y' "1%^ Division of Agricultural Sciences V\ UNIVERSITY OF CALIFORNIA TRENDS AND OUTLOOK DUSTRY 111 CALIFORNIA AGRICULTURAL intStation iiiiwn Service CIRCULAR 492 THIS IS THE SITUATION The camied ripe olives consumed in the United States are all from California. Much of the olive oil consumed and certain other products, such as Spanish p^reen olives, however, are imported, largely from the Mediterranean Basin. Acreage in California expanded rapidly until 1920, thereafter remaining at some 31,000 acres. During the past forty years, yield increased steadily to an average of 1.7 tons maintained since 1945. Annual production increased correspondingly, from 8,200 tons in 1910-14 to 46,000 tons in the past fifteen years. Olives were originally used chiefly for their oil. During the twentieth century their use in pickled form increased rapidly, and crushing declined from two thirds to one quarter of the crop. Farm prices reached a high level during the 1940's when war condi- tions drastically reduced olive oil imports. They declined immediately thereafter to an average of S200 per ton since 1950, compared with $60 for 1930-40. Marketing controls have been used to improve returns to the industry. At present the major reliance is on advertising to promote sales of canned ripe olives and, to a lesser extent, on a stabilization plan to correlate supply with market demand. THIS IS THE OUTLOOK Production is likely to increase in the immediate future, but only to a limited extent. Tree removal is expected to approximate new acreage coming into bearing. Yields somewhat above the present level are indicated — provided the good cultural practices now employed continue. The present pattern of use is likely to continue, except that the relative importance of crushing might decline still further. A sharp decrease appears unlikely. Forecasting farm prices is more difficult. The present level probably will be maintained or exceeded — if consumer purchasing power continues to climb at or near the rate of recent years. Prices for canning, crushing, and other processing should continue at present relationships since the proportions of the crop entering the various outlets are not expected to change. THE AUTHOR: Jerry Foytik is Associate Professor of Agricultural Economics and Associate Agricultural Economist in the Experiment Station and on the Giannini Founda- tion, Davis. DECEMBER, 1960 JERRY FOYTIK CALIFORNIA OLIVE INDUSTRY TRENDS AND OUTLOOK CONTENTS The Industry 4 Acreage Affects Production ... 6 Yield Trends Upward 11 Production 13 Crop Utilization 14 Canning 16 Olive Oil 21 Other Olive Products 23 Fresh Sales 23 Imports-Exports 24 Industry Controls 26 Returns to Olive Producers . . .31 The olive is firmly established as one of California's important specialty crops. The only other state growing olives com- mercially is Arizona, with an annual pro- duction of merely 100 tons or less. Thus, California dominates the domestic scene, though it produces only 1 per cent of the world crop. The crop is used primarily for canned ripe olives. Substantial quantities, at much lower prices, are crushed into oil or processed as other products. Califor- nia supplies all the canned olives con- sumed domestically and exports a small ^ Doubt exists about the date and location of the first California plantings. It has been stated frequently that olive seeds were brought to Mission San Diego in 1769. There appear to be no historical records to support this claim. "All we can prove is that some missions, including San Diego, had begun olive culture by 1803. Mission San Diego produced the first olive oil in Cali- fornia. Other missions no doubt were ready to do the same since their olive harvest was being gathered," So concludes Father Maynard Geiger, an outstanding authority on the mission period, who has found no documentary proof for a contrary view. Surely mission reports would contain some mention, if olives were planted much before 1800. My statement is based on information sent me by Father Geiger in a letter dated April 20, 1960. 1 wish to thank Miss Erline Hevel, Secretary, California Olive Association, and Mr. Harold G. Schutt, Lindsay Ripe Olive Company, for calling my attention to the uncertainty about the first California plantings of olives. [3] quantity. Normally, almost all the coun- try's olive oil is imported, as is also a substantial part of certain other products, chiefly Spanish green olives. Olives were introduced in California about 1800 when the Spanish padres brought olive seeds from Mexico.^ The resulting variety, named "Mission," is still one of the leading varieties in the state. During the second half of the nine- teenth century other varieties were im- ported from the Mediterranean coun- tries, chiefly for oil production. Soon after the turn of the century, emphasis shifted from oil to the more profitable table varieties. Important changes have occurred dur- ing the past decades, and others are likely to come. This circular examines the factors responsible for such changes and estimates future prospects. It must, how- ever, be limited to olives alone ; it cannot widen its scope to include such broad factors as prospective demand ( resulting from changing food habits and con- sumer purchasing power), relative pro- duction, and processing costs (for olives and alternative crops), and so on. Yet, by considering past shifts and present trends, intelligent projections for the future can be made of several factors affecting prices paid for olives. Olive growers and processors should consider these indications in their planning. THE INDUSTRY The olives growth requirements con- fine commercial production in Califor- nia to a few varieties grown in the cen- tral part of the state. Growing Conditions^ The olive is not especially sensitive to climate, moisture, and soil conditions. In establishing a commercial enterprise, however, the grower should give close attention to the following requirements. Olives produce best in areas with rela- tively cold winters and warm summers free of fog. Winter chilling is required for proper flower formation, but temper- atures below 15°F harm most varieties. Generally, areas above 45° latitude are unsuitable. Olives can be grown nearer to the equator than 30° latitude, but they may not fruit well there. The rainfall in most areas provides enough moisture for olive trees to live and bear some fruit. A liberal supply of water, however, is required during the growing season to produce larger trees with heavier crops of large and un- shriveled fruit. In California practicalK all commercial orchards use summer irri- gation. Rainfall during bloom appears not to decrease fruit set. Olives grow satisfactorily on a wide range of soil types. Unless trees are planted on well-drained soils free from alkali, however, they show stunted growth, produce a light crop, ripen their fruit prematurely, and die. Producing Areas Conditions for olive production are particularly satisfactory in the interior valleys of central California and in the surrounding foothills. Temperatures are suitable. Irrigation is possible and not too expensive. Insect control is less diffi- cult than in the coastal areas. Conditions in southern California and in the coastal area are less suitable for profitable pro- duction. Relative advantages in producing olives profitably in the various parts of the state are reflected in plantings made in former years and more recently. Al- most two thirds of the acreage is in Butte. Tehama, and Tulare counties. These OLIVE PRODUCTION DISTRICTS Counties for each district are listed in order of present acreage: South San Joaquin District includes five counties of the southern portion of San Joa(juin ValN^y: Tulare, Fresno, Madera, Kings, and Kern. About 40 per cent of the state's olive acreage is located in these five counties. North Sacramento District includes five counties in the northern part of Sacramento Valley: Butte, Tehama, Glenn, Shasta, and Yuba. They constitute 3o per cent of the acreage. Other Areas, representing 22 per cent of the acreage, include all other counties. Twenty of these have no commerical acreage, fifteen have limited plantings of less than 100 acres each, and nine have acreages ranging from 150 to 1.2S0. "For a more complete discussion see: H. T. Hartmann, Olive Production in C.alitornia. (Cali- fornia Agr. Exp. Sta. Manual 7, 59 pp., 1953. [4] three counties form the nuclei of two ma- At present, however, 98 per cent of jor producing areas located in south San the state's acreage is planted to five varie- Joaquin and north Sacramento valleys, ties. Mission and Manzanillo, the leading By adding nearby counties with smaller varieties, represent three quarters of the acreages to these production centers, the total. Next in order are Sevillano, Asco- territory included in the two principal lano, and Barouni. olive-producing districts listed in the These varieties differ widely in fruit box, page 4, is covered. This segregation size, oil content, flesh-pit ratio, ease of is arbitrary but convenient in this dis- handling, maturity dates, tree growth, cussion of major areas of production. productiveness, and in other respects . . (see box). Such differences influence Varieties Produced t^^i^ disposition considerably, and, Numerous olive varieties are cultivated hence, their profitability. They must be, in other countries. They can be grown and are, considered when growers choose successfully, though not always profit- varieties to be produced to meet the ably, in California. Many have been im- needs of available markets, ported by the University of California /- -j j and are being grown in test plots at its ' Cictors Considered Wolfskin Experimental Orchards at Bearing acreage changes every year Winters, California. as young trees come into production and CHARACTERISTICS OF OLIVE VARIETIES Major d'fferences in physical characteristics, suitability for processing, tree growth, and productiveness among the five major varieties of Cali- fornia olives may be summarized as follows: Mission is a relatively small-fruited variety with a low flesh-pit ratio. The fruit has a high oil content and is easy to process. It is subject to freezing injury because of late inaturity. The trees tend toward alternate bearing. Their tall, upright, and vigorous growth increases pruning and harvesting costs. Manzanillo is larger and fleshier than Mission. The fruit also has a high oil content and is easy to process. It matures early enough to avoid frost damage. The trees are regular bearers, grow relatively low and spreading, and are easy to harvest. Sevillano is a large-fruited variety — about three times as heavy as Mission and Manzanillo. Although the fruit has a lower quality and is more difficult to process, a premium price is paid because of its large