Agriculture | Free Full-Text | Efficiency Factors in the Olive Oil Sector in Turkey
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1. Introduction
This work is timely, as it addresses the primary issue currently faced by the agricultural sector both within and outside Europe: profitability. Through the uncommon combination of two reliable and rigorous methods, it identifies variables associated with economic efficiency in the olive sector. As such, it fills an academic gap due to the type of study conducted and the variables considered in the analysis.
Within this framework, the objective of this study is to scrutinize olive oil entities in relation to economic efficiency, with the purpose of pinpointing organizational variables directly correlated with heightened efficiency. Understanding the economic efficiency of companies operating in this sector provides crucial insights for enhancing their competitiveness and sustainability. Additionally, given the socioeconomic and environmental impact of olive cultivation and olive oil production in Turkey, evaluating their economic efficiency can help identify key factors for developing more profitable practices. Moreover, improving the economic efficiency of the olive oil sector in Turkey can contribute to the country’s economic growth and the well-being of local communities dependent on this industry. To achieve this objective, the study employs Data Envelopment Analysis, taking into account classical and pertinent variables linked to the economic performance of the companies under examination. Furthermore, in a subsequent phase of analysis, the QCA technique is applied to the previously acquired efficiency levels.
In accordance with the stated objectives, this paper is structured as follows: after this introduction, the contextual framework is presented, detailing the study propositions; then, the technical characteristics of the research are indicated in the methodology section; the results are then presented; and finally, the corresponding conclusions are presented.
2. Theoretical Framework
2.1. The Turkey Olive Oil Sector
2.2. Development Factors for the Turkey Olive Sector
The cultivation of olives in Turkey is predominantly carried out by small-scale agriculturists employing age-old, ancestral techniques. This system of cultivation has a rich and storied history in Turkey since immemorial times. Currently, the majority of olive orchards in Turkey are small-scale enterprises owned and managed by indigenous farmers. These farmers commonly rely on time-tested methods inherited from their forebears, which have been perfected through centuries of practice, to guarantee the production of top-notch olives.
The size of the organization, measured by the number of olive trees, favours the economic efficiency of the organization.
Hillside olive grove reduces the economic efficiency of the organization.
The irrigated olive grove increases the economic efficiency of the organization.
The commitment to the sale of olive oil, instead of table olives, favours the economic efficiency of the organization.
The percentage of olive oil, yield, obtained in the harvest favours the economic efficiency of the organization.
3. Materials and Method
3.1. Population
The study focused on olive oil-producing farms in Turkey, utilizing a semi-structured survey to collect data from oil mills located in the provinces of Hatay, Izmir, Kahramanmaraş, Gaziantep, and Kilis. Specifically, organizational managers of these farms were targeted for the survey. The total number of valid responses obtained was 193 organizations. To ensure the reliability of the responses, cross-referencing was carried out using information from alternative sources, and trended questions were carefully examined. The gathered information encompasses various aspects, including organizational structure, processes, production, and economic variables. Data collection was carried out during the second quarter of 2023.
3.2. Methods
4. Results
The core conditions of the first model obtained (BCC) are two: size of the olive grove and dedication to olive oil production. On the other hand, the core conditions of the second model (CCR) are identical, although the following is incorporated: ~irrigation ~hillside*~yield. This configuration has less explanatory power, and after checking these cases, we observe that they are associated with crops oriented to the sale of table olives.
In the BCC model, which is based on pure efficiency by eliminating the scale effect among the organizations analysed, we observe that the first causal configuration exhibits a gross coverage of 0.8334. In simpler terms, it is established that the combination of size, olive oil and the absence of a steeply sloping olive grove yield explains 83.34% of the cases associated with greater economic efficiency. Consistency reveals that 85.07% of the cases exhibit this noteworthy result. The second configuration indicates that 54.53% of the cases linked to greater economic efficiency are attributed to size, non-high slope, and irrigated olive groves with low yields, with a consistency of 88.21%. These cases are oriented to the sale of table olives or premium first-harvest oils.
Focusing on the CCR model, which does not account for the scale effect of organizations, we observe that the results are very similar to those obtained in the previous model, with modifications in the last causal configurations. In general terms, the size of the olive grove is associated with greater economic efficiency, as a key variable together with the orientation to olive oil production. In combination with the previous variables, irrigation is positively associated. Yield has a lower impact on economic efficiency, being not relevant at all when production is focused on the sale of table olives and not olive oil. In a small number of cases and when the scale effect is not considered, different non-irrigated, small size, low slope and table-olive-oriented crops also achieve high economic efficiency.
