ALIFORNIA AGRICULTURAL EXPERIMENT STATION IIRCULAR 370 JULY, 1947 CALIFORNIA OLIVES SITUATION AND OUTLOOK, 1947 ARTHUR SHULTIS - 300 200< 100 1934 1936 1938 1940 FIGURE 1942 1944 1946 THE COLLEGE OF AGRICULTURE UNIVERSITY OF CALIFORNIA • BERKELEY What of the future? Will the olive situation be more like it was before the war, when prices were poor and yields low? 1RBH9 OUTLOOK Supply and Demand The supply of olives for direct human consumption was well maintained during the war by California production and by im- ports, but there were not always enough of all types available on retail shelves at all times. This would seem to indicate an in- crease in demand, but it must be discounted somewhat because of wartime shortages, rationing, and price controls. The gain in olive consumption made during the war can proba- bly be held. Consumer desire for olives can be further increased by good advertising and trade pro- motion. Production Better cultural care, increased age of trees, and favorable climatic conditions have resulted in a tremendous increase in average annual production through in- creased yield per acre. Recent high yields can probably be maintained or further in- creased with good cultural care, which would be stimulated by continued good prices. Older or- chards and some recent plantings yet to come into production in- dicate an upward trend in total production, but not over 20 per cent increase in the next fifteen years. Orchard Profits Olives were not so profitable a crop as most other fruits in the 1930's, but during the war they became rather profitable, and compared favorably with other alternative crops. With continuing high costs, or- chard earnings will decline as olive prices go down. But heavy- producing orchards can show a profit for many years. Or will it continue to follow the trend of high prices and large yields maintained during the war? Let's Look at the Facts : OUTLOOK Prices farm price of California olives has risen to profitable levels during the last six years. Ripe can- ning olives rose from an average of $88 a ton (1935-1939) to $156 (1940-1944), and olives crushed for oil, from $37 a ton to $112, for the same period. Farm prices of all olives rose from $56 to $139 a ton. The 1945 crop brought $269 a ton, and the preliminary esti- mate for the 1946 crop is $352. With heavy production continu- ing and a large proportion of olives still going for oil at much lower prices than those for can- ning, lower prices for all olives are to be expected as soon as olive oil prices drop to their postwar level. Imports Olive imports, largely from Spain, were well maintained during the war, and enabled an increased per-capita consumption. Imports of olive oil fell to almost nothing during certain war years, and for the 1940-1944 period were only about 23 per cent of the previous five years. But California's olive oil output more than doubled as a result of higher prices and the large increase in the state's total olive production. Olive imports will probably con- tinue at about the same level as before and during the war. Im- ports of olive oil will probably increase to prewar levels within two or three years, which will bring down the price of Califor- nia olive oil and oil olives. New P/ontJ»0s Before the war, new plantings averaged about 100 acres per year, but rose to an average of 450 acres for the four years 1942-1945. It is too late for additional plant- ings to share in the good earnings of the next few years, and the long-time outlook does not war- rant additional plantings at this time. CALIFORNIA OLIVES SITUATION AND OUTLOOK, 1947 ARTHUR SHULTIS 1 What prices and earnings can be expected from olives over the next ten years? Will it pay to plant additional orchards? These and similar questions are important now to those who are interested in growing and handling olives. Definite answers are not available, but we can see what has happened to prices with changes in supply and demand factors in the past. And we can project some of these factors into the future. This circular has been prepared to present some of these facts with a little interpretation. Price factors Olive prices are determined by demand and supply. Demand is the ability and desire of consumers to buy olives and olive oil. Our supplies of olives and olive oil are from California production and from imports. We can predict the probable level of California production and imports for perhaps ten years ahead. Demand fac- tors can be forecast less clearly, and for only a few years. These will help us to see what may be expected, even though we may not be able to predict a specific price. Price Paid Depends on Use.