size. This variety is rarely crushed because of its low oil content and its desir- ability for canning. Tree size and shape make harvest easy. Ascolano also has large fruit. The fruit has a high flesh-pit ratio and produces a fine table olive. Its oil content is high but the variety is not crushed often because higher prices are received in the canning outlet. Susceptibility to bruising during harvest and processing is a major obstacle to expanded plantings. Barouni has large fruit — almost as large as Ascolano. The fruit has a low flesh-pit ratio, is difficult to process, and yields a product of lower quality. The tree is spreading and easy to harvest. [5 older trees are removed. Differential rates prevail among varieties and dis- tricts. As a result, the varietal composi- tion, geographic location, and age distri- bution of California's olive acreage undergo constant change. These changes affect the longer-run movement of yield. (Cultural practices affect yield over the life of the trees as well as for a particular season. But in the short run, yield de- pends largely on the weather during the blooming, growing, and harvesting season. These two factors — bearing acreage and yield — ultimately determine produc- tion, both for a given season and over the years. With California olives, produc- tion is practically synonymous with sales since almost the entire crop is sold. Normally, farm use is limited to 200 tons a year and cullage is not excessive. In 1932, however, almost one quarter of the crop was wasted because of depressed economic conditions. Generally, 50 to 60 per cent of the crop is canned as ripe olives, 25 to 30 per cent is crushed into oil, 15 to 20 per cent is processed as other products, and 1 to 2 per cent is shipped fresh. The relative demand for olives in these outlets de- pends on the combined influence of many factors. Each product has its own con- sumer appeal. Year-end stocks ( in the hands of processors and distributors) vary from season to season. Imports of olive oil and some other products, chiefly from Spain and Italy, are substantial. The industry's marketing control pro- gram affects canning directly, and other uses, particularly crushing, indirectly. Figure 1 shows the major relationships among these factors. The bars in the cen- tral portion of the diagram are drawn so that their widths are proportional to 1950-58 average disposition. The discussion in this circular is di- rected toward an understanding of the interrelationships among these factors. Other influences, though omitted here for convenience, are important and must be considered in arriving at final con- clusions. ACREAGE AFFECTS PRODUCTION Thou'jih the industry had alread) grown to its present size by 1920 im- portant changes in olive acreage have occurred since then. These were primar- ily shifts in tree age and in the relative importance of varieties and producing areas. Past Acreage Trends In 1910 California had 958.000 olive trees, including 836.000 of bearing age. By 1920 the total had increased to 1.6 million, on 31,000 acres. Acreage has re- mained at about this level during the past forty years. Actually, it declined to an average of 28,500 in 1933-42 and in 1945 returned to the 1920 level, where it has remained. Bearing acreage expanded rapidl) dur- ing the first quarter of the twentieth cen- tury, reaching a peak (28,800) in 1927. Subsequent changes have been minor. In 1930-53 bearing acreage varied between 27,000 and 27,800. But this "low pla- teau" was only 5 per cent below the 1927 peak. Since 1954 a slight increase oc- curred, bringing bearing acreage to a new peak of 29,000. Nonbearing acreage fluctuated much more sharply. For twenty years it de- clined steadily, from 9,200 acres in 1919 to an average of 825 for 1936-39. then it expanded to 5,200 during the 1940's and decreased sharply to 3,100 in 1953- 58. By Districts Although bearing acreage has con- tinued at an average of about 28.000 acres since the late 1920's, its geographic composition changed. This shift is shown in figure 2. The proportions of the state's bearing acreage in the two major pro- BEARING ACREAGE (Age, varietal and locational distribution) \: AVERAGE YIELD (Weather conditions, cultural care, etc.) 7 FARM PRODUCTION (50,000— ton average for recent years] Unharvested (Negligible) Farm Use (Limited Amount) DISPOSITION OF SALES (Normally 9914 per cent of crop) i FRESH m& CANNED 57% CRUSHED 26% STOCKS MARKETING ORDERS SPECIALTIES 16% IMPORTS & STOCKS * — Width of Bars proportional to quantity FIGURE 1. Major Factors Affecting Use of California Olives. [7] ducing areas increased substanlially — from 20 to 38 per cent for North Sacra- mento and from 31 to 38 per cent for South San Joaquin during 1921-56. A corresponding reduction occurred in other counties — from 49 to 24 per cent. Acreage in each district is concen- trated within a few principal counties. About 82 per cent of the South San Joa- quin District acreage is in Tulare; 9 per rent in Fresno; and 9 per cent in Madera, Kings, and Kern. The county distribution of acreage in North Sacra- mento District is: 44 per cent in Butte, 36 per cent in Tehama, and 20 per cent divided almost equally among the other three counties. The acreage in "Other Areas" is di- vided equally between north and south of the Tehachapi Mountains. About 35 per cent of this "outside" acreage lies in Riverside and Sacramento counties; 29 per cent in San Diego, Los Angeles, and San Bernardino counties; 15 per cent in Yolo, San Joaquin, and Stanislaus coun- ties; and 21 per cent in other counties. 30 [2 20 u < 8 10 I I State Tota So. S, Joaq. District I I I I 50 o < 40 LJJ ct: U < O z 30 on < LU CO U- o 20 h- z LU u Ql 10 So. S, Joaq, Dist. ^y No. Sacto. Dist. 1921 1926 1931 1936 1941 1946 1951 1956 FIGURE 2. California Olives: Distribution of Bearing Acreage, by Major Districts, 1921-56. 8] Table 1. Bearing acreage of California olives, 1936, 1956, and 1959' Variety state total No. Sacramento So. San Joaquin Other areas 1936 1956 1959 1936 1956 1936 1956 1936 1956 Mission. . . 14,350 11,640 11,084 5,410 5,690 3,260 1,780 5,680 4,170 Manzanillo . 5,930 8,960 9,746 590 710 3,770 6,660 1,570 1,590 Sevillano. . 2,930 4,520 5,632 2,230 3,560 380 850 320 110 Ascolano . . . 990 770 786 140 60 540 540 310 170 Barouni 500 270 318 220 200 100 20 180 50 Others 3,000 1,540 605 240 8,830 290 950 550 1,810 700 Total 27,700 27,700 28,171 10,510 9,000 10,400 9,870 6,790 * Acreage data for 1936 were revised in 1956 and 1959 by the California Crop and Livestock Reporting Board. The figures shown here are unrevised data by varieties adjusted uniformly to reflect revisions in county totals. By Varieties Olive acreage also changed in varietal composition. Between 1936 and 1959 bearing acreage increased about 90 per cent for Manzanillo and for Sevillano. It declined over a third for other varie- ties: 20 per cent for Ascolano; 33 per cent for Mission and Barouni; and 80 per cent for minor varieties. This shift is accomplished in two ways: by top- working present acreage and by remov- ing trees of unwanted varieties and planting groves of desired varieties. As a result, the relative importance of varieties has shifted since 1936. Man- zanillo increased from 21 to 39 per cent of the total acreage, and Sevillano from 11 to 20 per cent. On the other hand, Mission declined from 52 to 35 per cent and other varieties from 16 to 6 per cent. A detailed comparison on a district basis, for the period 1936-56 is summarized in table 1. Age Distribution Olive trees begin to bear during their fourth or fifth year, but harvest is not substantial until their seventh or eighth year. Full yield begins at about age twenty. With proper care, the productive life of olive trees is a hundred years or more. In 1958 two thirds ( 68 per cent ) of the acreage was of trees planted in 1939 or earlier, 22 per cent of younger bear- ing trees, and 10 per cent of nonbearing trees. Possibly the most noticeable change in the age composition of olive trees over the years is the shift in nonbearing acreage. The proportion of the acreage consisting of nonbearing trees declined steadily between 1919-21 and 1936-39 — from 28 to 3 per cent of the total. Non- bearing acreage reached a post-depres- sion peak of 5,200 (16 per cent of the total) in 1948-50, and then decHned to 3,150 (10 per cent) for 1956-58. Figure 3 shows the change in age com- position of olive acreage occurring be- tween 1936 and 1956. For this compari- son older-bearing trees are seventeen years or older. There are several impor- tant differences among the districts: II Nonbearing acreage increased sixfold in the two major producing districts and declined by a third in other areas. Practically all the new plantings are now in North Sacramento and South San Joaquin. ^ Acreage is much younger in average age in South San Joaquin. The propor- tion of young trees (bearing and non- [9 14 12 < LU CD z o 2 - North Sacramento District South San Joaquin District Nonboaring Trees Young Bearing Trees II I I I II Old Bearing Trees - Other Counties 1936 1956 1936 1956 1936 1956 FIGURE 3. California Olives: Age Classification of Acreage, by Districts, 1936 and 1956. bearing) is 43 per cent compared with 25 and 11 per cent in North Sacramento and in other areas. ]\ The proportion of young trees in- creased in South San Joaquin (from 27 to 43 per cent) and decreased (from 30 to 25 and 16 to 11 per cent, respectively) for North Sacramento and other areas. Probable Acreage It is difficult to estimate bearing acre- age very far into the future. For the period immediately ahead, however, a reasonably accurate forecast is possible. Our guides are recent plantings still to come into bearing and probable removals of older or diseased and weakened trees. Table 2 shows acreage shifted to bear- ing and acreage removed from produc- tion for the period since 1923. About 3,230 acres have been removed every six years during the entire period. If this rate is continued, bearing acreage will increase by 810 acres during 1959-65. since 4,040 acres of presently nonbearing trees will begin to bear. Actually, of course, trees may be removed at a differ- ent rate. If the rate is assumed equal to the average for 1947-59. then removals [10 1 will be offset exactly by new bearing acreage. The age distribution of bearing acre- age during four years is given in table 3. Unfortunately, acreage is not classified by age for trees older than twenty-three years. Yet, significant differences are evident. In 1958, as in 1953, a larger pro- portion of the acreage consisted of young trees that had just come into bearing. In addition, the number of older trees at full maturity (nineteen years or more since planting) was reduced from 93 per cent of the bearing acreage in 1943 and 1948 to 76 per cent in 1958. These