Is American Olive Oil About to Have Its Moment?

In 1976 the wine industry changed forever when a vintage from California was judged superior to its European counterparts. The same thing might be about to happen to olive oil.

By Peter Robison and Vernon Silver | January 25, 2016
Photographs by Lucas Foglia

On a Sunday morning in Rome, a couple dozen locals gather in an orchard of some 50 olive trees planted above ancient catacombs. The owner has offered lunch in exchange for help stripping the olives so he can get the harvest to a nearby press as quickly as possible. They begin by spreading a circular net around the trunk of a 12-foot-tall tree. Children scamper to the treetop to yank clumps of olives with their fists. Adults below pull fruit off the lower limbs with small rakes, taking care not to stomp on the piles accumulating at their feet. After 15 minutes, the hail of olives tapers off. The net is lifted and the fruit dumped into a small plastic crate—enough for perhaps a liter of oil. The gaggle moves on to the next tree. By the time the sky gets that glow of an Italian day’s end, the stronger of the pickers are loading the crates onto a trailer hitched to a Range Rover bound for a frantoio, or mill, where the olives are to be pressed into golden-green oil.

California Olive Ranch’s Kelley.

This farmer is a hobbyist, a weekend artisan. But even at much larger operations, in Italy and across the Mediterranean region, the techniques aren’t dramatically different. The height of the technology is a tractor with a vibrating arm that wraps around the trunks of the trees.

Across the Atlantic, however, an 18-year-old company called California Olive Ranch is upsetting tradition and muscling into the ancient industry by fixing the tree itself.

The company’s 2,200-acre orchard, an hour north of Sacramento, is an industrial marvel. The 1.3 million trees there are more like bushes, 6 to 10 feet tall and planted in neat, tight rows. The density lets a two-story mechanical harvester straddle the trees and strip away the olives to a conveyor that drops them into a truck, which delivers them to an on-site mill that can press 3,200 gallons of oil an hour. No olive is touched by hand. California Olive Ranch, a privately held company, estimates it accounted for 65 percent of the olive oil produced in the U.S. in 2015.

Traditionalists sneer at the idea of factory farming in the world of olives. “Some people wonder whether the olive oil produced from these kinds of trees will have such an appealing and varied taste,” says Jean-Louis Barjol, executive director of the International Olive Council (IOC), a Madrid-based organization that represents the primarily Mediterranean producers accounting for 98 percent of world output. “It is rather a question of specialized vs. commodity product.”

Gregory Kelley, chief executive officer of California Olive Ranch, says it’s the mainstream sellers that need to defend the quality of their products. Europeans, he says, have long sold their dregs to unsophisticated Americans, like jug winemakers did in the 1970s. In a strategy said to be either self-defeating or brilliant, depending on who’s talking, Kelley often rails about what he calls the olive industry’s dirty secrets. He says much of the so-called extra-virgin oil sold in the U.S. is of unreliable provenance: adulterated with cheaper oils, processed with excessive heat that strips out healthful properties, or flawed by sloppy harvesting that can cause fermented or rancid-tasting oil. “In food service, it’s a cost center, so there’s pressure even in fine restaurants to buy crappy olive oil,” Kelley says.

These are not merely the claims of an arrogant arriviste. The olive oil industry has been rocked by fraud investigations, most recently in November, when a prosecutor in Turin, Italy, said he was pursuing charges against producers whose extra-virgin oil had tested simply virgin. (To be rated extra virgin, oil must have a fruity, bitter, or pungent flavor, in addition to free acidity lower than 0.8 percent, and exhibit none of 16 official taste flaws; virgin oils may have acidity as high as 2 percent and a limited number of taste flaws.) In a peculiarity of the industry, the alleged fraud results were found not in chemical tests, but through tastings. The probe was conducted by a special branch of the Italian carabinieri, the Nuclei Antisofisticazioni e Sanità. Known as the N.A.S. and cross-deputized as health inspectors, specialists in the anti-adulteration unit are trained to detect bad oil. The agents’ prime investigative tools are little tasting glasses, tinted blue to obscure the color of the oil.

