Unity In Hard Times

A headline in today's El Ideal reads (loosely translated): 'Blank cheque from the junta to promote the union of Jaén's olive industry'. To make this more comprehensible to the non-Spanish reader, the 'junta' refers to the Andalusian regional government and 'promote the union' to financial assistance it will be offering to the province's co-operative olive millers to unify their sales and marketing in order to combat the disastrous descent in prices experienced over the last several months. In other words, Seville is promoting the formation of a cartel in the hope that it will eliminate the ruinous price competition between far too many small, often unsophisticated, operators that results when panic sets in.

How times have changed. Only two years ago, Andalucía's second most powerful politician, consejero de la presidencia Gaspar Zarrías, was stumping throughout the province attempting to sell individual growers on the benefits of abandonning the co-ops and signing on to SOS's plan to corner production before it got to the commonly-owned mills. But, it is now a serious enough political issue to force the government to change teams. With prices so low as to make many traditional plantations (this writer's included) unprofitable, the situation threatens the junta's ability to continue to deliver the economic gains of the past and, in the process, to prevent the abandonment of the country and the emigration from the small towns that provide so much of its electoral support.

In theory it is a good idea, but whether it will function as planned is another matter. Local and parochial interests, despite the number of mills that might sign on to the program, may take precedence. A good example would be the difficulty OPEC has in forcing member states to adhere to petroleum quotas. In any regard, if the problem is rapidly increasing production facing stagnant increase in demand because of the current economic situation, we are speaking of something beyond the control of anyone.

Currently, PoolRed reports cash extra virgin at 1.92€/kg, virgin olive oil at 1.88 and lampante at 1.76 - this last figure on extremely low volume and in no way confirmed by the 1.85 recent January crosses on the MFAO. Speaking of volume, the spot market is fairly quiet given the time of year. This is probably attributable to the refusal of many co-ops to sell at current prices and is clearly of benefit to the futures market, which has been very active of late.

As an aside, the effects of the crisis in banking are being felt, in a small way, by olive growers. At this time of year, regional savings banks (the cajas de ahorros), to attract new business, always offer very cheap loans against delivered crop. Often in the range of 1 percent, this year they are generally at the 2.5 percent level. Naturally, they are also valuing the crop at lower levels for this purpose. Two years ago, we were loaned over 20,000€ against a 55,000 kilo (of olives) crop. Last week, the 44,000 kilos we had taken to the mill got us 13,000€.

Readers should not be surprised if total Spanish production comes in at the low end of the expected range - 1,100,000 tons, say. The crop is not nearly as big as it looks on the tree.

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