compari- sons suggest that removals may be lighter than usual during the next few years. Both procedures lead us to the same conclusion: Removals from production during the early 1960's are likely to ap- proximate new acreage coming into bear- ing. It thus appears that for the next few years bearing acreage will continue at about the current level of 28,000 acres. YIELD TRENDS UPWARD Figure 4 shows a substantial increase in average yield during the past forty years — from 0.4 ton per bearing acre in 1920-24 to 1.7 since 1945. Actually, the trend was not uniform throughout this period. A general upward movement pre- vailed until the late 1930's. During the war years (especially 1940-44) the aver- Table 2. Changes in bearing acreage of California olives Period Bearing acreage Beginning of period Addition* Apparent removal End of period Acrest Per centt 1923-29 1929-35 1935-41 1941-47 1947-53 25,600 28,490 27,350 27,460 27,660 27,450 28,170 7,660 3,500 1,040 1,180 4,870 3,720 4,040 3,716 4,770 4,640 930 980 5,080 3,000 3,233 18.6 16.3 3.4 3.6 18.4 10.9 11.9 28,490 27,350 27,460 27,660 27,450 28,170 1953-59 1959-65 6-year average * Trees of nonbearing age at beginning of six-year period. t Difference between beginning bearing acreage plus "additions" and ending bearing acreage. t Per cent of beginning bearing acreage. Table 3. Age distribution of California olive bearing acreage Tree age, years 1943 1948 1953 1958 6-13 Per cent of bearing acreage 2.4 6.8 1 90.8 j 2.6 1.7 6.5 89.2 13.9 2.1 2.8 81.2 16.1 7.9 1 76.0 14-18 19-23 24 and over [11] Ota: << Averog.. -'7 ^- III 1 1 1920-24 25-29 45-49 50-54 55-59 FIGURE 4. California Olives: Production, Bearing Acreage and Yield, 1920-59. age was high. Probably this was an ab- normal result arising from a crop har- vested with great care to fill domestic needs when farm prices were high be- cause imports of olive oil were curtailed. Yield continued at 1.7 tons during the post-war period. Fluctuations in Yield Yield varies considerably from year to year (see right panel of figure 4). These fluctuations averaged 0.71 ton since 1945, or about 42 per cent of the average yield for the period. The annual change exceeded 1.0 ton in four of the past fourteen years, was 0.5 to 0.9 ton in six years, and fell below 0.5 in only four. Such wide variations complicate the problem of marketing olives. They re- sult in corresponding annual fluctuations in production and, hence, to a consider- able extent, in quantities available for canning. But utilization in this outlet is generally changed by a smaller propor- tion resulting in even greater variations for secondary uses. This, of course, has a direct and important impact upon farm prices. Comparative Yields Both production and acreage data have been collected on a varietal basis only since 1940. This information results in the yields summarized in table 4. It is apparent that yields differ substantially among varieties. Yield for Mission is only half that of the other three major varieties. For the minor varieties, yield is still lower. These data represent the yield for all bearing acreage and hence are not en- tirely comparable. There are significant differences in the age distribution of Table 4. Varietal yield of California olives , 1940-59 Variety 1940-44 1945-49 1950-54 1955-59 Ascolano . . . 1.50 1.60 2.00 2.46 Sevillano. . . 2.64 2.10 2.10 2.04 Manzanillo 3.55 2.44 2.17 2.25 Mission . . . 2.08 1.50 1.52 1.20 Others 0.53 0.49 0.73 0.68 All 2.04 1.53 1.74 1.67 1 [12 bearing trees among varieties and at dif- ferent years. Nevertheless, yield is con- siderably higher for Ascolano, Manza- nillo, and Sevillano than for other varieties. Similar data are not available for com- paring directly yields in the several dis- tricts. It has been estimated, however, that the usual yield for good commercial acreage (of mature trees) varies mark- edly among areas. These variances arise partly from differences in varietal com- position. The principal cause, however, is differences in soil fertility. Over the years in California, per-acre yields for olives have been about 25 to 30 per cent of those for deciduous tree fruits and grapes. Yield increased sub- stantially during the past quarter century as it had for other fruits. Presently yields are three times the 1920-34 average for olives, compared with increases of 115 per cent for deciduous fruits and 75 per cent for grapes. Yields since 1920 are compared in table 5. Probable Yields Presumably, improved cultural prac- tices increase yields. Good cultural care will continue to be used — unless prices decline so much that the cost becomes prohibitive. But even if trees are neg- lected, better care in the past will con- tinue to have a beneficial effect, thouofh Table 5. California yields for olives and other fruits Years Olives Decidu- ous tree fruits Grapes Tons per bearing acre 1920-34 1935-39 1940-44 . . 0.6 1.1 2.0 1.5 1.7 1.7 3.3 4.2 4.5 5.9 6.3 7.2 3.8 4.5 4.8 1945-49 . . 5.6 1950-54 5.7 1955-59 6.7 with diminishing amplitude, on yield for the immediate future. In view of these considerations and the changes in varietal, geographical, and age distribution of trees, a small in- crease in yield (of some 10 per cent to 2.0 tons per bearing acre on the average for the entire state) is likely for the early 1960's. A sharp increase above the pres- ent level, however, is not expected. Chemical spray thinning is being used more widely each heavy-crop year. Growers do not seem to object to the expense of application even though this practice has not yet been shown to be very effective in alleviating alternate bearing for olives. The practice, how- ever, does overcome the undesirable sit- uation created in the "on" years when trees bear large crops of very small fruit. Presumably cultural practices may be modified in this and other ways in an attempt to reduce the undesirable effect of alternate bearing. It is expected, how- ever, that for the years immediately ahead annual fluctuations in yield will continue at about the present magnitude. PRODUCTION Past changes in acreage and yield, present trends, and estimates of future levels are discussed above. Figure 4 shows the relationship of acreage and yield in determining the general course in production. Production Trends The average olive crop increased from 8,200 tons in 1910-14 to almost 50,000 since 1945. This expansion, however, was not at a uniform rate. The increase aver- aged some 500 tons per year until the mid-1930's. Then, as bearing trees be- came older and yield rose, production expanded much more rapidly. Actually it is difficult to show this rate because the care with which harvesting was done during the war period, especially 1940- [13] 43, gave abnormally large crops. If these years are disregarded, production in- creased by about 2,000 to 2,500 tons per year. Annual fluctuations in production are very large because of considerable varia- tions in yield. During the past twenty years these short-run changes in produc- tion amounted to 19,000 tons, or about 40 per cent of the average crop. Probable Production Our estimates of the production trend for the years ahead are a combination of forecasts of bearing acreage and yield. From information now available we con- clude that for the next few years bearing acreage is likely to continue at about the present level and that yield will probably increase moderately. Thus, the usual crops for the early 1960's should be somewhat above the average for the 1950's but the production increase will be relatively small. This projection assumes: ]\ Good cultural practices will continue in the major producing areas, even if prices decline. U Tree removal will be at or near the rate prevailing since 1950. If Bearing acreage will shift to the more productive varieties and to the South San Joaquin District ( where yields are higher), and will include a larger pro- portion of trees at full maturity. CROP UTILIZATION Table 6 summarizes disposition data for the past fifty years. This information clearly shows two major changes. An ab- normal situation prevailed during the 1940's. Utilization increased much less rapidly for fresh sales and crushing than for canning and other processing. Wartime Demand United States imports of olive oil were greatly curtailed during World War II and continued to be relatively low^ for a few years thereafter. The domestic olive industry adjusted to this situation in two ways: 1) Quantities harvested were in- creased by using greater care to pick all available supplies on commercial acreage and to pick from trees used as border Table 6. Production and utilization of California olives, 1 91 0-59 Average Production* Quantities utilized for : All sales Fresh sales Canning Crushing other processing 1910-14 1915-19 1920-24 1925-29 1930-34 Tons, fresh weight 8,200 9,400 10,200 18,200 18,000 31,000 56,000 42,200 48,200 47,600 8,000 9,200 10,000 18,000 16,800 30,500 55,800 42,000 48,000 47,000 100 220 240 540 500 900 940 420 560 500 2,300 3,800 5,140 9,540 7,980 10,440 14,660 17,720 25,780 29,000 5,040 3,760 3,300 6,180 6,340 14,740 30,000 17,000 14,440 9,680 560 1,420 1,320 1,740 1,980 4,420 10,200 6,860 7,220 7,820 1935-39 1940-44 1945-49 1950-54 1955-59 * Difference between production and all sales consisted of 200 tons per year used directly by the farm household and of quantities not utilized during 1932, 1938, and 1958. [14 J I 1 1 1 1 ('■■ T ■ I \ I 60 - \ \ \ \ y Canned / ^ ^^ - N y^ " 40 - / ■"^ Crushed \ V V y 20 ' ^ Other Processed — ■ n _.. 1 , _,. J 1 1 1 J 1 . . 