At the same time, Italy’s antitrust authority announced its own probe into allegedly unfair trade practices of seven brands, including the well-known Bertolli, owned by Madrid-based Deoleo. The allegations again were based on oils lacking extra-virgin qualities, in this case as assessed by experts at the Italian customs agency, which also had a role in the Turin tests. The news splashed across Italian front pages. (Deoleo says its bottling records show its oil complied with European Union chemical and sensory standards as extra virgin and that it has followed the law and is cooperating with the authorities.) Agriculture Minister Maurizio Martina reassured Italians in a Nov. 10 statement about the integrity of the country’s olive oil. His own inspectors had done 6,000 inspections and made seizures worth €10 million ($12.5 million) in 2014, he said, and had stepped up enforcement recently. “It’s now important to clear things up and look after consumers and the thousands of honest businesses that are today occupied with the new production season,” Martina said.

There’s more at stake than just national pride and identity. Italy exports billions of dollars’ worth of olive oil, including hundreds of millions to the U.S., the world’s third-largest olive oil market, with $2 billion in sales. Brands that trade on an Italian identity dominate. Many of the best-selling oils, legally labeled “imported from Italy” or “packed in Italy,” with images of the country’s flag or hearty peasants, are made from olives grown in Greece, Spain, or Tunisia and then shipped to Italy for processing. The U.S. is that rarity—a rich market with room to grow. It’s awash in celebrity chefs, reality cooking shows, and cookbooks, yet 6 in 10 Americans never buy olive oil. Consumption in the U.S. has tripled since 1990, compared with a doubling worldwide, and is still only 0.8 liters per capita—one-tenth of what a typical Italian uses in a year.

Samples for an olive oil tasting at the California Olive Ranch mill in Artois, Calif.

California Olive Ranch is trying to do with olives what California did with wine. It’s marrying a fastidious, technology-driven approach—Kelley worked at several Silicon Valley tech startups—with California’s self-appointed role as the world’s regulator. Prompted by Kelley’s lobbying, the state in 2014 established chemical standards for olive oil stricter in some respects than those of the IOC, which was established under United Nations auspices in 1959. This month, New World producers are expected to announce the creation of a rival organization, the World Olive Oil Trade Group. Members may include such non-IOC countries as Australia, New Zealand, and the U.S. The group could press globally for more standards like California’s.

The question of quality is being answered in a way that echoes the moment in 1976 when a chardonnay from Chateau Montelena in Napa outscored its French rivals in a blind tasting that came to be known as the Judgment of Paris. In November, Cook’s Illustrated magazine released its closely followed recommendations for supermarket olive oils. Tasters in blind tests sampled the oils plain, with bread, over mozzarella and tomatoes, and in a vinaigrette drizzled on salad greens. They gave their top ranking to California Olive Ranch’s Everyday Extra Virgin, which they said was “fragrant” and “fruity,” with a “complex finish.” An Italian brand was also recommended. The next eight oils, all imported, were recommended “with reservations.” They were described with such words as “mild,” “dull,” “medicinal,” “thin,” “stale,” “greasy,” and “flat.” As one taster said of a Bertolli extra virgin: “Nothing special. Could be vegetable oil in here.”

California Olive Ranch’s 2,200-acre orchard.

The day after his harvest, the farmer in Rome drives his fruit to the press, then watches closely as the stainless-steel machinery does its work. Hobbyists are often concerned, mostly for sentimental reasons, that the juice coming out the other end is actually theirs and not the previous customer’s batch. He leaves after a few hours with a 50-liter tub of oil.

Not all olive oil coming through Italy’s presses and bottlers has such perfectly documented provenance. Say the next producer at the frantoio isn’t a hobbyist. Say he’s a working farmer who trucks in his olives, then sells the oil to a wholesaler or a local agricultural cooperative. His is added to the oil of other farmers, and that’s where the world of olive oil becomes murky. It can be hard to know where the liquid comes from or what’s in it. Testing is expensive, so the industry relies largely on the honor system.

The business has been subject to scams, most infamously in 1991, when thousands of tons of Turkish hazelnut oil were sold as Greek olive oil, according to Tom Mueller’s 2011 book, Extra Virginity: The Sublime and Scandalous World of Olive Oil. Such blatant cheating isn’t common—but dilution of good olive oil with cheap vegetable or seed oil isn’t unheard of. (In the case of Bertolli, aside from a snarky taster’s comment, nobody has alleged such adulteration, and the parent company points out that taste testing is subjective.) Improper storage is a bigger problem. Exposing oil to heat or light makes it bland and also destroys the cancer-fighting polyphenols that are the basis of its reputation as a promoter of good health.

