Greek Fires Destroy Olive Trees, Cutting Olive Oil Production

By Marianne Stigset

Aug. 31 (Bloomberg) -- Greece's worst forest fires in history may have destroyed as many as 5 million olive trees, cutting production in the world's third-largest olive oil supplier and threatening to reduce output for years, an industry group said.

As much as 5 percent of this year's harvest may be lost, according to the group, Sevitel. A week of fires has killed at least 63 people and ravaged about 250,000 acres (101,200 hectares) of forest and farmland, Greenpeace Greece estimated. The Peloponnese peninsula, which generates 30 percent to 40 percent of the country's 9 billion-euro ($12.3 billion) olive oil market, is the worst affected.

The damage may reduce output to 285,000 metric tons and will devastate the economies of Peloponnese villages, which on average get as much as 60 percent of their income from olive farming, according to Sevitel, an association of producers and processors. Olive trees, which were cultivated by the Minoans of ancient Crete in 3500 B.C., can take 15 years to reach optimal production, the organization said.

``It's the first time in the history of this country that we have such an environmental disaster,'' Nikos Charalambides, director of Greenpeace Greece, said in a phone interview from Athens yesterday. ``Hundreds of people have lost their farmland, their animals. The olive trees will need years to grow.''

It may take a decade for people living off olive farming in the stricken areas to get their earnings back to prior levels, Gregory Antoniadis, the president of Sevitel and spokesman for Elais-Unilever SA, a Greek olive oil exporter, said from Athens.

Homes, Jobs

At least 2,500 people have been left homeless by the fires, which may lead to labor shortages and loss of expertise in the industry, Charalambides said.

More than 250 blazes have spread across central and southern Greece since Aug. 24, requiring the biggest firefighting operation in Europe since World War II. Early estimates set the cost of damage to farmland at 1.5 billion euros, Greek newspaper Express reported this week, citing unidentified government officials. Greece has experienced more wildfires this month than any European country in the past decade, according to the European Space Agency.

Greece, the largest olive oil producer after Spain and Italy, accounts for 13 percent of the global market, according to Rabobank Groep, the world's biggest farm lender. The country produces on average 300,000 tons a year, Antoniadis said. A 5 percent output cut would represent a loss of about 45 million euros, at current prices.

Spain Key

The drop in Greek production is unlikely to affect prices because of rising output in Spain and Italy this year, Rabobank said.

``What's really important is what happens in Spain, the world's top producer,'' Vito Martielli, a food and agribusiness analyst with Rabobank, said by phone from Utrecht, the Netherlands, on Aug. 29. ``Olives have a biannual production cycle and this year, production in Italy and Spain will be very high.''

Production increases in Spain and Italy would more than offset any decline in Greece, helping lift global output potentially by as much as 7.1 percent to about 3 million tons in the next season, which runs from November to March, Martielli said. That would be the highest since 2003-2004, he said.

Prices have dropped about 25 percent to 3 euros a kilogram since 2005-2006, when frost hit the main producing countries, according to Martielli.

Spain produced an estimated 1.1 million tons this season, 39 percent of the market, followed by Italy, which produced 630,000 tons, according to Rabobank. Greece produced 370,000 tons, more than half of which was exported to Italy, the world's biggest consumer.

To contact the reporter on this story: Marianne Stigset in London at mstigset@bloomberg.net