1 1 1 1910-14 1915-19 1920-24 1925-29 1930-34 1935-39 1940-44 1945-49 1950-54 1955-59 FIGURE 5. California Olives: Disposition of Sales, 1910-59. plantings, and 2) prices for crushing olives were raised sharply to direct a larger proportion of the supply into oil extraction. These devices were successful. During 1940-44, production was raised to 56,000 tons, an average exceeding by a large margin the average crop for any five-year period before or after World War II. Similarly, the quantity crushed was far above the average for other years. Past Changes This situation of the 1940's is omitted from our discussion. Attention is focused primarily on the usual conditions and their changes over time. Since 1910-19 the use of olives in- creased threefold for crushing and fresh sales compared with ninefold for canning and other processing. As a result, of course, the relative importance of the various processing outlets changed sig- nificantly. Figure 5 shows this shift in the utilization of the olive crop. Canning rose from 29 per cent of all sales in 1910-14 to 50 per cent in 1920- 34 and 58 per cent since 1950. "Other processing" increased from 11 per cent in 1910-29 to 16 per cent for recent years. Use of olives for crushing declined correspondingly — from 60 per cent in 1910-14 to 26 per cent in 1950-58. Purchases by canneries vary less from year to year than purchases by crushers. Since 1940, annual variations in farm sales for canning were 31 per cent of average purchases compared with 60 per cent for crushing. Thus, as production changes annually, the greater part of the difference is reflected by large variations in quantities crushed into oil. Varietal Usage In California, olive varieties are used for special purposes much more than other tree crops. This specialization is indicated by the data in table 7. Mission is used extensively for both crushing and canning — 50 and 40 per cent, respectively, of the average crop since 1950. Crushing represents 15 per cent of the crop for Manzanillo and 5 per cent for Sevillano and Ascolano. Two thirds or more of each of these three varieties are canned. The processing of other olive products is specialized. For example, practically all Greek and Sicil- ian style olives, respectively, are made from Mission and Sevillano varieties. Fresh sales for these four major varieties are negligible. A significantly different utilization pattern prevails for the minor varieties. Spanish green takes 40 per cent of the crop, canning and crushing 30 per cent, and fresh sales (for home processing) [15 Table 7. Varietal utilization of California olives, 1950-59 Outlet Manzanillo Mission Sevillano Ascolano Other All Canned Tons 12,994 2,988 1,700 44 9 892 112 6,541 8,441 412 935 9 675 45 6,226 402 1,271 1 892 193 111 1,452 108 63 4 149 4 177 121 424 16 31 258 27,390 12,060 3,870 980 930 1,940 530 Crushed Spanish green Greek style Sicilian style Other processed Fresh Total 18,739 17,058 9,096 1,780 1,027 47,700 1 25 per cent. Thus, these minor varieties represent almost half of the fresh sales although their production is barely 2 per cent of the total. CANNING Normally over half the olive crop (50 to 60 per cent) is canned and the farm price for canning olives is about 2^-2 times the average for other uses. Thus, about 75 per cent of the farm income for olives is derived from cannery sales. In other words, canning is the most profit- able as well as the most important outlet for the grower's production of Califor- nia olives. Olive Canners California olives are marketed primar- ily by processor-canners whose chief product is canned olives (ripe or green- ripe) . Several of these processors also pack other items, such as Spanish green, Greek style, Sicilian style, and chopped or sliced olives. A very few manufacture olive oil. Generally, however, oil is ex- tracted separately by some 30 to 40 olive oil plants — most of which do not operate each year. Nine of the 13 canners located in Butte, Tehama, and Tulare counties pack other olive products. There are seven other canners in northern California and six in the southern part of the state. Only two of these pack other olive products. Four of the 26 olive canners pack products other than olives. To convey proper emphasis, it might be better to say that four processors of other com- modities also can ohves. Their com- bined production is a significant portion of the total pack. This situation is in con- trast to that for most other California canned products. Generally in this state canners who limit their pack to one or two fruits and vegetables represent a relatively small proportion of the pro- duction of those products. At present there are six grower-owned cooperatives, eight grower-canners, and 12 independent canners. (There is con- siderable difficulty in drawing a line be- tween grower-canners and independent canners. Here a grower-canner is defined as one who controls at least 50 per cent of his product as a sole proprietor, through outright company ownership of groves, through a profit-sharing arrange- ment with his growers, or by informal buying arrangements of the company with its stockholders or partners.) These three groups share the pack of canned ripe olives almost equally. Thus, the cooperatives and grower-canners, on the [16 average, pack about twice the volume processed by independent canners. The past decade saw several signifi- cant changes occurring in the composi- tion of the olive canning industry. Two plants that were independent canneries in 1950 were reorganized as cooperatives. Three companies began packing olives. Seven canners went out of business. That includes two of the larger canneries, with a combined pack representing over 10 per cent of the 1950-51 total. Two com- panies are operating at new locations without a change in management. Preparation for Canning Canned ripe olives are prepared from properly matured olives which are treated to remove their characteristic bit- terness. They are picked when straw- colored and may be held in brine for several months before being processed. After a rather complex series of treat- ments involving neutralization of the bit- terness by applications of sodium hy- droxide, olives are packed in a salt solu- tion and processed by heat for preserva- tion in hermetically sealed containers. Two distinct types are produced. The "ripe type" are olives treated and oxi- dized to produce a typical dark brown to black color. "Green ripe" olives are not oxidized in processing. Their color ranges from green-yellow or yellow-green to mottled tan or brown, depending on the maturity of the fruit and the individ- ual preference of the canner. Generally these two different types are considered to be canned ripe olives. (U.S.D.A. Standards established three classifica- tions by splitting the "green ripe" cate- gory into two groups: "green-ripe" and "tree-ripened." This distinction, made to satisfy a small group, does not reflect general industry practice and is not used here.) The principal outlet for canned ripe olives is in the form of whole unpitted olives. In recent years, however, other packs have become important. Pitted olives account for about a quarter of the pack. Next in importance are chopped and sliced ripe olives. (A few canners pack a small volume of halved olives — i.e., pitted olives which are cut length- wise into two approximately equal parts.) Finally, as a salvage outlet the large pieces broken during the pitting operation are packed as broken pitted olives. Grade Standards Marketing contracts for many agricul- tural products frequently specify the voluntary use of U.S.D.A. grade stand- ards. These standards are revised periodically to reflect changes in manu- facturing techniques and marketing practices. In the case of canned olives the use of U.S.D.A. grades is limited primarily to purchases by governmental agencies. Sometimes federal standards are used to settle disputes about quality of canned olives shipped to private-label buyers. They may be used as a sales gimmick by a canner trying to establish himself in a new territory. Generally, however, olive canners sell to the trade by sample and not on the basis of grade standards. U.S.D.A. Standards, originally adopted in March, 1941, were revised in November, 1959, to accomplish two pur- poses: 1) to provide a better basis for the Department's internal regulations and 2) to liberalize the treatment of de- fects. The industry had long desired this liberalization and welcomed the change even though the standards are seldom used for private sales. The earlier standards applied only to whole pitted olives. Other packs are covered by the revision. Four grades (U.S. Grades A, B, C, and Substandard) are established. Quality factors used for determining grade were changed substantially from those in effect since 1941. Although flavor is evaluated and noted on the score sheet, it no longer affects grade. Comparison of the old and [17] Table 8. Quality scores of U.S.D.A. standards for canned ripe olives Factor March, 1941, standards* November, 1959, standards Single sizes* All others Flavor Color Character of fruit Absence of defects Uniformity of size Uniformity of symmetry Total points * For whole pitted olives only 30 15 25 10 10 10 100 20 30 30 20 100 25 3734 37 K 100 new scoring system (see table 8) indi- cates the extent of the change. Size Designations The controlling legislation for size- grade designations for canned ripe olives is the California Ripe Olive Standardiza- tion Act of 1931, as amended several times. U.S.D.A. Standards merely reflect the size-grades enacted into state law. The state law recognizes 16 designa- tions for size-grades: three alternate names for the smallest olives, eight other single sizes (with two alternates), and three blends. In addition, many packers market their largest olives as "Special Super Colossal." Some canners use still other names (such as "Cadet," "Guest," and "Queen") for mixed sizes. Often housewives, and sometimes even dealers, are unable to keep the proper order of all these size names in mind when making tlieir purchases. The nine single sizes range from "Small" to "Super-Colossal." These des- ignations represent olives which vary a great deal in size — from 8.4 olives per ounce for "Small" to 4.4 for "Mam- moth" and 1.9 for "Super-Colossal." For each size-grade the olives must be fairly uniform in size and approximate the count, on a drained weight basis, given in table 9. In recent years mixed sizes have been used with increasing frequency. The state law was amended in 1953 to secure greater uniformity. Three blend sizes, constituting mixtures of specified indi- vidual sizes, were established with the following count: 91 to 105 for "Family," 45 to 53 for "King," and 34 or less for "Royal." Thus "Family" is on a par with "Large," while "King" and "Royal" are slightly smaller than "Jumbo" and "Super-Colossal." Table 9. Size grades for California canned ripe olives (California Ripe Olive Standardization Act) Size-name designation Count per pound Aver- age Range Small (or Select or Standard) Medium Large Extra large (or Picnic) Mammoth (or Gem ) . . Giant Jumbo Colossal Super colossal 135 113 98 82 70 128-140 105-121 91-105 76-88 65-75 53-60 46-50 36-40 32 or less 1 [18 U.S.D.A. Standards, as revised in 1959, designate the same size-grades, in- cluding blend sizes, with two minor ex- ceptions. "Picnic" and "Gem" are not specified as alternate names for "Extra Large" and "Mammoth." "Special Super Colossal" is specified as a single size for the largest olives. Actually these size- grades are not very different from those contained in the 1941 Standards. The three blend sizes and "Special Super Co- lossal" were added by the revision. In addition, size of canned pitted olives is given by illustrations ( attached to the Standards) which show size before pit- ting. Some dissatisfaction has been ex- pressed in the past with the olive indus- try's method of designating size. One view, published in 1953, was as follows: "Dealers believe that there are too many sizes of ripe olives. They think the present sizing