5. Discussion
This study assesses the economic efficiency of olive oil producer entities to identify the specific production and organizational variables directly linked to increased economic efficiency. Through DEA, the efficiency of olive oil-producing organizations has been calculated, considering the classic models of this technique, which show pure and scale efficiency (CCR and BCC models). Once these indicators were calculated, they were used as outcomes to apply QCA, allowing us to determine which sets of variables are associated with higher efficiency scores.
In summary, academic literature has assessed the aforementioned factors separately, but not in the manner undertaken in this research, which thus addresses a gap in the literature. Such factors must be considered for proper management leading to the organization’s economic efficiency. With the aforementioned considerations, our findings lead us to accept the hypotheses proposed in the theoretical framework.
6. Conclusions
The conclusions that can be drawn from the results described above are clear. The proposed variables are clear indicators for improving the organizational practices of Turkish production entities and, consequently, their efficiency. Thus, the size of the entity (determined by the number of olive trees) and its focus on olive oil production are clear indicators of higher efficiency. Irrigation and low-slope olive groves also contribute to this efficiency, as well as to the yield obtained in olive oil production.
To improve the value chain of Turkey’s olive oil production, the research recommends introducing organised companies that would facilitate production, processing, and marketing. Companies can acquire the latest technologies to boost productivity and shorten processing time. Additionally, companies owning or coordinating the farms can win better bargains in the international market. This strategy will assist in transforming Turkey from a price taker to a price maker in the global market of olive oil. Next, access to financial services for the farmers should be increased to facilitate the farm activities of irrigation, pruning, and harvesting. Based on the findings, funding only reached the mills but did not dissipate to the farmers. This led to low-quality fruits, which interfered with the quality of the oil extracted. Moreover, the study recommends the implementation of serious regulations for the pricing and cost of olive oil products in Turkey. The step is significant in helping the country control the production process and costs and eventually determine the right prices for the local and international markets. The hoarding problem has made Turkey’s olive oil attractive only domestically.
It is crucial to underscore the primary limitations of this study. Firstly, our research is focused solely on companies within the olive oil sector. However, it is worth noting that this sector holds significant importance both domestically and globally. We believe that the insights gathered from this research can be extrapolated to other sectors within the agri-food industry. Secondly, the scope of our study is confined to a single country, Turkey. While Turkey holds a privileged position in olive oil production, conducting a comparative analysis with other producing countries could offer invaluable insights. Moreover, the Turkish olive oil sector grapples with various challenges, including issues related to profitability, efficiency, and international market competitiveness. A comprehensive understanding of these aspects is crucial for identifying avenues for improvement, fostering sustainability, and driving the country’s economic development forward.
This study unfolds a spectrum of avenues for future research endeavours. These encompass a more profound exploration of organizational structure as a catalyst for market targeting through virtual social networks and other information and communication technologies. Additionally, there is a need to ascertain whether the elucidated explanatory model resonates with other agri-food sectors and to investigate the potential enhancement of efficiency results for companies scrutinized in this study through modifications to the identified key factors.
7. Policy Implications
To enhance the efficiency and competitiveness of the Turkish olive sector, it is imperative to undertake comprehensive strategies addressing various aspects of agricultural production and management. One key aspect involves focusing on value addition throughout the supply chain and strategically targeting international markets for olive oil exports, aiming to establish Turkey as a prominent player alongside Spain and Greece. Achieving this goal requires a multifaceted approach that encompasses modernization of agricultural practices, adoption of cutting-edge technologies, and promotion of mechanization to bolster productivity while simultaneously reducing operational costs. Additionally, there should be a concerted effort to diversify olive-derived products, invest in research and development initiatives aimed at elevating production quality and efficiency, and provide farmers with adequate training and education opportunities. These efforts must be underpinned by clear and supportive policies and regulations that prioritize transparency and environmental sustainability across the entire olive sector value chain.
This study helps establish a series of policy implications of particular concern to enhance the economic efficiency of olive farms. The results indicate that policies focused on irrigation are crucial for enhancing the competitiveness of these entities. It is imperative to promote the modernization of irrigation systems and encourage sustainable practices that optimize water use, thereby ensuring an increase in efficiency and productivity in this sector. Furthermore, the need for policies aimed at addressing variability in topography and farm size has been identified. It is essential to implement measures that facilitate the adoption of cultivation techniques adapted to the terrain characteristics and provide support to small-scale producers to improve their access to resources and technology. This would not only increase efficiency in olive and oil production but also promote equity within the sector.
Finally, these policies are essential for promoting economic growth in Turkey’s olive sector. Improving efficiency can enhance the competitiveness of the economy as a whole, thereby potentially fostering positive impacts on economic growth and national development. Increased efficiency and productivity also lead to higher income and economic stability for farmers. Consequently, these policies hold the potential to positively transform farmers’ livelihoods, contributing significantly to the enhancement of satisfaction and prosperity within the olive farming sector.
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