-The use made of California olives is a most important factor in determining the average price paid for all olives (see fig. 1, cover). Figure 2 shows that, except for the war years, canning olives have brought more than olives crushed for oil. Up to now we have needed the oil outlet for cull and small olives and for surplus olives in years of high produc- tion. Keeping in mind the two outlets for olives— canning and oil— let us con- sider the various uses for California olives within those outlets. TABLE 1 UNITED STATES AVERAGE ANNUAL UTILIZATION OF OLIVES BY SOURCE California olives used as olives Imports of olives Total utilized as olives Per cent of supply from Pounds California Imports per capita 1925-1929 tons 10,380 tons 20,730 tons 31,110 per cent 33 per cent 67 pounds .53 1930-1934 10,500 20,540 31,040 34 66 .50 1935-1939 15,100 19,640 34,740 44 56 .54 1940-1944 24,940 22,180 47,120 53 47 .70 1 Extension Specialist in Farm Management and Associate on the Giannini Foundation. California Olives: Situation and Outlook 5 Importance of California Olives.— Practically all the olives produced in the United States are grown in California. This includes about half the country's eating olives— 44 per cent during the five years before the war (51 per cent of California production) and 53 per cent during the war years. Most of the country's olive oil, however, was imported before the war. With 49 per cent of its olives used for making oil, California furnished only 7 per cent of the edible olive oil used from 1935 to 1939. FIGURE 2 CALIFORNIA OLIVES, FARM PRICES IN DOLLARS PER TON 300 1925 1930 1935 1940 1945 Utilization California olives are processed into a number of types and forms, each with its own consumer appeal and demand. The canned ripe olive and olive oil have been the principal outlets for California olives over the years, although recently, with increased total pro- duction, other products are being tried. These include Spanish- and Sicilian-type green olives, and Greek-type olives. Canned Ripe Olives.— Canned ripe olives have been the principal and most profitable outlet for California olives in recent years, usually returning two or three times as much as oil. For this type, the olives are picked when straw- colored and may be held for several weeks in brine, for processing. The olive industry expects the canned ripe olive to remain in top place in future, and is rather confident that demand will continue to increase. Exporting coun- tries have difficulty in producing ripe olives free of insect damage. The import duty on ripe olives is also higher than on green olives. The green-ripe olive is a variation of the canned ripe. Although meeting with good consumer acceptance, the quantity that can be processed in this form 6 California Experiment Station Circular 370 is limited since the olives must be picked and processed quickly. Table 3 shows the main ways in which California olives have been used in recent years. Spanish-type Green Olives.— Spanish-type green olives have been processed here in considerable volume since 1940, and are more widely known and used outside California than is the canned ripe olive. Most of our imported olives are of this type. Heavy olive production and recent good demand and prices have encouraged the California producers to enter this field. Imports, however, are expected to furnish the bulk of the supply, which may result in a lower return from this type of utilization than from the canned ripe. Sicilian-type Green Olives.— For this type, the olives are picked green. They are fermented in brine and frequently packed with peppers, spices, and garlic for flavoring. Their somewhat bitter flavor is often preferred by Italo- Americans and others. Since demand is limited, this type is not expected to be as large nor as profitable an outlet as canned ripe and Spanish-type green olives. This process may, however, offer an outlet for surplus olives not suited to oil production, such as the Sevillano. California Greek Olives.— These are made from mature olives that are dark red to black in color. They are dry-salt cured and hence salty and shriveled. This type is eaten as a relish or used as a flavoring in such dishes as stews and spaghetti. Although high in food value, their outlet is limited to those with a liking for the salty, bitter taste. Gleanings of very ripe fruit are frequently used in this form, as are surplus ripe olives not wanted for canning or suitable for oil. Another Greek-style olive processed in California during the war is packed in brine and vinegar. This type has not been produced in sufficient quantity over a long enough time to indicate its future possibilities. Olive Oil.