is confusing, mis- leading, and detrimental to best mer- chandising and advertising operations. They suggest reducing the number of ripe olive sizes and simplifying the naming of them. For the sake of uni- formity, they believe that this should be done on an industry-wide basis. ""^ This challenge has not yet been met by olive canners. It is realized, of course, that grading standards must recognize processing techniques. But it is doubtful whether the present array of size names facilitates the marketing of canned ripe olives. The Pack Production of canned ripe olives has expanded steadily except for a decline during the early years of the Great De- pression of the 1930's. The pack in- ^ Randolph, Julian P., Food Trade Marketing Survey for Canned Ripe Olives. California Dept. Agr., 1953, 70 pp. This survey was con- ducted for the California Olive Industry under a project financed jointly by the California State Department of Agriculture and the United States Department of Agriculture. The quotation above is in the introduction to section 8 of the report (pp. 39-48) . creased from an average of 650,000 cast s in 1926-39 to 1,100,000 in 1940-49 and to 2,200,000 in 1955-58. This threefold expansion represents an annual rate of 65,000 cases (5 to 6 per cent) during the past twenty-five years. Annual fluctuations in the pack, though substantial, are smaller than variations in the crop. During the past twenty years these short-run changes amounted to 425,000 cases — 28 per cent of the average pack — compared with fluctuations of 40 per cent in production. Often the carry-in of canned ripe olives into the new pack year is fairly sizable. It averaged 290,000 cases since 1947 — one sixth of the annual pack of 1,760,000. Container Sizes Over two thirds of the pack is in pint- size containers^ — 62 per cent in the No. 1 tall can. Smaller sizes are used for 12 per cent of the pack, and the larger No. 10 cans for 18 per cent. This pattern, pre- vailing since World War II, represents a change from former years. The use of larger containers (No. 10 and the Quart ) declined. No. 1 tall replaced some of the pack formerly in other pint sizes. Small containers are relatively more important than formerly. In 1942-45 over half of the pack (55 per cent) was in glass because of war- time restrictions on the use of tinplate. Normally, however, 99 per cent of the pack is in tin containers. Fruit Size Figure 6, presenting 1948-51 averages, shows a typical distribution of the pack by fruit sizes. A pronounced bimodal pat- tern exists because both small-fruited and large-fruited varieties are canned in large volume. On a varietal basis the bulk of the pack (90 to 95 per cent) is of sizes "Small" to "Extra Large" for Mission and Manzanillo and of sizes "Giant" to "Colossal" for Sevillano and Ascolano. The average fruit-size composition of the pack has not changed much in recent [19] FIGURE 6. California Canned Ripe Olives: Pack, by Variety and Fruit Size, 1948-51. decades. Some changes, however, can be noted from the data summarized in table 10. The intermediate sizes ("Large," "Extra Large," and "Mammoth") de- cHned in relative importance — from 41 per cent of the total in 1938-47 to 35 per cent thereafter. Most of the offsetting in- crease was in "Giant" and "Jumbo." The fruit-size composition varies con- siderably from year to year. Annual changes amount to about one quarter of average percentage packed in each size. These short-run chanfjes are least for the Table 10. Pack of canned ripe olives, by fruit size Fruit size 1938-47 1948-57 Substandard Small Medium Large Extra large . . . Per cent of total pack 3.3 13.8 17.2 19.3 13.7 7.7 6.2 8.4 7.4 2.9 0.1 0.0 16.7 18.4 17.9 11.7 5.8 8.0 10.0 7.4 2.6 1.5 Mammoth Giant Jumbo Colossal Super colossal Other* * Pack of ungraded sizes or of blends not re- ported on a grade basis. smaller sizes and greatest for the larger sizes. During the past twenty years they averaged 14 per cent for "Small," "Me- dium," and "Large," 23 per cent for "Extra Large" and "Mammoth," and 31 per cent for "Giant," "Jumbo," and "Colossal." Shipments Relative shipments of canned ripe olives have changed. A greater propor- tion of the supply goes to out-of-state markets than formerly. Currently ship- ments are made more uniformly through- out the season than even a few years ago. The geographical pattern of canned- olive consumption can be approximated by the delivery data in table 11. The de- livery data were compiled from shippers' manifests by the California Olive Asso- ciation for 1934-36 and by the Olive Ad- visory Board for most years since 1947. Their major drawback for our use arises from the fact that they are not corrected for diversions beyond initial destinations. It is believed, however, that such adjust- ments, if made, would not substantially alter the conclusions given above. Consumption varies greatly among major areas of the country and changes at different rates. The typical Californian uses 2.5 cans annually, compared with rates of 1.0 in other western states. lUi- [20] Table 1 1 . Deliveries of California canned ri pe olives Area 1934-36 1950-57 1950-57 cans per person* 1,000 cases California 326 327 7 707 1,366 47 2.54 Other United States 0.44 Exports Total 660 2,120 per cent of total New York 12.0 8.0 10.2 7.3 2.4 9.7 14.0 12.1 8.8 11.6 6.0 12.0 0.94 North East, other 0.50 Illinois 0.98 North Central, other 0.31 South 0.12 West, excluding California 1.18 U. S., excluding California 49.6 1.0 49.4 64.5 2.2 33.3 0.44 Exports California 2.54 * Average deliveries (per year) converted at 48 No. 1 tall cans per standard case. Note: U. S. per capita consumption averaged 0.62 in 1950-57 and 0.25 in 1934-36. Per capita figures in 1934-36 were 2.47 for California and 0.13 for other states. nois, and New York; 0.4 in other north- ern states; and 0.1 in the South. Since the mid-1930's, sales doubled in California markets and quadrupled in out-of-state markets. As a result, the pro- portion shipped interstate increased from 50 to 65 per cent of the total. On a per capita basis, consumption remained con- stant (at 2.5 cans annually) in California and tripled (from 0.13 to 0.44), on the average, in other states. The monthly distribution of shipments shifted considerably during the five-year period extending from 1947-51 to 1952- 56 — see figure 7 on page 30. Early move- ment during December-March declined from a monthly rate of 10.5 to 8.9 per cent of the season total. Most of the off- setting increase occurred in late ship- ment — from 6.5 to 7.8 per cent on the average for September-November. Fluc- tuations in monthly shipments were re- duced sharply. (In statistical terms, the standard deviation of monthly ship- ments — about the average of 8.3 per cent decreased between 1947-51 and 1952-56 from 1.89 to 0.79 percentage points. I In 1952-56, shipments ranged from 10.1 per cent in January to 7.1 per cent in September, compared with variations from 12.0 to 5.7 per cent in 1947-51. OLIVE OIL Generally, California olive growers di- rect their cultural practices toward pro- ducing canning olives because canners pay higher prices for the larger and higher-quality olives. A substantial por- [21] tion of the crop remains for crushing and other processing outlets. The farm price for oil olives is about 30 per cent of the canning price. Olives for Oil Most of the olives crushed are fruit unsuitable for canning, or are surplus fruit above canning needs. Crushing is an important outlet for olives of the small-fruiting varieties. It provides a sal- vage outlet for the small, cull, or damaged olives of other varieties. In seasons of early frost, when olives are damaged too badly to be canned, the oil mills become an important outlet for frozen olives since freezing does not affect the fruit's desirability for crushing. When olive oil prices are extremely favorable ( as in the early 1940's) many more olives are used for oil extraction. Olives intended for oil production are crushed when fully ripe. To produce the best quality, the oil is removed immedi- ately from the residual pulp. That pre- vents the formation of free fatty acids, which may induce rancidity. The pulp may be pressed a second time to produce oil, which is then deacidified, decolor- ized, and deodorized to produce refined olive oil. Practically all of the olive oil produced in normal seasons in California is virgin oil, while most of the imported olive oil is refined or blended oil. Nor- mally the oil salvaged from pomace by the solvent process is used for soap and other nonfood uses. The extraction yield depends mainly on the variety, maturity, and the effi- ciency of the equipment used for pressing the oil. Maturity is important. The oil content increases markedly as fruit color changes from green to straw to red to black. The oil content of olives also varies with prevailing climate and cultural prac- tices followed. In California the yield of oil ranges from about 10 gallons per ton for green culls to around 50 gallons for prime oil fruit of the Mission variety. Because of varietal differences in oil content and in cannery demand ( arising from fruit size), there are substantial differences in the use of different varie- ties for crushing. Currently about 50 and ^ 15 per cent of the Mission and Manzanillo crops are crushed, compared with an av- v erage of 5 per cent for other varieties. These two varieties, respectively, supply 75 and 20 per cent of the olives used for oil. Production and Consumption California's production of olive oil reached a peak during World War II when olive prices were very high. Under these circumstances growers fertilized their groves more and took better care of them and, as a result, production rose sharply — but not for long. As labor costs f increased considerably above prewar levels and imports were resumed, the pro- duction of olives for oil became less prof- itable and growers gave less care to their trees except when producing cannery fruit. Production of olive oil in California now averages 500,000 gallons. This rep- resents a substantial decline from the peak production of 1.2 million reached in 1940-44, yet is considerably above the prewar level — 250,000 gallons in 1925-34. Domestic supplies provide only 6 per cent of United States consumption. Con- sequently, large quantities are imported each year. Imports, however, are declin- ing because consumption is being re- duced. The use of edible olive oil is down a quarter from prewar in total quantity and almost half ( 45 per cent ) on a per < capita basis. Consumption of salad, table, and cooking oils is shifting to other do- mestic oils, which are available at much lower prices. Olive Oil Crushers This shift in consumption has pro- * duced a substantial change in the com- position of the industry. Many plants manufacturing