Dividends and Outlook for Spain’s olive oil production grim

If you believe in the Mediterranean diet for healthy eating, it likely includes using olive oil. Similar to products all over the world where the best olive oil comes from is up for debate. You may have thought about Italy or Greece, but half of the world’s olive oil production comes from Spain. In Spain, the 67 million olive trees planted in the province of Jaen, located south of Madrid and north of Granada has been growing trees since Spain was part of the Roman empire. The trees of Jaen is one of the world’s largest man-made forest and has made Jaen the olive oil capital of the world.

In an article by David Segal and Jose Bautista of the New York Times News Service, the reason why the region is in the news is the drought that has been going on in Europe. The trees are green but the production of oil will be down drastically, about 1/5 of normal volumes. It is hard to be a farmer and pay bills on 20% normal volume. The millions of trees has essentially made the province of Jaen a one crop economy.

In years gone by, harvesting the olives was a very labor intensive industry, but a now days tractors equipped with a vibradora, a machine which shakes the trees and the olives fall into a net.

In Jaen, it has not rained in 3 months which means those trees which have some irrigation are alive and doing well, those without the leaves are turning brown with little to no fruit. Olive oil trees are use to living without much water, but the winters are dry and short and the droughts are stronger and lasting longer.

The drought has increased the price of oil oil, but costs to produce the olives has increased. The average farm is about 4 acres and the government does provide a subsidy of about $1,400 a year.

Linking to dividend paying stocks, similar to all investors have diversification in your portfolio is a good thing. It is difficult, for example in the above example, trees have producing fruit for thousands of year we are in 2022, Roman times are year 1. Under normal circumstances the farmers could produce and make a reasonable living, however capital costs are going up and farms will need to consolidate or change because of climate change. Change is difficult no matter what industry you are in.

There are more questions than answers, till the next time – to raising questions.

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