Olive oil often feels expensive when we see it on supermarket shelves, but the price consumers pay does not necessarily translate into a comfortable income for the farmer.
A detailed cost calculation from a Cretan olive producer via Creta Live illustrates just how much work, labor and investment go into producing olive oil. The example considers an olive grower with 1,000 trees in a rain-fed organic olive grove, using typical cultivation practices and the production figures of two consecutive years.
The numbers show a familiar problem for Greek olive farmers: at an olive oil price of €3.50 per kilogram, the producer actually loses money.
1,000 trees, two very different harvests
The calculation takes into account the natural phenomenon known as alternate bearing, or biennial bearing, in which olive trees can produce a much larger crop one year and a substantially smaller crop the next.
In the example:
- First year: 1,000 trees produce approximately 40,000 kg of olives.
- At a conversion rate of 4.5 kg of olives for 1 kg of olive oil, this produces about 8,888.9 kg of olive oil.
- Second year: production falls to approximately 12,000 kg of olives, producing about 2,666.7 kg of olive oil.
- Over the two years, the grove produces 11,555.6 kg of olive oil.
- The average annual production is therefore approximately 5,777.8 kg of olive oil.
The average gives a realistic picture of what the producer can expect over time rather than basing the economics on an exceptionally good harvest.
The cost of maintaining the grove
Producing the olives requires considerably more than simply harvesting them.
For 1,000 trees, the estimated annual costs in the example include:
| Cost | Annual cost |
|---|---|
| Harvesting | €5,600 |
| Winter and summer pruning | €7,000 |
| Weed control | €800 |
| Manure | €3,300 |
| Potassium fertilizer | €3,240 |
| Flowering sprays | €207.50 |
| Copper treatment | €211.25 |
| Kaolin for olive fruit fly control | €780 |
| Fuel and vehicle costs | €800 |
| Olive mill processing | €2,022 |
| Total | €23,961 |
The harvesting bill alone is substantial. At approximately 25 trees per day, the farmer needs around 40 days to harvest the 1,000 trees, with labor costs estimated at €140 per day.
Pruning adds another €7,000, while fertilization, weed control, pest management, and treatments account for thousands more.
Then comes the olive mill. The calculation assumes a milling charge equivalent to 10% of production, valued at €3.50 per kilogram. Based on an average annual production of 5,777.8 kg of olive oil, this amounts to approximately €2,022 in annual production costs. The result is an estimated cultivation and processing cost of €23,961 per year, or about €23.96 per tree.
What happens when olive oil sells for €3.50?
This is where the calculation becomes particularly revealing.
At an average annual production of 5,777.8 kg, selling the oil at €3.50 per kilogram generates approximately €20,222 in revenue. But production costs are estimated at €23,961. That leaves the farmer with a loss of approximately €3,739 per year.
In other words, at €3.50/kg, the farmer has not yet earned an income. The farmer has not even recovered the cost of producing the oil.
The break-even price is about €4.15/kg
According to the calculation, the olive oil would need to sell for approximately €4.15 per kilogram simply for revenues to match production costs. That is the break-even point. But breaking even is obviously not the same thing as making a living.
At €5.39/kg, approximately 30% above the break-even price, the calculation produces a gross annual return of roughly €7,178 after production costs, equivalent to only about €598 per month.
That is still far below what most people would consider a sustainable income.
So how much would the oil need to sell for?
The calculation goes one step further by considering a basic living income.
If the producer needs approximately €1,500 per month to live, the gross income from the olive grove at €5.39/kg still falls short.
For a family of four, assuming a required household income of approximately €4,000 per month, or €48,000 annually, the calculation adds that amount to the estimated €23,961 production cost.
That brings the required annual revenue to approximately €71,962.
With annual olive oil production of 5,777.8 kg, the required selling price would therefore be approximately €12.46 per kilogram.
That figure is not presented as the price consumers should necessarily pay at the supermarket. Rather, it illustrates the enormous gap between the cost of producing olive oil and the income an agricultural household needs to make a living from that production.
How can the economics improve?
The calculation points to three possible ways forward.
Increase production. More olive oil from the same investment would reduce the cost per kilogram.
Move to standardized, packaged olive oil. Selling a finished, branded product can generate more value than selling bulk oil, but it requires packaging, certification, marketing, and a distribution network.
Do both. Higher productivity, combined with better access to the final consumer, could give producers a greater share of the value of their products.
And this is perhaps the most important part of the calculation. When consumers complain that olive oil has become expensive, the price does not exist in a vacuum. Behind every bottle are months of pruning, fertilizing, spraying, maintaining machinery, controlling weeds and pests, harvesting thousands of trees, transporting the crop, and paying the olive mill.
The real question is not simply why olive oil costs so much. It is how much of that price actually reaches the person who produced it.
Featured image © Koronekes Olive Mill