olive oil during World [22 War II, when large quantities of olives were crushed, no longer operate regu- larly. Some have been dismantled and shipped abroad. Others remain intact but crush olives only in occasional years. Even operators of larger oil mills who farm substantial acreages on their own try to move as much of their crops as possible to more profitable uses. No new plants have been erected in recent years. Most of the mills now used, however, have been expanded and modernized to increase their efficiency for extracting high-quality oil. Because of these circumstances it is difficult to indicate how many olive-oil plants there really are. About 30 or 40 have produced some olive oil during the past five or six years. In a typical season, however, the great bulk of the domestic- ally produced olive oil (at least 95 per cent of the total production) comes from 10 to 12 plants. Several other plants crush oil fairly regularly but in limited volume. Sometimes growers encounter difficulty in getting their olives crushed, even on a salvage basis, because of the reluctance of crushers to operate their plants unless they have an assured mar- ket for a substantial volume of olive oil. OTHER OLIVE PRODUCTS Olives are also processed into other products. These volumes are considerable although relatively small in comparison with olives canned or crushed. About 7,500 tons, five times the 1910-34 aver- age, are used annually for these other products. Half of these olives are proc- essed into California Spanish green. A quarter is used for Greek and Sicilian styles and a quarter for chopped, sliced, and brine-cured olives. Some quantities of each major variety are used for these olive products. But generally such use is largely for process- ing one or two of the specialty packs, which vary from variety to variety. This specialization for "other processing" has already been mentioned ( see table 7 and accompanying discussion, above). Spanish green olives are produced mainly from Manzanillo and Sevillano — respectively, 40 and 35 per cent of the total. The use of other varieties for this product has increased sharply since 1940. The bulk of the nation's supply of Span- ish green olives is imported since do- mestic production is small relative to demand. Yet, California exports a sig- nificant part of its pack, chiefly to Latin America, because domestic demand is not particularly good for the smallest sizes packed in the state. Greek style olives are made by dry-salt curing mature olives or by packing them in vinegar and brine. They are eaten as a relish or are used as a flavoring. Almost the entire pack consists of the Mission variety. Sicilian style olives are green olives fermented in brine and packed with gar- lic, peppers, and spices. Their production comes almost entirely from surplus Sevil- lano olives. Most of the chopped, sliced, and brine- cured olives are Manzanillo and Mission. Other varieties are coming into use in larger quantities for these products. FRESH SALES Although fresh uncured olives can be shipped for considerble distances, only limited quantities are so marketed. Fresh sales generally amount to about 300 to 1,000 tons per year — about 1 per cent of the crop. The large, firm Barouni olives comprise a large portion of fresh ship- ments. Fresh sales are a major outlet for this variety. In some years significant quantities of other varieties are shipped. These shipments are made chiefly to eastern cities for home processing by persons of Mediterranean descent. The farm price is generally about 15 per cent below that received for canning olives. [23] IMPORTS-EXPORTS We have already mentioned this coun- try's foreign trade in olive products. It may be well, however, to give more detail since imports, especially olive oil and Spanish green olives, constitute the bulk of our supply of certain olive products. Olive Oil Imports Olive oil production is concentrated in the Mediterranean Basin. These coun- tries are also the largest consumers. Hence, only a fifth of the 300-million gallons of olive oil produced annually enters foreign markets. The United States is a leading importer of olive oil. Before World War II (1920- 34 average I imports averaged some 10 and 6 million gallons, respectively, of edible and inedible olive oil. Following the war, imports of edible olive oil in- creased to 70 per cent of the 1920-34 level. Imports of inedible olive oil, how- ever, continued low — at 6 per cent of prewar. The importance of imports in supplying needs for United States con- sumption is indicated by table 12. Ex- cluding the abnormal conditions of the war period and immediately thereafter, imports account for 93 per cent of the edible olive oil used in this country. Our imports come chiefly from Spain and Italy. Several substantial shifts have occurred since the prewar period — see table 13. Imports of edible olive oil from Spain increased from 2.6 to 3.4 million gallons — from 30 to 50 per cent of the total. There was much expansion also in imports from North Africa but this vol- ume is still relatively small. Imports from Italy and other countries declined by over one half. Practically all imports of inedible olive oil have stopped, except for a relatively small quantity still com- ing from Portugal. Other Imports Brined-olive imports are large. About 12.6 million gallons are imported cur- rently compared with a prewar average of 6.3 million and of 8.6 million during the 1940's. Normally, 90 per cent or more of these quantities come from Spain. Most of the remainder originates in Greece. These imports are predomi- nantly Spanish green olives — an average of 94 per cent since 1940. Such imports contribute 90 per cent of the Spanish green olives consumed in the United States. Table 14 summarizes these im- port data. The United States also imports a rela- tively small quantity of dried olives — called Greek-style olives in this country. About 300 tons come from abroad com- pared with a prewar average of 250 tons. Table 1 2. U. S. supply of olive oil, 1 920-58 Item 1920-34 1935-39 1940-44 1945-49 1950-58 million gallons Inedible olive oil U. S. imports Edible olive oil U. S. imports California production Total supply Per cent imported 5.96 9.79 0.21 10.00 97.9 4.47 8.40 0.59 8.99 93.4 0.51 1.15 1.20 2.35 49.0 0.39 3.06 0.68 3.74 81.8 0.35 6.92 0.50 7.42 93.3 [24 J Table 13. U.S. irr ports of olive oil, 1930-57 Country of origin Edible olive oil Inedible olive oil 1930-39 1950-57 1930-39 1950-57 Spain million gallons 2.6 4.7 0.3 0.6 0.6 3.4 1.9 0.9 0.3 0.3 1.1 1.6 1.3 1.3 0.5 * * * 0.4 Italy North Africa Greece Others Total 8.8 6.8 5.8 0.4 * Included in "others." Exports Annual shipments to foreign markets usually amount to about 1,000 to 1,600 tons, basis of fresh fruit equivalent. These exports are small relative to the average crop (50,000 tons) and to im- ports (equivalent to some 220,000 tons of fresh olives) . Exports are principally to nearby countries. Canada and Mexico receive two thirds of the total. Another 20 per cent goes to other areas of the Western Hemisphere. The remainder (12 per cent) is divided almost equally between the Philippine Republic and the rest of the world. Although exports going to in- dividual countries, especially to those re- ceiving a small volume, vary considerably from year to year, the summary appear- ing in table 15 indicates the relative im- portance of diiferent countries of destina- tion during recent years. U. S. Tariffs For many years this country has main- tained tariff protection for the olive- processing industry. Two major changes in import duties have been made during the past quarter century. Rates estab- lished by the Tariff Act of 1922 were raised in 1930, by 25 to 50 per cent on major import items. In 1950, several re- ductions were made after negotiations Table 14. U. S. imports of brined olives, 1925-58 Country of origin and type 1925-39 1940-44 1945-49 1950-58 All brined olives SDain million gallons 5.63 0.44 0.26 7.52 0.08 0.10 8.71 0.51 0.29 11.42 0.73 0.42 Greece Other countries Total 6.33 7.70 7.35 95.5 81.7 9.51 8.78 92.3 88.3 12.57 11.84 94.2 89.2 Spanish green olives Per cent of all brined . Per cent of U. S. consumption 1 25 Table 15. U. S. exports of o ives, 1955-59 overage Country of destination Quantity (1,000 lbs 1 Per cent Canada 1,200 442 62 139 155 155 46 155 184 47.3 Mexico 17,4 Cuba 2.4 Other off-shore islands* 5.5 Central America 6.1 Venezuela 6.1 Other South America 1.8 Philippine Republic 6.1 Other countries 7.3 Total 2,538 100.0 * Includes Bahamas, Bermuda, Dominican Republic, Haiti, Jamaica, and North Antilles. with Greece and Italy under provisions of the General Agreement on Tariffs and Trade (GATT), adopted at Geneva in 1947. The major changes were decreases of about 50 per cent for edible olive oil, dried ripe olives, and certain packs of brined olives. Table 16 presents the rates established by the tariff acts of 1922 and 1930 and those in effect for 1950-60. Inedible olive oil (for mechanical and manufacturing purposes) is on the free list, as it has been since 1890. It is the only olive product exempt from the tariff. The present duty on edible olive oil, amounting to 4.75 cents per pound for large containers and 3.25 cents for small containers, is half the levy prevailing be- fore 1950. It is much less burdensome to importers than formerly when rates were higher and prices were lower. On the other hand, California growers now get less tariff protection. The significance to consumers, dealers, and growers of changes in tariff duties is illustrated by considering ohve oil. In 1950 the rate (for olive oil in large containers) was decreased from 6.5 to 3.25 cents per pound — this is equivalent to a reduction from $19.80 to S9.90 per ton of olives crushed. New York wholesale prices for edible olive oil (imported in drums) in- creased from 26.3 cents per pound in 1935-39 to 38.1 cents in 1955-58. Farm prices for olives sold to crushers in- creased from S38 to $67 per ton during this period. Thus the importance of the tariff relative to prices declined by two thirds — from 24.7 to 8.5 per cent of the wholesale price and from 52.1 to 14.8 per cent of the farm price. Depending on the style of pack and type of container, the rate for brined olives varies from 15 to 30 cents per gal- lon: 15 cents for ripe olives, 20 cents for green olives, and 30 cents for pitted and stuffed olives in containers generally used for American imports. The rate for "other" brined olives and dried olives is 2.5 cents per pound compared with 5 cents in effect during 1930—50. INDUSTRY CONTROLS Compulsory control over the market- ing of California olives was initiated in 1933. Operations, however, were not ex- tensive until the past decade. During this period a variety of regulatory provisions was used. Experience