— Ripe olives are used for making oil, largely those varieties with a satisfactory oil content, such as Mission, Manzanillo, Redding, and Neva- dillo. The Sevillano, Ascolano, and Barouni have such a low oil content that if they are used for oil at all it is merely a salvaging of cull fruit. Before the war, oil was usually only a salvage outlet for small, surplus, or overripe fruit. Only since 1940, with lower imports of olive oil and high prices, have olives for oil been a profitable outlet to growers. When imported olive oil and com- peting substitutes become more plentiful and cheaper, crushing for oil will be only a low-priced salvage outlet once more. Fresh Shipments.— Fresh shipments of olives are possible for considerable distances, and out-of-state shipments have taken from 200 to 1,500 tons over the years. Since these are largely processed for home use by eastern buyers, they do not represent any substantial additional outlet. The Barouni, being a large, firm olive, contributes a considerable portion of fresh shipments. Prices are usually about the same as those for canning olives. California Olives: Situation and Outlook TABLE 2 EDIBLE OLIVE OIL PRODUCTION AND IMPORTS 1925-1929 1930-1934 1935-1939 1940-1944 California olives crushed for oil (tons) Average grower price per ton (dollars) .... 5,020 34 7,100 28 14,400 37 27,260 112 Domestic olive oil production (1,000 gallons) 183 10,333 10,516 277 9,057 9,334 575 7,915 8,491 1,090 Imports for consumption (1,000 gallons) . . . Average annual supply (1,000 gallons) .... 1,839 2,928 Per cent of supply from California olives . . . 2 3 7 37 Per-capita supply (gallons) .09 .08 .07 .02 Average wholesale price imported edible olive oil in New York (dollars per gallon) 2.30 1.71 1.97 4.19 Average wholesale price cottonseed oil at New York (dollars per gallon) .72 .44 .66 .88 TABLE 3 CALIFORNIA OLIVES: UTILIZATION, 1940-1945 1940 1941 1942 1943 1944 1945 Tons Canned ripe and green ripe Green Spanish. . . . Sicilians Greeks Other Fresh shipments . . 16,200 5,100 4,200 2,200 700 1,500 16,700 4,500 1,600 2,500 1,000 400 11,100 5,500 1,900 1,500 1,400 1,400 15,500 5,200 1,300 2,700 2,900 800 13,800 3,600 500 1,500 2,200 600 13,900 3,000 500 400 2,700 100 Subtotal, used as olives Crushed for oil . . . 29,900 39,100 26,700 28,300 22,800 34,200 28,400 28,600 22,200 19,800 20,600 9,400 Total production . . 69,000 55,000 57,000 57,000 42,000 30,000 8 California Experiment Station Circular 370 Varieties The size of the fruit and the oil content determine the use tvhich is made of the different olive varieties. The two leading ones, Man- zanillo and Mission, are medium- to small-fruited, with only a small percentage of the fruits classified as ''mammoth." Mission is a good oil olive, while Manzanillo is the best general-purpose variety. The Sevillano and Ascolano are large- fruited varieties used almost entirely for canning. Large olives, being in more lim- ited supply and selling for higher prices when canned, bring a higher price per ton than the smaller ones. Mission.— This is the leading variety in acreage. Heavy production in some years results in a surplus of small fruit. This surplus means that the production must go for oil. Mission is a good oil olive, usually yielding 40 gallons or more of oil per ton. However, in some districts it is either a poor or an irregular producer. Fruit of the Mission ripens later than other varieties and is more apt to suffer frost damage before harvest. Also, its tall, upright habit of growth makes harvesting more costly. As a result, much Mission acreage is being or has been grafted over to other varieties, and it is not favored for planting at this time. Manzanillo.— The Manzanillo is now considered the most suitable general- purpose variety. Its fruit is a little larger than the Mission, and ripens earlier. It is tender and of high eating quality when pickled. Although not quite so good an oil olive as Mission, it usually brings about the same price per ton for oil. The yield is about 38 to 40 gallons of oil per ton. A low, spreading tree with fairly regular bearing habits, this variety is currently recommended for the bulk of any new plantings in the Lindsay area. Local canners recommend that about 75 or 80 per cent of any new plantings be Manzanillo and the remainder Sevillano or Ascolano. Sevillano.