A harvester works the rows in California Olive Ranch’s orchard. In a half-hour, it can pick 7 tons of olives. Once picked by the high density olive harvester, olives are transported by conveyor belt to a tractor in the next row.

California Olive Ranch positions itself as the New World answer to these problems. But its own roots are in the Old World. The company is owned mostly by Spaniards who, in part, just wanted to sell more trees. In 1986 a Catalan construction magnate-turned-gentleman farmer named Carles Sumarroca was frustrated at how long it was taking to graft peach trees on his estate outside Barcelona. His weekend chats with an agronomist eventually developed into Agromillora, the largest nursery in the world for stone fruit trees.

Agromillora didn’t view olives as a particularly attractive market; the trees can live for 1,000 years, so they don’t need to be replaced often. Then one day, as lore has it, Sumarroca looked out over his vineyards and noticed a mechanical grape harvester systematically stripping the fruit. Nearby, at a neighbor’s olive orchard, he saw men picking by hand. Sumarroca wondered if a grape harvester could do the same work for olives. His managers told him about a variety called arbequina, which grew like a bush.

Their experiments led to a production method now known as super-high- density, with as many as 900 trees planted per acre, eight times what’s typical. José Ignacio Romero, an acquaintance of Sumarroca’s in the Catalan business community, began searching for farmland in California, where, he reasoned, they could start from scratch.

“California is producing, from an agricultural point of view, everything,” Romero, 74, remembers, sitting in his wood-paneled office on the eighth floor of a modern building in a leafy Barcelona neighborhood. “They had not developed olive oil.”

The partners, together with Romero’s brother and another friend, invested $10 million initially. They bought 733 acres near Oroville, Calif., where, in the 1700s, Franciscan missionaries from Spain had planted some of the first olive trees in North America.

To run California Olive Ranch, they brought in former managers from Blue Diamond Growers, the almond cooperative that made the nut a success with its can-a-week marketing. One of them, Alan Greene, recalls asking his wife to sample some of the company’s oil. She reported there was something wrong; it tasted like olives. With so many Americans accustomed to flavorless oils, Greene recommended that the grower stick to private label and bulk supply.

Then, in 2006, Kelley turned up for an open house. After taking a couple of years off to backpack, he’d been consulting and was living in nearby Chico. Romero hired him as chief financial officer, then made him CEO in 2007. Kelley, 44, has the zeal of a man who’s found his true love in mid-career. His two young children slather their toast with olive oil instead of butter; the household goes through a liter a week.

Kelley quickly decided that the company should create its own retail brand; otherwise, there would be little to distinguish it from the sea of imports. At first, buyers told him nobody wanted oil from California. “A lot of people looked at this business and thought we were crazy,” he says. The flagship Everyday Extra Virgin is now sold in 25,000 stores. Unusual for a brand trying to cultivate cachet, it’s marketed by Kelley to Walmart, which sells a 500 milliliter bottle for $7.49, and Whole Foods Market, where it costs $9.99.

Kelley’s retail push coincided with a growing fascination with the health benefits of the Mediterranean diet. Antioxidants in olives, present in the highest concentrations in the best extra-virgin oils, reduce the risk of cancer. The TV chef Jamie Oliver developed such a fetish for drizzling a “lug of olive oil” on his dishes that it inspired parodies.

In 2008 the University of California at Davis created the Olive Center, part research center and part industry advocate. Funding came from California Olive Ranch and other domestic oil producers. Dan Flynn, a former state legislative consultant, runs the organization.

The Olive Center planted a flag in 2010 when it issued a report that bared, and greatly exacerbated, the growing schism between traditional growers and the upstarts. Laboratory tests, the center said, had found that 69 percent of imported brands sold as extra virgin in California supermarkets didn’t meet international standards. Hundreds of media outlets in the U.S. ran stories. Flynn says a half-dozen trial lawyers called, sniffing for opportunities to sue importers.

