Private-equity firms are eyeing olive farms in Spain and Portugal that use new agricultural techniques to boost production, as they see big profits after prices doubled since the start of 2023.
Spanish fund manager Beka Finance has launched its first fund with Portuguese industrial partner Bolschare to invest in super-intensive olive and almond farming.
Encouraged by its bet on higher prices, Beka is expecting returns of up to 20% from the new fund, compared with the initial 11% over 10 years it offered investors.
"There is more and more interest in investing in this sector ... A well-managed farm is good business," said Fernando de la Vega, managing director of Beka Finance, who expects olive oil prices to remain above the fund's initial forecasts.
The investments are being made to create modern, super-intensive olive groves in a country where the majority of farms are still cultivated by small producers who harvest manually and work collectively to make extra virgin olive oil.
Olive Oil Prices
In Spain, the price of extra virgin olive oil has doubled since the beginning of the year, reaching €8.20 ($8.74) per kilo in September, according to official figures, as production has halved, mainly due to the drought.
In some Spanish supermarkets, bottles have been selling for more than €10 since August, according to consumer watchdog OCU. While consumption in Spain and Italy has slumped due to higher prices, demand in the United States remains strong, the world's leading olive oil bottler Deoleo said this week.
The Beka & Bolschare Iberian Agribusiness Fund based its initial forecasts on a historical average price for olive oil in Spain of €2.70 per kilo.
Spain, the world's biggest olive oil producer and price-setter, relies mainly on rainfall rather than irrigation to water its olive trees. The ongoing drought will generate a similar harvest in 2024, according to estimates by several olive oil producers in Spain.
Beka Finance's more conservative forecast is that olive oil prices will be above €7 per kilo by the end of the year, even if rainfall improves. In all its scenarios, prices will be above €5 per kilo next year.
Modern Groves
Canadian fund Fiera Comox, which specialises in agriculture, agreed to a share purchase agreement with Cibus Capital to buy Spanish olive oil producer Innoliva this month.
"The private-equity funds are interested in modern olive groves that use technology to grow olive trees in super high density," said Jorge Pena, Innoliva president and CEO.
Innoliva farms about 8,000 hectares in Spain and Portugal using techniques that enables it to plant 2,000 small trees per hectare - compared with less than 200 trees in traditional plantations. It also relies on smart irrigation systems and mechanical harvesting of olives to be more productive and efficient.
The Beka Fund has also invested in 1,200 hectares of olive groves in Portugal, where it has secured irrigation from an artificial reservoir.