— Most of the olives in the Corning area are Sevillanos, the leading large-fruited variety. In other areas the Sevillano acreage is small. These are not good oil olives, and produce only a little over half as much oil per ton as Mission. They are not ordinarily sold for oil manufacture, so any surplus beyond ripe canning requirements must be used for green and other types. Large canned ripe olives or green pickles bring a price premium considerably above that for smaller sizes and therefore have a rather limited market. The olive industry feels that much increase in the production of large olives would reduce the premium and make these varieties less profitable to grow than the smaller, general-purpose, heavy producers which furnish the bulk of the olives sold. California Olives: Situation and Outlook TABLE 4 CALIFORNIA OLIVES: UTILIZATION BY VARIETIES, 1944 Mission Manzanillo Sevillano Ascolano Bearing acres 14,028 1.55 5,121 2.79 2,803 1.58 710 Yield (tons per acre) .79 Types of utilization Tons Per cent Tons Per cent Tons Per cent Tons Per cent Canned ripe 2,850 50 1,380 750 20 13 6 4 7,550 2,920 20 110 1,060 40 53 20 1 8 2,930 520 470 10 300 30 66 12 10 7 1 410 30 10 60 73 Green Spanish 5 Sicilians 2 Greeks Other 11 Fresh shipments Subtotal, used as olives Crushed for oil 5,050 16,750 23 77 11,700 2,600 82 18 4,260 170 96 4 510 50 91 9 Total production 21,800 100 14,300 100 4,430 100 560 100 TABLE 5 MANZANILLO OLIVE SIZES AND PRICES IN THE LINDSAY AREA, 1940 AND 1944 Size grade Average number of olives per pound 1940 (large crop) 1944 (fair crop) Per cent of total Price per ton Per cent of total Price per ton Giant number 60 70 82 98 113 135 per cent 0.2 5.2 15.4 26.5 21.9 12.9 17.9 dollars 112.10 112.10 102.10 87.10 72.10 53.55 20.00 per cent 5.7 11.1 16.2 20.0 14.4 12.9 19.7 dollars 235 00 Mammoth 235 00 Extra large 210 00 Large 190 00 Medium 170 00 Standard 140.00 Culls 100 00 Total or average . . . 100.0 71.13 100.0 173.74 10 California Experiment Station Circular 370 Ascolano.— The Ascolano is also a large-fruited variety, but about one grade size smaller than the Sevillano. Although some canners regard it as making a better canned ripe olive than the Sevillano, its softness and high cullings from damage in harvesting make it less desirable from the growers' standpoint. It yields more oil per ton than the Sevillano but too little for profitable sale as an oil olive. TABLE 6 SEVILLANO OLIVE SIZES AND PRICES IN THE CORNING AREA, 1940 AND 1944 Size grade Average number of olives per pound 1940 (large crop) 1944 (fair crop) Per cent of total Price per ton Per cent of total Price per ton Colossal and larger number 40 and less 50 60 70 82 98 per cent 16.4 36.2 27.7 12.9 5.1 1.6 0.1 dollars 176.00 106.00 66.25 50.00 30.00 30.00 20.00 per cent 28.4 31.0 17.0 12.2 4.9 2.9 3.6 dollars 375.00 Jumbo Giant 290.00 240.00 Mammoth 200.00 Extra large 150.00 Large 120.00 Culls 120.00 Total or average . . . 100.0 95.63 100.0 276.75 Marketing Growers and processors both realize that they have a joint interest in marketing a large volume of canned olives at good prices. They have also recognized the need of limiting the pack and using out- lets other than canning in order to keep the price for canning olives from falling too low. The California Olive Association is a trade association of ripe-olive canners, formed to promote the in- terests of the olive industry. This is done largely through collecting and pooling information. Processing.— The processing of olives is a specialized commercial under- taking requiring considerable capital as well as technical knowledge and ability. There are about 29 canners of ripe olives in California, and most of these also pack green and other types. A few also make olive oil. Four are grower-owned cooperatives. There are about 80 olive oil plants, but not all operate each year. A number of the canners and oil makers also own orchards from which they obtain part of their olives. Marketing Programs.— In 1934-35, a marketing agreement under federal legislation was used by the industry in setting a price schedule for various sizes of canning olives. In 1937-38, there was a prorate plan under state legislation. California Olives: Situation and Outlook 1 1 This limited the pack of canned ripe olives, with the result that some of the surplus was diverted to green and Greek types and the remainder to oil. In 1940, the State Director of Markets sponsored a meeting of growers and can- ners that resulted in agreements on prices satisfactory to both groups. Al though similar meetings in 1941 and 1942 were not successful, growers received high prices for both olives and oil because of high demand. Ceiling prices on olives and oil largely determined prices for the 1943 to 1945 crops. The 1946 crop brought high prices, with strong competition among canners. In the immediate future, prices probably will continue to be a matter of individual arrangements between canners and growers, although there will soon be a chance for improving returns through marketing programs under state or federal legislation. Such programs could improve grower returns by: 1. Promoting wider use and distribution of California olives. 