Dr. Mehmet Oz invited Flynn onto his TV show in 2013, naming extra-virgin oil “among the biggest lies” at the supermarket. “It infuriates me,” Oz said. “I’m buying olive oil to make my family healthy, and I’ve got some news for you, folks—we’re not getting it.” Audience members cringed as Flynn said professional tasters had used words like “waste pond” and “baby diaper” to describe the worst oils.

Importers still complain about the report’s impact. Little mentioned in all the coverage was who funded it: California Olive Ranch, the California Olive Oil Council, and another California producer, Corto Olive. And the 69 percent figure wasn’t from chemical tests, but from a tasting panel. New World producers “have a history of, I would say, bending the facts to support their sound bites,” says Eryn Balch, executive vice president of the North American Olive Oil Association, which represents imported brands including Bertolli, Filippo Berio, and Pompeian. Her group’s own testing, she says, shows that only 2 percent of oil in the U.S. by volume is adulterated. (Flynn responds that chemical tests confirmed the tasting results in the majority of cases.)

When California, with one-tenth of 1 percent of the world’s market, adopted chemical standards stricter than the IOC mandates, it made waves in the Old World. The rules, which for now apply only to California producers, also barred the use of the marketing terms “pure,” “light,” and “super virgin” on labels. The Italian consulate general in San Francisco, a Spanish trade attaché, and representatives from a half-dozen importers traveled to Sacramento to oppose the standards at a hearing of the California Department of Food and Agriculture.

Most of them said, politely, that Americans don’t know what they’re talking about when it comes to olive oil. “What the United States, including the state of California, needs relative to olive oil is education,” said Gabriel Estevez, chief operating officer of Sovena USA, based in Rome, N.Y., the largest importer of olive oil in the U.S. Many of the people testifying against the standards complained that all the talk of bad product would only boomerang, turning Americans off olive oil completely.

Lab tests, the Olive Center said, found that 69 percent of imported brands sold as extra virgin didn’t meet international standards

It’s Day 61 of the harvest in California, which means it’s a banner year: Typically, the harvest is two weeks shorter. Kelley is in no mood to be a statesman. Over lunch, he reaches seemingly offhandedly for a common supermarket brand and sips it. “Crayon,” he pronounces. “It’s not hard to find rancid oil, unfortunately.”

Kelley says California Olive Ranch had sales of $82 million in 2015. Within three years, co-founder Romero forecasts, sales could more than triple, to $250 million.

Limited by its harvesting techniques to three varietals—arbequina, arbosana, and koroneiki—the company sought to broaden its lineup last year by acquiring Lucini, a Miami-based importer whose oil was, as it happens, the top-rated Italian brand in the Cook’s Illustrated report. The deal also brought in Molinos, one of the largest food companies in Argentina, as a shareholder.

Given the close spacing of the trees, risk of disease in monoculture, and the tree damage caused by machine harvesters, California Olive Ranch employees spray a liquid copper fungicide. The spray is used to control diseases such as anthracnose, bacterial leaf spot, fire blight, and botrytis.

Even the old guard concedes that super-high-density harvesting, in use for just 5 percent of Europe’s volume, may eventually catch on. Mechanical harvesting costs about one-seventh as much as picking by hand. “It will probably be the future in Italy and all over the world,” says Renato Calabrese, general manager of Pietro Coricelli, an olive oil producer in Spoleto that exports to more than 100 countries.

Soon after an Oxbo harvester has taken a half-hour to swallow 7 tons of fruit from an acre of trees—work that would have taken 15 people a day by hand—the olives are at the mill in California. After an evaluation of temperature, moisture content, fat content, and fruit size to ensure they aren’t fermenting or oxidizing, the olives, pits and all, are churned into paste, which is run through a centrifuge to separate the oil. A stream of golden oil the diameter of a garden hose pours into a vat.

Kelley dips in plastic cups and hands them around. He drinks. “That’s good oil,” he says, remarking on the buttery, mellow notes of riper olives late in the harvest. “Really good oil,” the burly head miller says, nodding.

—With Sergio Di Pasquale

Global dairy price recovery seen six months out

Global dairy price recovery seen six months out

Published: July 3, 2014 9:47AM
Rabobank’s newest dairy report shows the anticipated drops in global dairy commodity prices in the second quarter of 2014 were more sever than anticipated.