gained under ear- lier programs led to suggested changes in the regulatory provisions and the admin- istrative setup. The reader interested pri- rnariU in the present!) used marketing 26] order can skip over the material of the first two subheadings of this section. Early Program The period 1933 to 1939 was one of experimentation. Compulsory marketing control was begun on December 13, 1933, with the adoption of a federal marketing agreement. Major reliance was placed upon price and volume control. Volume control was to be obtained through can- ner quotas and grower allocations. The minimum price and other regulatory pro- visions, though designed to facilitate volume control, were used separately. Minimum grower and f.o.b. prices were prescribed. Establishment of minimum f.o.b. prices on sales to distributors was deemed necessary as most of the pack of canned olives was sold by grower-proc- essors and by cooperatives who do not buy olives at fixed grower prices. To make these price schedules effective, re- strictions on allowances, brokerage fees, and other terms of sale were spelled out. This program was initiated too late to affect the size of the 1933 pack, and its volume control feature was not used in 1934. The program was terminated in November, 1933, after operating the pric- ing provisions for two seasons, when the price-fixing provision of the Agricultural Adjustment Act was declared unconsti- tutional. A state program, issued under the Cali- fornia Prorate Act of 1933, was adopted on May 25, 1937. Since minimum-price provisions could not be used, the pro- gram merely permitted volume control to be established through grower prorates based on current crop estimates for indi- vidual growers. This proration plan proved grossly unsatisfactory and caused much controversy. The first state pro- gram was abandoned after the 1937-38 Table 1 6. U. S. import duties for olive products, 1 922-60 Description Unit Tariff Act of 1922 Tariff Act of 1930 In effect, 1950-60 Olive oil, inedible lb lb gal gal gal gal gal lb lb lb cents per unit designated free 7.5 6.5 30 20 20 20 20 4 35%t free 9.5* 6.5 30 30 20 30 20 5 5 5 free 4.75 3.25 30 30 20 15 15 2.5 2.5 5 Olive oil, edible Containers of less than 40 lbs Containers of 40 lbs or moref Olives in brine Pitted or stuffed Ripe— in airtight container Green— in airtight container Ripe— not in airtight container Green — not in airtight container Other- not in airtight container Dried ripe ohves Other olives . . * Reduced to 8 cents on July 24, 1931, under Sec. 336, Tariff Act of 1930. t Duty is on contents and container. 1 Ad valorem rate. [27 Further Development After a decade of no controls, the in- dustry inaugurated a second state pro- gram, developed under terms of the Cali- fornia Marketing Act of 1937. It was applied from February, 1948, to June, 1955, and actually embodied two sepa- rate orders that complemented each other. One order rejected the earlier prora- tion scheme in no uncertain terms: "Nothing in this order shall be construed to permit . . . any quantitative prorate upon the deliveries, processing or pack- ing of olives." It provided for: 1) ad- vertising and sales promotion; 2) mini- mum quality and size requirements; and 3) research investigation. Program ad- ministration was by the Olive Advisory Board of seven producers and seven processors. Assessments, levied equally on pro- ducers and processors, were limited to $12 per ton of processing olives. (The maximum rate was assessed each season except that for olives used for preserva- tion as California green olives the assess- ment was $2 per ton in 1951-52 and $1.50 during the next three years.) Op- erations were undertaken each season from February 19, 1948, when the pro- gram was adopted, until it was discon- tinued on June 30, 1955. The other order, adopted on March 4, 1952, established a stabilization plan to be administered by an Olive Stabilization Advisory Board of nine processors. The stabilization percentage was set at 30 per cent for the rest of the 1951-52 season and at 33 per cent for 1952-53. Proc- essors were assessed 1^/4 and 1 cent per case of canned olives during the two seasons. By July 1, 1955, the industry was again without a marketing control. A new mar- ket order, including a surpkis control provision, was submitted for industry approval. Processors, however, failed to give the required assent. It became evi- dent at the public hearing held in August, 1955, that the industry was divided over the stabilization issue. Producers refused to accept a program without volume con- trol, and processors opposed such regu- lation. Many in the industry still favored the advertising program. But two seasons passed before tempers cooled and details were worked out for the revivified order. In February, 1957, processors revived their previous stabilization program for use during the remainder of the 1956-57 season. A stabilization pool of 13 per cent was established and processors were as- sessed $1 per ton. When this order ex- pired, in September, 1957, the various segments of the industry were ready to agree upon a single program — adopted on September 10, 1957, and operated in 1957-58 and 1958-59. Present Program The current marketing order, adopted on September 1, 1959, "shall continue in effect through January 31, 1964, unless sooner suspended or terminated." It is merely an extension in amended form of the 1957 order. The only major change is the addition of surplus control provi- sions. As a practical matter the present order is the latest version of the program initiated in February, 1948, and applied continuously since then except for a lapse of two years (June, 1955, to September, 1957) when the industry failed to agree on whether production control should ac- company advertising activities. Program administration and cost are shared equally by producers and proc- essors. The Olive Advisory Board, which administers the program (subject to ap- proval by the Director of Agriculture), is composed of nine producer and nine processor members. A maxinmm assess- ment of $13 per ton of processing olives is specified. (Since 1957-58 the assess- ment rate has been set at the maximum ($13) on olives processed into canned ripe oHves and at $2 per ton on olives 28] ducer to deliver a proportionate share of his production for processing as canned ripe olives. Proration is based on his- torical relationships instead of on fore- casts of individual crops for the current season as was required by the 1937-38 program. 5) A stabilization plan is established to regulate the marketing of canned ripe olives. This plan is designed "to effect a reasonable correlation of the supply of canned ohves with the market demand thereof," and to stabilize marketing con- ditions in the olive canning industry. The marketable quantity and the stabilization percentage for each season are deter- mined from a consideration of available information on supply and demand con- ditions. The industry considers the advertising provision to be the most important fea- ture of its program and expects to use surplus and stabilization controls only occasionally when supply becomes exces- sive because of the alternate-bearing tendency of the olive. There are numer- ous details about the five provisions. The major ones are discussed below in a foot- note.^ Accomplishments Average monthly shipments for 1947- 51 and for 1952-56 are compared in * In essence, the minimum quality and size provision excludes from canning olives smaller than "Small" for Mission and Manzanillo varieties, "Medium" for Obliza, "Extra Large" for Ascolano, St. Agostino, and Barouni; and "Mammoth" for Sevillano and other varieties. Surplus control is determined individually for each "olive property" — each piece of land planted to a single variety and operated by a single producer. The allotment is obtained by multi- plying the "historical usage" by the "deliverable percentage." Historical usage is the higher of 1) average deliveries of the base period (the four seasons immediately prior to the current har- vest season) and 2) 75 per cent of the largest delivery for any season of the base period. The deliverable percentage is set each season at a level not less than 70 per cent. Different deliverable percentages may be set for small- and large-fruited varieties based on supply-demand relation- ships for each group. Minimum delivery allotments are provided to cover special cases, such as young olive properties. The stabilization percentage may not exceed the lowest of: 1) the percentage by which the January estimate of supply exceeds the August estimate of demand; 2) 10 per cent of the prospec- tive available supply, if surplus controls are used to allot deliveries among producers; and 3) 20 per cent of the prospective available supply, if surplus controls are not used. In July the situation is reviewed and, if conditions have changed substantially, the stabilization percentage may be reduced — but not increased — for the balance of the season. Each producer is assured a minimum marketable quantity equal to 110 per cent of his deliveries during the immediately preceding season. processed into canned green-ripe olives, chopped olives, and sliced olives. This differential is maintained because the order stipulates that the portion of the assessment relating to advertising and sales promotion shall apply only to canned ripe olives.) Five methods for improving returns to the industry are specified in the order: 1 ) The bulk of the funds is used for advertising and sales promotion. These monies finance "plans for promoting the sale of canned ripe olives for the purpose of creating new and larger domestic or foreign markets for olives as canned ripe olives. Such plans shall not promote the sale of a particular private brand, shall not make false or unwarranted claims on behalf of olives and shall not disparage any other agricultural commodity." 2 ) Necessary and proper research studies may be undertaken on the pro- duction, harvesting, processing, and mar- keting of olives. 3) Minimum quality and size restric- tions are specified as a means of eliininat- ing smaller olives from the processing of canned ripe and green-ripe olives. Such smaller olives may be used for other pur- poses, e.g., processing as chopped or sliced olives. 