tions regard­ing the new Common Agricultural Policy (CAP), which will pro­vide funds to Europe’s agri­cul­ture sec­tor from 2023 to 2027.

The entire Italian olive oil indus­try is worth an esti­mated €3 bil­lion, accord­ing to Ismea, which rep­re­sents slightly more than three per­cent of the entire Italian food sec­tor.

The report began its analy­sis of the sec­tor with grow­ers, con­clud­ing that olive pro­duc­tion is too frag­mented. According to Ismea, the aver­age olive grove cov­ers just 1.8 hectares, far below the nine hectares of an aver­age Italian agri­cul­tural com­pany.

Furthermore, the report added 97 per­cent of all olive farm­ing busi­nesses in the coun­try are man­aged by a sin­gle indi­vid­ual. The three per­cent of busi­nesses run at a larger scale are mostly found in north­ern Italy and are often based on a more entre­pre­neur­ial approach, the report added.

“Competitiveness is a major issue for the whole Italian olive oil sec­tor,” Anna Rufolo, head of the olive sec­tor at the Italian Farmers Confederation (CIA), told Olive Oil Times. CIA was among the asso­ci­a­tions that col­lab­o­rated on Ismea on the report.

“We will need to work fur­ther to over­come the weak­nesses, such as pro­duc­tion and mar­ket frag­men­ta­tion or the often diverse costs dynam­ics,” she added.

Along with the highly frag­mented nature of the sec­tor, the Ismea report also found that many of these farm­ers are enter­ing the tra­di­tional retire­ment age and there is a scarce sup­ply of younger farm­ers tak­ing their place.

Less than five per­cent of spe­cial­ized olive farms are man­aged by grow­ers under the age of 40.
The fig­ure rises to eight per­cent in the broader agri­cul­tural sec­tor. According to the aging index used by Ismea, for every young olive farmer in Italy, there are 11 over the age of 65.

The Ismea report also pointed out that many of the country’s olive groves are inhab­ited by older trees, which decreases pro­duc­tion effi­ciency.

The trees grown in more than 61 per­cent of ded­i­cated olive grow­ing areas have an age of 50 or more. Trees younger than 11 years old cover only three per­cent of the whole olive sur­face.

Based on its analy­sis, the Ismea report advo­cated for the imple­men­ta­tion of more high-den­sity and super-high-den­sity farms in the coun­try to increase the prof­itabil­ity of the sec­tor. However, the report also acknowl­edged the impor­tance of tra­di­tional and small-scale sub­sis­tence farms to national cul­ture and iden­tity.

According to the report, sub­sis­tence olive farm­ing makes up 30 per­cent of the country’s total olive oil pro­duc­tion.

“While there are a few ter­ri­to­ries where inten­sive olive farm­ing can be devel­oped, poli­cies have to adapt to the diver­sity of the con­di­tions grow­ers face,” Rufolo said. ​“Models which have worked in other coun­tries can­not always be trans­lated to our own. Given that, qual­ity and con­nec­tion with the ter­ri­tory remain the focus for a renewed com­pet­i­tive­ness.”

Overall, the best ways to mit­i­gate the costs incurred by the frag­mented nature of olive grow­ing and oil pro­duc­ing, the Ismea report rea­soned, are to focus on pro­mot­ing qual­ity and cre­at­ing more syn­ergy among the dif­fer­ent parts of the olive oil sec­tor.

An oppor­tu­nity lies in the fur­ther devel­op­ment of olive oils cer­ti­fied with a Protected Designation of Origin (PDO) or Protected Geographical Indicator (PGI), unique regional prod­ucts pro­tected by the European Union.

The report adds that more can be done since only about 10,000 tons of olive oil are pro­duced among the 42 PDOs and six PGIs, rep­re­sent­ing between two and three per­cent of Italy’s over­all annual pro­duc­tion.

The high qual­ity of Italian extra vir­gin olive oil and its often inter­na­tion­ally acclaimed olive oil blends rep­re­sent the basics of the sector’s suc­cess in the world mar­kets, accord­ing to Ismea.

Between 2017 and 2019, Italian extra vir­gin olive oil exports have grown by 10 per­cent in vol­ume, equal to 250,000 tons, which is more than 80 per­cent of all olive oil exports. Most of those exports were des­tined for the United States and Germany.

However, the major­ity of the value that the sec­tor is deriv­ing from exports is com­ing from oper­a­tions that blend imported olive oils with local pro­duc­tion. Less than 30 per­cent of national pro­duc­tion is made up of 100-per­cent Italian olive oil.

The report also empha­sized a renewed focus on organic olive oil pro­duc­tion, which is asso­ci­ated with higher pro­duc­tion costs, but also bet­ter sales value. For these rea­sons, the Ismea report sig­naled that more CAP funds should be directed toward pro­mot­ing organic agri­cul­ture.

Currently, 18 per­cent of the more than one mil­lion hectares ded­i­cated to olive grow­ing in Italy are organic farms, though only seven farms out of 100 focus on organic cul­ti­va­tion and pro­duc­tion.

Still, those num­bers are steadily ris­ing: in 2019, organic olive grow­ers almost reached 200,000 hectares. While organic extra vir­gin olive oil con­sti­tutes 11 per­cent of all national pro­duc­tion, its value reaches 15 per­cent due to the higher prices that it com­mands in the mar­ket.

In a sur­vey of 50 olive grow­ing com­pa­nies from Puglia, Sicily, Calabria and Tuscany – which com­prise roughly 65 per­cent of the nation’s olive groves – almost half of the sam­ple, 47 per­cent, is engaged in organic olive grow­ing.

On aver­age, pro­duc­tion costs reach €2.66 per hectare for these organic grow­ers. The aver­age gross oper­at­ing profit, cal­cu­lated with­out con­sid­er­ing pub­lic funds, is equal to €1.19 per hectare.

“In the future, poli­cies should sup­port the olive grow­ing areas able to com­pete on the inter­na­tional mar­ket more while also avoid­ing the alarm­ing and grow­ing phe­nom­e­non of the aban­don­ment of olive orchards in mar­ginal areas, where the olive tree plays a role as land­scape resource and is needed to pre­vent hydro­ge­o­log­i­cal insta­bil­ity,” the report said

Ismea con­cluded that Italian offi­cials should focus on devel­op­ing a stronger con­nec­tion between farm­ers, oil mills, the bot­tling and mar­ket­ing indus­try. It also argued that funds from CAP would go the fur­thest if they were to help pro­mote these efforts.

“The con­nec­tion among the dif­fer­ent sub­jects of the olive oil chain is of the utmost rel­e­vance,” Rufolo said. ​“But we should prob­a­bly look at a broader pic­ture, favor­ing the inclu­sion of new sub­jects, such as tourism and restau­rants.”

“Those are sec­tors that became cru­cial for other agri­cul­tural sec­tors and the same must hap­pen with at least a part of olive oil pro­duc­tion,” she added. ​“We should include pro­fes­sion­als who are not tra­di­tion­ally related to the olive oil chain and expand our vision from the pro­duc­tion chain to the pro­duc­tion sys­tem.”

• Institute for Services to the Agricultural Market