2. Providing for the most profitable volume each year to each outlet, such as canned ripe, green, oil, etc., by planned processing and carry-over. 3. Dividing more profitable outlets equitably among growers, taking into consideration the kind of fruit, should such a prorate become necessary or desirable. The Supply Situation The future United States supply of olives and oil will depend on imports and on production in California. Imports are not expected to be higher than before the war, at least not for some time. Cali- fornia production may increase, but not over 20 per cent over the next fifteen years. California Production Varies from Year to Year.— Olive trees are not regu- lar producers from year to year. They tend to alternate bearing. Climatic and other conditions also result in a considerable variation in set of fruit. These influences, together with changes in cultural care, resulted in total production varying from a low of 14,000 tons in 1933 to a high of 69,000 tons in 1940 (fig. 5, p. 15). These fluctuations present a marketing problem— in some years production is too low to make full use of processing facilities and maintain an adequate supply of all kinds of olives at consumer level, and in other years there is a large surplus which can only be used for oil. Effect of Age of Trees.— It takes several years for a newly-planted olive orchard to come into commercial bearing. Under good conditions, there may be enough fruit in the third or fourth year to pay for harvesting. With con- tinued good growth and development, production may reach a ton per acre around the eighth year, and 3 tons by the twentieth year. Field inquiry, enter- prise management studies, and observation furnish the background for figure 12 California Experiment Station Circular 370 3, showing the effect of age on yield. The higher curve shows the level of average annual yields obtained in orchards on good soil, in suitable climatic zones, and with the best of cultural care. The lower curve is an estimate for the state as a whole, which includes orchards under all conditions, but with good cultural care assumed. Yields in any year may be above or below the estimates, but five-year averages could be expected to be not far from these curves. But olive trees are long lived and may be expected, with proper care, to produce for 100 years or more. In California they remain in actual or poten- tial production indefinitely, or until removed for more profitable crops or TABLE 7 CALIFORNIA OLIVES: ACREAGE, PRODUCTION, AND FARM VALUE Total new plantings Average non- bearing acreage Average bearing acreage Average annual total production Average yield per bearing acre Farm value per ton Average total farm value acres acres acres tons tons dollars dollars 1925-1929 1,391 4,984 28,264 18,200 0.65 76 1,379,800 1930-1934 549 2,722 24,872 18,000 0.72 53 955,800 1935-1939 459 672 24,398 31,000 1.27 56 1,745,600 1940-1944 1,483 947 24,653 56,000 2.27 139 7,903,400 1945 638 2,169 25,076 30,000 1.20 269 8,070,000 1946 (prelim, est.) . . . 24,751 46,000 1.86 352 16,192,000 use of land. Much of the bearing acreage is still relatively young or just reach- ing maturity or maximum production. Hence increased age of trees has con- tributed materially to the increased total production of olives in California in recent years and this upward trend will continue into the future. Effect of Cultural Care.— Although the olive will survive considerable neg- lect, it has been shown to respond with better yields to better cultural care. Adequate irrigation, pest control, and proper pruning and fertilization are essential to a profitable succession of heavy crops in an individual orchard. And with generally improved cultural care in all commercial olive districts in recent years, total production has been materially increased. Some orchards and many border trees that were neglected during the logo's were restored to fair production by better cultural care when olive prices became good in recent years. It is expected that yields and total production will remain high or continue to increase as a result of the continuation and improvement of good cultural care, at least as long as olive prices are high enough to make such care profitable. A moderate price decline would cause neglect only in low- yielding orchards in unsuitable locations which contribute a small portion of our total production, and would not be much of a factor in reducing that total production. California Olives: Situation and Outlook 13 FIGURE 3 CALIFORNIA OLIVES YIELD PER BEARING ACRE or