Olive Growers Council of California

 http://www.olivecouncil.com/index.html

The Olive Grower’s Council formed in 1978 due to a large influx of new plantings on the west side of the San Joaquin Valley in California. When water from Northern California became available to Southern California, suddenly marginal land became valuable because they had water to irrigate. Much of that land was planted to olives, a total of almost 10,000 acres. The supply of olives increased sharply and the prices fell.
 
That year, the processors told the growers that they would only give them the price to cover harvest – nothing for the cost of the product itself.

In response, the olive growers got together to figure out a strategy for the future.

A Cooperative Bargaining Association was formed by the producers. The Council first negotiated with the processors in 1979. They a filed complaint that year with the Ag department against one of the processors under the code for cooperative bargaining association and were told by the California Secretary of Agriculture the law, as written, was short on enforcement language. They then joined with cling peach, tomato, raisin, apricots and prune associations to put some teeth in the law.

The Olive Growers Council led the way to amend the law. Language was developed that would require good faith negotiations, require the processors to meet with the cooperatives for reasonable periods of time to negotiate price and terms of contract along with a dispute resolution mechanism.

A lobbyist was hired to work with the state legislature. Early on, they were told it would be a two year process. The bargaining association representatives caucused and determined to push for a one-year bill. Processors quickly organized and lined up against the producers. At that time, there was a great deal of animosity between the producers and the processors.

During a meeting with the Assembly Agricultural Committee in Sacramento, growers and processors presented their respective positions on the bargaining bill; growers in favor and processors adamantly opposed. During this meeting, one of the representatives of a major processor exploded, cursed and said that their company decided pricing policy, not the producers, and that they would never deal with a bargaining association. This one incident solidified the growers’ case. Other processors in the room knew it was a strategic mistake. The legislators saw the problem and the bill (AB 1944) quickly moved through the various committee hearings. During a final closed door hearing, processors made a move to take out the dispute resolution process which angered the growers. With this element removed, the bill quickly passed the Assembly and Senate and was signed by the governor. The entire process took eight months.  It was only a partial victory. With the dispute resolution clause removed, the bargaining association had an improved law but still no enforcement provision.

Within a few months, the coalition of California bargaining associations decided to introduce a bill that would add dispute resolution to the existing law. Again, they were advised that it would take two years to accomplish the change and again the producers were determined to get it done in one year. 

The amendment to the California Bargaining Act, still fresh in the legislator’s minds, quickly moved through the hearing process and was approved by both the Assembly and Senate. It was sent to the Governor’s desk for signature. There, the processors were able to convince the Governor that it was bad legislation and it was vetoed. Because of the veto, the bill became a two-year effort.

Bargaining associations met, recognizing it was going to take two years, and decided to resubmit. The second year the producers made sure that all the bases were covered. This time, the dispute resolution amendment (AB 2500) was signed by the Governor and became law in September 1989.

The Olive Growers Council has been negotiating successfully since inception of the law. Each year, the Council publishes the “Council Factor” which is simply the difference between processors opening price offers compared to the final negotiated price. The Council Factor represents the added amount per ton paid to the growers through the efforts of the Olive Growers Council. Depending on current economic conditions (crop size, inventory carry-in, foreign pressure, etc.) the added dollars will vary from year to year. It is not always a large amount, but there has always been an improvement in price due to the efforts of the Council.

Production Trends
The best year for the olive growers was 1992 – 163,000 tons, which was the biggest crop in history. Olives are an alternate bearing crop, so generally speaking, every other year brings a good crop alternating with a short crop. The 2000s have been downhill for California production. Weather has been a major issue – in 2006, late spring heavy rains washed away the pollen and reduced the crop. A normal crop is 120,000 tons, and that year the total was only 16,000 tons statewide – a crop disaster.

Olives are down about 35 percent in production acreage, currently at approximately 26,000 acres. Growers continue to remove trees. A major loss in the fall of 2007 occurred when a single block of over 500 acres of olive trees was removed. The growers are searching for other tree crops to replant that they believe will be more profitable.