4) Surplus control over unprocessed olives is established to permit each pro- [29] Dec. Felx. Apr. June Aug. Oct. FIGURE 7. California Canned Ripe Olives: Shift in Monthly Shipments Averages for 1947-48 to 1951-56 and 1952-53 to 1956-57. figure 7. Quite clearly, shipments are made considerably more uniformly throughout the marketing season now than a few years ago. This shift may not be due entirely to the introduction of the stabilization feature in March, 1952. The industry's advertising activities are de- signed to level out alternate large peaks and valleys in movement. This result is the principal effect of the marketing program's operations that can be indicated. In addition minimum qual- ity and size restrictions have eliminated smaller olives from the canning outlet. For example, during 1942-46 about 6 per cent of the pack was of substandard size. These smaller olives have not been packed for over a decade. The program is too new to warrant other definite conclusions about its effec- tiveness. Data now available, although relating to only four seasons, seem to suggest that sales are more stable from one year to the next than would be the case without a program. The effectiveness of advertising expenditures in stimulat- ing demand has not been studied. Admittedly, little is known about the economic implications of marketing con- trols. Many of their price and other ef- fects have not been measured. Operation of these programs, however, is not costly [30] except for funds expended on advertising. Continued support of the program pre- sumably signifies the industry's confi- dence that short-run returns are improved without harming long-run interests. Certain intangible and incidental, yet nevertheless real, achievements should be mentioned. Administrative procedures have shaken down into reasonably stable patterns. Most problems encountered in earlier years have been resolved to the mutual satisfaction of different groups within the industry. The program has served as a vehicle for getting growers and processors together for a better un- derstanding of industry problems, the alleviation of mutual suspicions, and the dissemination of information. The pro- gram has also served as a focal point for numerous endeavors relating to produc- tion, processing, and marketing. RETURNS TO OLIVE PRODUCERS Farm prices may be quoted on several different bases, depending upon a vary- ing amount of "added service" rendered by the producer. As used in this circular, "farm price" refers to the payment re- ceived by producers for "naked fruit at the first delivery point." Such prices have been reported by the California Crop and Livestock Reporting Service for each year since 1919 for olives sold in each utilization outlet and for "all uses." General Level Over the years, fluctuations in farm prices are due primarily to changes in consumer purchasing power and produc- tion. Both factors have varied widely dur- ing the past several decades. Prices ranged from a low of $32 per ton in 1932, at the depth of the Great Depres- sion, to a record high of $374 in 1946, when demand was strong at the conclu- sion of World War II. The effect of consumer purchasing power is shown by noting the cyclical movement in average farm prices during the past several decades. Prices dropped sharply from $77 per ton in 1920-29 to $36 in 1931-32. They increased, but only gradually, during the next decade, to $76 in 1941, and then rose sharply to a war- time peak of $281 in 1944-46. Since 1947 the price has fluctuated about an average of $175. Year-to-year changes in farm prices arise mainly from annual variations in yield. Such changes have been substan- tial. For example, during the past eight- een years ( when the price averaged $190 per ton) the price changed, from one season to the next, by $76 to $224 in six years, by $56 to $70 in six years, and by $5 to $45 in six years. These price changes are definitely correlated with opposite changes in production. For the year under discussion, a typical period, the annual price fluctuations can be ex- plained as yearly variations in produc- tion. ( In statistical terms, this inverse relationship is expressed by the coeffi- cient of determination, r- = 0.56.) By Outlets Farm prices vary considerably by out- let. They are highest for olives sold to canners and lowest for those used by crushers. Relative to cannery prices, farm prices are about 30 per cent for crushing, 40 per cent for other processing, and 85 per cent for fresh sales. These relative prices are not drastically different from those prevailing before World War II. They were somewhat lower on fresh sales and higher for crushing and other proc- essing. The general relationships among prices for the period since 1920 are shown in figure 8. By Varieties Differences in farm prices on a varietal basis arise chiefly from two factors. Sub- stantially different proportions of the [31] ^^ IU_I UO 200 Ave ■" /\- 100 - / ■ 1 1 1 1 1 1 1 -^ Conned \ '***'>.*,/^ rushed _...!, J, , 1 Other Processed ^ 1 1 1 1 >/^ N;- 1920-24 1930-34 1940-44 1950-54 1950 1952 1954 1956 1958 1959 FIGURE 8. California Olives: Grower Prices by Type of Utilization, 1920-59. several varieties are sold at the higher prices received for cannery olives. Fur- thermore, within the cannery outlet a wide range of prices is paid, depending on fruit size, with the result that the small-fruited varieties have a much lower cannery price than the large-fruited va- rieties. During 1948-52 the cannery price averaged about $210 per ton for Mission and Manzanillo, $340 for Sevillano, and $300 for other varieties. It ranged from around $200 for "Medium" olives to $300 for "Giant" and $400 for "Co- lossal." Returns Per Acre In considering profitability to growers, yield as well as price must be compared with production and harvesting costs. On the average, of course, fluctuations in price and yield are inversely related, so variations are smaller for returns per acre than for prices per ton. This com- parison for the past twelve years is shown in table 17. Future Returns If future production continues in the pattern indicated, there will be a moder- ate increase in supplies available for canning. If imports continue at recent levels, most of the United States supply of canned olives will be domestic olives while the bulk of our supply of olive oil and brined olives will come from abroad. If consumer purchasing power continues to climb at or near the recent rate, de- mand will expand rapidly enough to ab- sorb the additional supplies in sight. Table 17. Comparison of grower returns for California olives, 1948-59 Year Per ton Per acre Yield 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 $145 190 231 173 103 198 166 242 178 236 101 229 $306 241 354 398 213 202 295 302 450 313 236 220 2.1 1.3 1.5 2.3 2.1 1.0 1.8 1.2 2.5 1.3 2.4 1.0 1 [32] On balance, therefore, farm prices should not be unduly depressed if the American economy continues its present growth. In fact, the general level may in- crease slightly. In occasional years, how- ever, when bumper crops are produced, grower returns will decline substantially, as they have during past decades. Furth- ermore, there is no reason to expect a substantial change in the proportions of the crop entering different use outlets. Hence, farm prices for canning, crush- ing, and other uses should continue at about the present relationships. Relative prices might be altered by operations of the industry's marketing program. Theoretically, the elastic con- sumer demand for canned ripe olives could be exploited more fully than is being done at present by restricting the pack drastically. Since this action would require, among other things, diverting substantial quantities of olives into lower- priced uses, such an attempt is not likely. The stabilization feature of the program could serve to reduce year-to-year fluc- tuations in farm prices. As a matter of fact, this result is being accomplished. But, again, regulations stringent enough to reduce annual variations in farm prices sharply are not likely to be at- tempted. An example will serve to indicate the magnitude of the task. Suppose, for the sake of simpKcity, that 1) without con- trols 70 per cent of the crop would sell at $250 per ton to canners, while 30 per cent would bring $100 for other uses and 2) a reduction in canning to 60 per cent of the crop could be accomplished with- out any decrease in the average price for other sales. Then the cannery price would have to be raised from $250 to $275 just to maintain the same returns to growers for their entire crop. And, of course, canners would have to be satis- fied with packing a smaller volume. Actually, of course, the price for other uses would be depressed as sales were increased by a third (from 30 to 40 per cent of the crop). If this price declined only 15 per cent to $85, then the cannery price would have to rise to $285. It is probable that the relative price elasticity is such that an artificial restriction on the pack of canned ripe olives would de- crease, rather than increase, total returns for the crop. In a discussion of the future course of farm prices, mention must be made of costs incurred for processing and market- ing olives. These changes are a substan- tial portion of the consumer price. To the extent that they increase, farm prices will be less favorable than would be indi- cated otherwise. [33 ) The tables and figures used in this circular are summaries of more de- tailed information appearing in "Mimeographed Report No. 227," pub- lished in December, 1959. This report gives sources in detail. It may be obtained by writing to the Giannini Foundation of Agricultural Eco- nomics at Davis or Berkeley. 6Jto-12,'60(B4196)MH YouK Consider^^J^ Future in Agricultural Economics Agricultural economics applies SCIENCE to the BUSINESS OF FARMING ... to the marketing of farm products, to the use of agri- cultural and range resources. If agriculture is to continue as an important segment of our na- tional economy, farmers must be adequately trained in the business of farming. The University of California's course of study in agricul- tural economics is a step toward that goal. The curriculum . . . presented on the Davis campus, places major emphasis on Farm Management . . . but also provides instruction in Marketing, Co-operative Marketing, Agricultural Finance, Policy, and related subjects. Supplementary work may also be taken in such branches of agriculture as Agronomy, Animal Husbandry, Pomology, Agricultural Engineering, and the like. The faculty ... is comprised of trained, experienced economists, many with national and international reputations in their fields. The staff is active in service and research work in all of the Western States. Job opportunities . . . can best be understood by pointing to positions now occupied by graduates. The largest percentage are farmers. Other lines of endeavor include: Farm Managers * Credit work • Farmer Organizations Marketing Organizations • Agricultural Extension work State and Federal Departments of Agriculture work College teaching and research • High school teaching For more information: Write to the Department of Agricultural Economics, University of California, Davis. or: See your University of California Farm Advisor for college entrance requirements.