Higher global milk production and a reduction in Chinese dairy purchases led to a 10 to 20 percent decline in international dairy commodity prices in the three months leading up to mid-June, according to Rabobank.

In its latest quarterly dairy report, Rabobank said the lower prices were expected as global milk production increased in response to almost 12 months of exceptionally high prices.

But, the bank’s analysts said, the extent of the fall was more severe than anticipated.

The prices of whole milk powder, skim milk powder and butter fell by about 20 percent. Cheese, which never peaked as high as other commodities, fell by 9 percent.

U.S. wholesale prices have slipped considerably less than those in other markets and in many cases were at a significant premium to world prices in mid-June. But they are expected to fall faster than elsewhere through the second half of the year as exports fall back and domestic milk production picks up, the bank estimated.

Global milk production rose at an unprecedented rate in export regions as producers responded to near-record prices, lower feed costs and generally positive weather. The big seven export regions generated a combined 5.5 percent increase in production the first four months of the year — roughly an additional 123 million hundredweight of milk.

Consumption growth in those regions has been modest, with consumers battling disappointing economies and significant price increases in dairy products.

A tipping point in the market balance hit in the second quarter of the year as China suddenly retreated from the market just as the supply wave reached its peak, the bank’s analysts said.

Rabobank expects export supply growth to lose steam as 2014 progresses, with little improvement in prices until late in the year or early 2015. It expects to see a recovery phase in early 2015 as economic growth boosts consumption in export and import regions and China returns to the world market in earnest.

In the U.S., dairy exports increased 20 percent year over year in the first four months of 2014. But with commercial inventories below year-ago levels, the U.S. will be unable to repeat the record stock drawdown of the previous 12 months. Combined with higher pricing in the domestic market, U.S. export volumes will likely fall in the second half of the year, Rabobank analysts said.

Year-to-date milk production in the U.S. in the first five months of the year was up only 1.1. percent, despite exceptional margins. Strong export prices and low feed costs have had producers’ income over feed costs above $10 per hundredweight since October 2013, peaking above a new record $15 per hundredweight in March.

But many farmers have used improved returns to pay down debt, buy more land or buy feed forward rather than invest in expansion. Bitter cold in the Midwest also held back supply, the bank reported.

Rabobank expects U.S. milk production to gain some traction and to be up 3 percent year over year in the second half of 2014 and continue to grow at a clip in the first quarter of 2015.

U.S. demand is also likely to pick up by then, and Rabobank expects the U.S. to resume its trend of building an even larger export footprint.

Global Hay Demand, Competition Grow Strong

Global Hay Demand, Competition Grow Strong

How much hay will be exported to calcium- and protein-hungry regions like China and the Middle East may depend in part on competition from California dairies. So says Greg DeWitt, marketing manager for ACX Pacific Northwest, Inc., a California-based hay exporter.

ACX currently buys hay from seven key Western states – Washington, Oregon, California, Arizona, Nevada, Utah and Idaho. But demand for high-quality hay among domestic customers is on the rise, partly because of continued drought in the West that has cut into hay stocks and pushed prices upward.

“It’s all going to come down to the domestic markets and the availability of hay,” he says of his company’s ability to sell more hay overseas in 2014.

Even so, only 3-4% of all U.S. hay production is exported, he adds. “A significant portion of the alfalfa we supply overseas is summer hay that traditionally has not had the strongest demand domestically.

USDA’s May ag export projection, totaling $149.5 billion, is an increase of $6.9 billion from its February prediction. Hidden in the numbers is the rising demand for alfalfa hay, which alone accounted for about $586 million in exports last year.

“Export forage dynamics have changed a lot in a relatively short period of time,” says John Szczepanski, director of the U.S. Forage Export Council, a committee of the National Hay Association.

“Just a few years ago, Japan and Korea accounted for the lion’s share of U.S. forage exports. Since 2007, those traditional markets have remained pretty much the same, with all the new growth coming from China and the Middle East.” (See graphic.)

China, with an estimated 15 million dairy cows to feed, is now the No. 1 foreign buyer of U.S. alfalfa, due in part to its growing appetite for dairy products and animal protein. More than 800,000 tons of alfalfa hay were shipped from the U.S. to China in 2013, compared to none in 2006 and 460,244 tons in 2012, according to USDA’s Foreign Agricultural Service (FAS).