Competition
The European Union is the competition for the California black ripe olive industry. The EU heavily subsidizes the table olive and olive oil industry. They have $150 per ton grower subsidy on top of what the processors pay. Currently, 56 percent of the U.S. market is held by California, with the remaining 44 percent supplied by foreign sources. The major foreign product is black ripe sliced olives coming primarily from Spain and Morocco. They are using a type of olive that would be referred to as an industrial olive grown for olive oil. Imported sliced olives are used primarily on pizzas, where cheese, meat and vegetables hide the strong (and to some objectionable) flavor. Foreign olives are also prominent at salad bars, sandwich shops and delicatessens.

California is small in the global olive industry. The international olive industry is driven by olive oil, not table olives. The U.S. is a major consumer of olive oil, importing more than 65 million gallons compared to California’s most recent production of roughly 400,000 gallons of olive oil. The olive oil industry is enjoying a rebirth in California with a new hedgerow style planting that lends itself to mechanical harvest. 

Some Italian processors are in trouble for “blending” their olive oil – cutting it with hazelnut and other oils. In the U.S., there are no standards for olive oil but this is being changed as California is passing a new law that will hopefully correct this problem. Recently, the New Yorker Magazine (August 2007 issue) carried a story exposing the “adulterated” olive oil industry.

In food service, there seems to be a big opportunity for California olive oil – many chefs would rather buy a local product if it is of high quality. It can be viewed similarly to the domestic wine industry that produces high quality wines that compete with foreign producers.

Olive varieties are grown for different uses. There are varieties that are for oil and those that are for table use. California has long used the Mission olive as the olive for oil production. It can also be used as a table olive. It was brought to California by Spanish missionaries from South America but is originally from Spain. The more prominent table varieties are Manzanillo and Sevillano. U.S. consumers don’t generally like whole olives, but the flavor is retained better with the pit still in the olive. Housewives buy medium and large size olives.

Product Innovation
In order to continue to innovate and promote the use of California table olives, the Council has worked aggressively toward new product development and marketing.  The Council is now packaging in stand up re-closable plastic bags. They are one of the first to package and market in a convenient snack style container. The sizes include both small retail bags and also large food service bags. The bags eliminate the sharp can edges. They are also experimenting with snack flavors for the olives like Tex-Mex, ranch, smoky and zesty flavors.

Almost all table olives are harvested green. They are picked at a mature green stage, which allows them to be processed and pitted successfully as black ripe olives. The fermentation process for green olives (Sicilian style) is a natural process in which olives are harvested and introduced into a salt brine. While in the brine, the olives go through a natural lactic acid fermentation after which it takes about ten months for curing. 

Value-Added Grant Program
The Olive Growers Council is eligible for Value-Added Grants as a farmer owned cooperative. The Council has received several grants to work in product development and marketing. Some of the flavored olive products which have been developed with support from the grants include:

• Roasted Garlic and Chili (pouch pack)
• Ranch Flavored (pouches and cups)
• Salad Toppers (sliced in a pouch)
• Macho Nacho topping (blended jalapeno and olives)
• Stuffed Olives (garlic and jalapeno) for both retail and food service

These are marketed under Peitro Olives, mostly on the West Coast.

No matter how good an idea is, it takes long hours of devoted time and effort to open markets for new products. U.S. consumers are now being exposed to a number of additional styles of olives. Growers hope that some of the new packaged products will catch hold and develop a strong demand. The Food Network can be a big help for new products as consumers are becoming more adventurous in their eating habits. 

Olives are being marketed as a healthy snack food, a good alternative to other sugar and salt laden items. Olives naturally contain the “good” fat and no sugar, but some salt.

One strong competitor is Divina. They have a wide selection of flavored olives that are sold in olive bars in grocery stores. They are often at a higher price point, and they also have a large marketing budget.

Without the benefit of the USDA Value Added Producer Grants, the Olive Growers Council would not have been able to attempt to launch the newly packaged olive products. Market entry is prohibitively expensive. With the benefit of dollar matching grants, growers have an opportunity to bring new ideas to fruition.

Olive supply continues to be an issue as growers continue to depart the industry. Within the last three years, only one (2007) has produced a decent crop. Other major problems that growers deal with on a regular basis include sky-rocketing costs of production, more expensive labor supply, availability of labor when needed and the continual fight for good olive prices. Farming in the state of California is more problematic because of intensifying regulatory issues. Being in one of the most highly regulated, highly taxed states costs growers 30 percent higher input costs than other regions.

