University of California report cites cost study for growing olives

Olives are alternate-bearing fruit, meaning they tend to produce larger crops one year and smaller crops the following year.

UC report cites figures needed to profitably grow olives

California growers produce table olives differently than they do olives for oil California produces at least 99 percent of the U.S. olive crop 37,000 acres of olives were harvested in 2014  

Table olives and those grown for oil production are the subject of two new cost and return studies out of the University of California Agricultural Issues Center.

The studies independently report on table olives based on the Manzanillo variety and the Arbequina variety grown in super high-density plantings for oil production.

The cost analyses are based on hypothetical farm operations of well-managed orchards, using conventional practices common to the region. Growers, Cooperative Extension farm advisors and other agricultural associates provided input and reviewed the methods and findings of the studies.

California is the largest producer of olives in the United States, according to the California Department of Food and Agriculture. At least 99 percent of the olives produced in the United States are grown in California.

In 2014, California growers harvested olives from 37,000 acres, primarily from the counties of Tulare, Glenn, Tehama, San Joaquin and Yolo.

Olive Oil

Olives grown for oil production are differentiated from their table-variety cousins by their planting densities and how the trees are trimmed.

Based on the report, olives grown for oil are planted in what is commonly called “super-high density” orchards. These trees are five feet apart in rows spaced 12 feet apart. This gives an orchard density of 726 trees per acre. They are also cropped short enough for large harvesters to drive over the trees with machines similar to those used to mechanically harvest grapes.

For purposes of the UC study, the hypothetical farm size is 120 acres (110 acres of trees), farmed by the owner in the Sacramento Valley, using drip irrigation.

Labor costs were based on prevailing rates paid in early 2016. Though the report doesn’t spell this out, those rates will change significantly starting in 2018 as California begins to ramp up its minimum wage to $15 per hour by 2022.

Of all the cost structures reported, the report’s authors note that while crop insurance is available at different rates and coverages for olives, the report does not factor in the cost of crop insurance.

According to the report, olives grown for oil begin economic production by the third year. At that point, the hypothetical 110-acre orchard can net $226 per acre the first year and about $750 in the second year of production (fourth year for the trees). This is based on a grower payment of $16 per gallon of oil produced.

Olives grown for oil are priced on the gallons of oil produced, which generally increases in volume from years three to five, at which point the trees are said to be at full production.

Full production of this variety can be five tons of fruit per acre, fresh weight, producing between 190 and 210 gallons of oil, according to the report.

Cost assumptions are based on mechanical harvesting and a 25-year economical life of the orchard.

Table Olives

The report uses the Manzanillo variety, assuming an orchard of 35 acres on a 40-acre parcel with trees planted on an 11-foot by 22-foot spacing for a density of 180 trees per acre. The report assumes a developed and producing orchard owned and operated by the farmer.

Cost assumptions are based on hand pruning and hand harvesting methods with an estimated economic life of 40 years.

Manzanillo olives are assumed to be fully bearing in the eighth year. The report also states that mature yields can vary greatly as olives are alternate bearing. For purposes of the report, an annual average yield of five tons is assumed.

A grower price of $1,020 is used for the study and tables within the report spell out potential returns at different prices and yield averages.

Like the report on olives grown for oil, authors did not calculate the cost of crop insurance into the figures because of the wide variability in coverages and costs for the programs.

According to the report, at $1,020 per ton to the grower, production would need to average five tons per acre to effectively break even. Production below that level would be at a loss to the grower.

The authors describe the assumptions used to identify current costs for the olive crop, material inputs, cash and non-cash overhead. A ranging analysis table shows profits over a range of prices and yields. Other tables show the monthly cash costs, the costs and returns per acre, hourly equipment costs, and the whole farm annual equipment, investment and business overhead costs.

The new studies are titled:

  • “Sample Costs to Produce Table Olives in the Sacramento Valley – 2016”
  • “Sample Costs to Establish a Super-High-Density Orchard and Produce Olives for Oil in the Sacramento Valley – 2016”

Free copies of these studies and other sample cost of production studies for many commodities are available. To download the cost studies, visit http://coststudies.ucdavis.edu.

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