Just three years ago, Chinese hay purchases were about 2% of ACX’s total revenue, adds DeWitt. Last year, China accounted for 21% of the company’s hay sales.

Although 94% of the hay that China imports comes from the U.S., according to FAS, other countries are also starting to compete for the business. China recently signed significant agreements to import forage from Canada and Spain.

“The U.S. isn’t the only show in town,” Szczepanski warns. “Exporters need to continue to focus on safety and quality.”

But rising demand for hay is more than just a Chinese phenomenon. The United Arab Emirates, South Korea, Taiwan, Malaysia and Indonesia all have increased their hay imports over the past year as well.

ACX is based in Bakersfield, CA, with storage and hay-processing facilities in Stockton and WIlmington, CA; Ellensburg, WA; and Goldsboro, NC.

Contact DeWitt at gregdewitt and Szczepanski at john.

Will El Niño bring winter rain to California?

Will El Niño bring winter rain to California?

It may not be the kind of news growers like to hear, but rain during the period when California farmers harvest cotton and tree nuts this year is more likely than not, as the Pacific Ocean transitions into a short-lived El Niño pattern.

Forecasters are growing confident in the likelihood that El Niño will impact weather patterns this winter across California. Just how much and to what extent is uncertain. El Niño does not always portend wetter-than-average years.

WeatherBell, a private weather forecasting service, and the National Weather Service (NWS), suggest the likelihood of an El Niño will be 70 percent by September and closer to 80 percent by November.

What does it mean for California agriculture?

According to WeatherBell Chief Meteorologist Joe D’Aleo, the chances of an early rainy season in central and southern California are more likely than not, with a good chance that the weak to moderate El Niño event will peak by late in the calendar year. D’Aleo expects the rainy season to stretch into early 2015.

D’Aleo expects the short-lived El Niño could expand to bring above-normal precipitation to all of California by the January-February period before ocean temperatures cool below the El Niño threshold and West Coast weather patterns return to near normal.

The potential September start to this year’s rainy season could impact California’s cotton harvest plus tree nuts and rice, though D’Aleo says northern California could remain in a drought pattern until later in the year, thus possibly sparing California’s rice crop from rain.

“We’ll likely see our first Pacific El Niño system by October,” he said.

Conditions and early indications of a purported “super El Niño” are just not there at this time, D’Aleo says.

El Niño generally starts with the movement of warmer water eastward from the western Pacific. Warmer water in El Niño events move eastward along the equatorial region to western South America and spread up the eastern Pacific to California.

Scientific consensus defines El Niño as at least three months of sea surface temperatures at or above 0.5 degrees Celsius higher than average.

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This push of warmer water can be assisted by a shift in wind patterns. D’Aleo says forecast models are not showing this push, which makes him believe this season’s El Niño will be on the weak to moderate side.

“There were some who thought this would be a super El Niño because the first push of warm water to the east was very strong and the water was very warm underneath,” he said.

California may rest assured that this season’s El Niño will likely not be the barn-burner compared to the 1997-1998 when a series of warm storms rolled into California and caused wide-spread flooding. Sea surface temperatures that year were as much as four degrees Celsius above normal.

Ocean temperatures are currently much closer to normal but about half-a-degree Celsius above normal, according to recent figures published by the NWS. It is the half-degree threshold that forecasters use over several consecutive months to declare an El Niño.

D’Aleo bases this on ocean temperatures that are cooler than the 1997-’98 El Nino, plus the depth at which the warmer water resides. Wind patterns are also not as favorable.

“We don’t see that happening; we don’t find the pressure patterns favorable for that,” D’Aleo said.

However, the warmer water does make the eastern Pacific riper for tropical storms and hurricanes, D’Aleo said.

An early example of this are the the two Category 4 hurricanes that appeared in the eastern Pacific within the past month. Both storms eventually met their demise in the cooler waters off the west coast of Mexico before heading out to sea.

Hurricane formation in the western Pacific during El Niño events can also push storms up the Baja California peninsula and into the Gulf of California. Rain can push into Yuma, Ariz. and southern Arizona, and southern California.