The Need to Increase Olive Oil Production Can Lead to Offshore Investment Profits

Olive oil is showing up in more and more kitchens and on more and more dinner tables throughout the world. The oil is cherished by cooks, enjoyed on salads, and healthy for the heart. Over the last two decades this combination of factors has led to increased consumption far beyond the Mediterranean Basin, the traditional home of the olive and its oil. It used to be that virtually all olive oil was produced as well as consumed around the Mediterranean and in the Middle East. Production has been sufficient for local (Mediterranean Basin) demand. As worldwide demand increases olive trees will be planted and olive oil produced outside of the countries that have historically been the leading producers. This is a big trend that will need capital and those who have the foresight may well profit from investment in growing, refining, exporting, distributing, or selling olive oil in regions as diverse as the UK, India, Japan, China, or the USA.

Olives and Who Makes the Oil

People have been making oil from olives for as long as 5,000 years according to archeological evidence in Greece. Today olives are grown and processed into to oil in Spain, Italy, and Greece who are the major producers at 36%, 25%, and 18% of worldwide production according to recent figures. As demand for more olives and more oil goes up these countries will probably not be able to answer the call. Greece, for example, devotes 60% of its cultivatable land to olive orchards already.

After the big three olive oil producers, come Tunisia (8%), Turkey (5%), Syria (4%), Morocco (3%), and Portugal (1%) in the same recent set of figures from 2005. These countries, from Spain at the top down to Portugal, produced 90% of the world supply in 2005. Every other nation produced less than 1% of world production. A big part of this is that olives are native to the Mediterranean Basin and grow best there. It is not just a matter of the plant surviving but that it produces high quality olives for refining into exportable oil.

As the figures show a handful of producers currently make the oil from olives. Now the question is who will step in to make more as worldwide demand multiplies? What kind of olives will work the best in what locations and who is going to invest the capital to make all of this work?

Where Are Folks Going to Plant Olive Trees?

Olives are grown throughout the world but they work best in the Mediterranean Basin. The space, climate, and soil conducive to growing exportable quality olive oils are on the opposite side of the Mediterranean Sea for the current major producers, Spain, Italy, and Greece. Tunisia (8%) and Morocco (3%) are already in the top seven producers. Now Algeria, the second largest nation in Africa is planning a million hectare planting of olive trees. Algeria lies to the immediate East of Morocco and on the Mediterranean Sea. Its climate is Mediterranean. Olives are grown for food and oil already in Algeria but the infrastructure has not been present on a sufficiently large scale to refine enough oil promptly enough to produce export quality oil. A major factor here is having enough processing plants dedicated to a set of orchards and the infrastructure needed to pick and process in a timely manner. Another factor has been that of foreign connections for export, marketing, and sales.

It turns out that folks are going plant a million hectares of olive trees in Algeria. That is, for those from the USA, 2.5 million acres. If planted in one block it would be 100 kilometers or 62.5 miles on a side. Foreign investors are bringing their expertise and capital to this project. In addition foreign companies are setting up projects in such a way as to attract the foreign capital necessary to plant orchards, tend orchards, pick olives, process olives to oil, and send processed oil through a supply chain to the supermarkets of places as far afield as North America, India, and Japan.

The supply chain for olive oil looks like this:

Producer-Farmer 
Oil Mill or Cooperative 
Refining into oil 
Export 
Wholesaler 
Distributor 
Consumer

What foreign expertise will bring to the mix will be expertise in choosing olive varieties, the building of a sufficient number of modern oil mills and the connections for export and distribution.

An example of a promising project in Algeria is one by a Spanish firm. This company has a subsidiary in Algeria. Through the subsidiary the company will plant 1, 500 hectares of the Arbequinia olive. This is a variety suitable for intensive culture. It is drought resistant and cold resistant. The small tree yields 20% weight per volume of oil from its small brown olives and is well known for the excellent taste of its oil.

The company will build a modern processing plant to assure prompt refining into high quality oil for international markets. It will develop the supply chain to move olives to processing, oil to export, and exports to wholesales in markets around the world.

As projects like this take hold the world wide demand for high quality oil will be satisfied. As private companies attract investors to this sort of profitable undertaking they will attract the necessary capital that has often been missing in order to develop a complete supply chain and enhance profits.

To continue the example above the Spanish company is allotting 500 of its 1,500 hectares for private investors. Investors will receive interest on investment as well as a “piece of the action.” After three years when the Arbequinia olive starts to produce investors will receive $2 US per liter of oil produced on “their’ hectare of land. The Arbequinia variety typically produces 11,000 kilograms of olives per hectare. The olives typically yield 19% oil. Thus a hectare of arbequinia olive trees will produce 11,000 times 0.19 equals 2,090 liters of olive oil. At $2 a liter this is more than $4,000 to the investor on top of yearly interest. This arrangement will last for ten years at which time the investor will receive his initial investment back, having doubled his money. In the end the investor helps increase olive oil production, makes money, and may even find a bottle of “their” olive oil at the supermarket.

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