Olive groves: the 22% return that leaves out the price of land

Olive groves: the 22% return that is calculated without paying for the land

A 22% annual return. That is the figure circulating in reports on mechanised olive farming, and it is what leads more than one person to look at estates in Tarragona or Lleida with an investor's eye. The problem is where that percentage comes from: from studies that assume the farm is already owned, with the land left out of the equation. When the price of the land is added to the spreadsheet —in the area under discussion, people talk about **1.5 euros per square metre**— the return deflates and the conversation changes tone.

The initial proposal was ambitious: oil, arbequina variety, irrigation and **80,000 euros** to buy around six hectares that could hold up to 300 olive trees per hectare. A plan that mixed profitability with the idea of having a retirement retreat where one could tend a vegetable garden at weekends. On paper, flawless. In practice, the first to raise the alarm was someone who already owns olive groves and vineyards an hour from Madrid: better to talk it over before signing anything.

What a kilo of olives really costs

The optimistic calculation behind the deal spoke of olive prices above **300 pesetas** per kilo. The downward revision is brutal: with olive oil at **2.5 euros** per kilo and a yield of 20% —already generous for arbequina— the kilo of olives comes out at **0.5 euros**, that is, around 80 pesetas. The difference between the two figures is not a nuance: it is the difference between a business and an expensive hobby.

Then there is the machinery chapter. A tractor for **just over 5 million pesetas** sounds cheap because it is. The advice that comes from experience is not to buy big, and to subcontract ploughing and spraying to whoever already has a tractor and a tank. The small stuff —chainsaw, leaf blower, shaker— can be taken on.

The olive grove bubble and the subsidy with an expiry date

From Jaén comes the most uncomfortable warning: compared with the olive grove bubble, the property bubble is nothing. A good part of the crop's profitability depends on subsidies which, according to this analysis, expire in **2013**. And the day-to-day reality is not a brochure: ploughing several times a year, spraying, fertilising, removing branches and a crew of day labourers at **60 euros a day** when the harvest arrives.

Some people flatly state that if you had ever picked olives, the investment would not even be considered. The reply does not deny the hard work: it defends mechanised harvesting as a leap in profitability and quality of life compared with generations who broke their backs at the job. Both things are true at once.

The olive tree is not just the harvest season

The warning repeated most often is about the calendar. Pruning requires know-how; ploughing and spraying require someone willing to drive the tractor to your farm, and that is not always available. Someone who bought a plot with **120 olive trees**, almond trees, irrigation water and two wells near the Francolí ran into that wall: without the know-how, you depend on a professional doing you a favour.

The advice that closes the circle is the cheapest of all: put in a few days' work with someone before buying anything. Testing the harvest on your own back saves you unpleasant surprises. And if there is family willing to help, the experience can even be rewarding; if not, the problem is served.

How many hectares does it take for this to be a business and not a hobby with expenses? The question still has no definitive answer, and perhaps that is the answer.