Olive harvest runs from mid-September to the first part of November. Olives are hand labor intensive, and immigrant labor needs to be on-site for 6-8 weeks during harvest. New farm labor rules and regulations present huge challenges to the olive industry. Mechanical harvesters have been tried with no success, but research continues as growers hope for a major break through in harvesting technology. 

Organizational Structure
The Olive Growers Council currently has nearly 200 members. The members deliver directly to processors, with whom they have individual contracts. The Association has the right to represent the members in negotiations for price and terms of contract. The producers pay their dues paid on tons produced, which provides for the organization’s annual operating budget.

The Council publishes a monthly newsletter, holds annual meetings and provides daily contact through the phone and field work. There is only one staff person, Adin Hester, who stays in close contact with the board chairman and board of directors. The directors meet monthly to conduct business, review industry information and establish organizational policy. Membership in the organization is open to all table olive growers in California.

Challenges
One major issue confronting the California black ripe olive industry is the increasing flow of cheap imports into the U.S. Currently more than 44 percent of total sales, predominantly black ripe sliced olive, come from foreign sources. The Council has formed a coalition of growers, processors and interested olive industry people under the banner of the California Ripe Olive Coalition (CROC) to review current USDA inspection procedures and practices with the purpose of ensuring that they are adhering to the Agricultural Marketing Act of 1937, paragraph 8E. The Coalition is working in concert with the Mondavi Institute for Wine and Food Science at U.C. Davis.

Under the Ag Marketing Act of 1937, paragraph 8E, it states “All imported product shall grade as good as or better than domestic.”  The intent of the law is to ensure that the consumer will be presented with a product that is desirable, that will be enjoyed and encourage the consumer to make a repeat purchase. It also suggests that all products shall contribute to maintaining a stable market without disruption. The Coalition feels that the USDA is not following the letter of the law.

A petition was sent out to every olive grower in CA, approximately 1,000 growers. About 300 growers, representing a majority of olive tonnage produced, have signed on, as well as the major olive processors. It is costly to set up flavor testing panels, develop off-flavor descriptors and to work with UC Davis to do the flavor analysis on what is acceptable and what is not acceptable. The Mondovi Olive Center will work with the Coalition, led by the Olive Growers Council to more objectively grade for off flavor, color, texture and aromatic characteristics. This will lead to more inspector training and use of sophisticated lab equipment to objectively separate good from bad table olives. The industry recognizes that significant tonnage of foreign olives with serious off-flavor characteristics are being allowed to enter the U.S. and reach the consumer through the food service industry. They feel that this is not acceptable. 

The California League of Food Processors set up a separate group called the California Olive Association (COA). COA is also a member of, and is cooperating with, the Coalition. The trade committee was originally formed to file an anti-dumping petition against Spain and Morocco. International litigation is a long and expensive process with the end result always in question. COA has helped finance the Coalition’s early operations.
 
These and other legal issues continue to plague the olive industry in California. According to the Adin Hester of the Olive Growers Council, the industry is at a crossroads. He believes that new olive acreage needs to be planted directed toward mechanical harvest. “With labor taking well over 50 percent of the farmer’s gross income, mechanical harvest seems the only option. Table olive growers need to follow the lead of the olive oil industry by planting trees that can be engineered for successful mechanical harvest”, says Hester. “We recognize that there will always be the need for some hand harvest of specialty varieties as they cannot be machine harvested.” The Council will continue to work for the best interests of their members in the table olive industry.

About USDA VAPG

VAPG funding has been offered by the USDA periodically since the early 2000s. A new round of funding is anticipated to be announced in the coming months. To be considered value added, projects must show how products are differentiated in specific ways from commodity crops. Typically, projects must also show how they may deliver greater returns to producers.

Independent producers, farmer or rancher cooperatives, agricultural producer groups, and producer-owned business ventures, including non-profit organizations, may apply. In previous cycles, applicants were required to be producers of the raw commodity who will maintain ownership of that commodity through the process of creating a value-added product. Grants have been available for planning projects (such as marketing and business plans and feasibility studies) and working capital projects (which might include wages or packaging supplies). (http://www.rd.usda.gov/)