Investment funds interested in olive groves in Portugal and Spain

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Olive growers in Spain and Portugal have turned to new cultivation technologies to improve their yields, and a jump in prices since the start of the year has brought them significantly better profits, attracting the attention of investment funds.

The Spanish Beca Finance in partnership with the Portuguese consulting company Bolsher established the first fund for investments in super-intensive cultivation of olives and almonds.

The Spanish company is speculating on rising prices and expects the new fund to generate a return of up to 20 percent, compared with the 11 percent initially reported over a 10-year period.

Iberian agribusiness fund Beca & Bolscher based its initial forecasts on the historical average price of olive oil in Spain of €2,70 per kilo. The price of olive oil in Spain has doubled since the start of the year to €8,20 a kilo as production has halved, largely due to drought.

In some supermarkets, it exceeded 10 euros, according to the data of the consumer regulator OCU. Higher prices have reduced consumption in Spain and Italy, but not in the United States, the world's leading olive oil producer Deoleo said this week. In the more conservative forecast of Becca Finance, it is stated that a kilogram of olive oil will cost a little more than seven euros by the end of the year, even if the rainfall situation improves. In the coming year, according to all scenarios, it should be higher than five euros.

Spain is the largest producer of olive oil in the world and sets the prices. Olive growers generally do not irrigate the trees, but rely on rainfall. Next year's harvest should remain at the annual level due to the drought, according to a group of olive oil producers.

"There is a growing interest in investing in the sector. An agricultural economy with good management is good business," said Beca's financial director, Fernando de la Vega, who expects olive oil prices in the coming period to be higher than the initial ones.

Investments are focused on modern, super-intensive olive groves in Spain, where small olive growers still hand-pick olives and collaborate to produce extra virgin olive oil. Canadian agricultural fund Fiera Comox struck a deal this month with Kibus Capital to buy Spanish olive oil producer Inoliva.

"Investment funds are interested in modern olive groves that use technology to grow olive trees at a super high density," said Inoliva President and CEO Jorge Pena.

Inoliva cultivates around 8.000 hectares in Spain and Portugal, using technologies that allow it to plant 2.000 small trees per hectare, compared to less than 200 trees in traditional olive groves. It also uses smart irrigation systems and mechanical olive harvesting.

The Becca Fund also invested in 1.200 hectares of olive groves in Portugal, where it provided irrigation from an artificial lake.

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