olive industry high density position paper june 2007 industry high density... · high density high...

The case forThe case forThe case forThe case for

High Density High Density High Density High Density

Olive TechnologyOlive TechnologyOlive TechnologyOlive Technology using low vigour olive varietiesusing low vigour olive varietiesusing low vigour olive varietiesusing low vigour olive varieties

June 2007

Harvesting High Density olive groves at Lewis Horticulture -May 2007

“Tomorrows solutions today”

2

The olive industry in Australia has been expanding rapidly in recent years centered around the use of managed investment schemes. Recent changes to this scheme and the need for environmental accountability has required a new direction focused on efficient use of water and natural resources as well as the need for strong profits to drive the industry to be world competitive. To date this has been lacking in many projects in Australia which have been strongly focused on tax deduct-ability as opposed to achieving the quality, yields and profit required for long term sustainability. The strong international demand for extra virgin olive oil will see further expansion of the Australian Olive Industry. The technology offered to Australian Olive Industry by Lewis Horticulture is world class allowing proven high quality, consistent heavy yields with margins that permit long term sustainability not achievable by current traditional olive technology.

Overview

Export opportunities abound for the Australian Olive Industry if it is internationally competitive.

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Contents Overview…………………………………………………………………..….2

Contents………………………………………………………………………3

The industry development-now and into the future…………………….…4

i. The Present……………………………………………………....4

ii. Export Markets………………………………………………….4

iii. The Future……………………………………………………….5

Australian Extra Virgin Olive oil-competitive advantages……………….6

Yield and performance data of Traditional Australian Olive Growers....7

High Density Olive Technology …………………………………………….8

Cropping yields using High Density Low Vigour Olives ………….…......9

Pruning High Density Groves……………………………………………....9

Comparison of High Density Vs Traditional Groves………………….…10

i. Ease of management…………………………………………...10

ii. Yields of Oil per hectare……………………………...….……10

iii. Cost of establishment……………………………….…………11

iv. Financial returns…………………………………...………… 11

v. Quality of oil………………………………………………..….11

Water Efficiency-gross returns per mega-litre……….………………….12

Competitors for Australian Olive Industry……………………………...12

Conclusion………………………………………………………...………...13

References……………………………………………………………...…...14

Trevi Olive Grove-High

Density low vigour grove at

Two Wells, South

Australia.

4

Background

The Present The olive industry in Australia has developed rapidly to where in 2006/07 it is predicted to produce 13,000 tonnes of oil for domestic and export sales.(1) This is up from only 500 tonnes in 2001. Imports of olive oil for 2006/07 are estimated at 27,000 tonnes. Export Markets Exports of olive oil (1)from Australia in 2006 were 2,987 tonnes, this is less than 1% of total world production in 2006. Main export markets have been China, Italy, Spain, New Zealand, and USA. The largest for 2006 was USA at 2,210 tonnes followed by China at 135 tonnes. These two markets are the fastest growing with little domestic production, they offer large growth potential for Australian product. Industry commentators (5) in China suggest that China will require 650,000 tonnes of olive oil by 2015-2020 up from 6000 tonnes in 2006. The demand for olive oil in United States continues to grow rapidly with a forecast consumption of 226,000 tonnes for 2007 up from 194,000 tonnes in 2000.

I n d u s t r y commentators advise that China will require 650,000 tonnes of o l i v e o i l b y 2 0 1 5 - 2 0 2 0 . C h i n a imported 6000 tonnes in 2006 with virtually n o d o m e s t i c production.

The Australian Olive The Australian Olive The Australian Olive The Australian Olive IndustryIndustryIndustryIndustry––––where are we where are we where are we where are we now?now?now?now?

Total world production (2) in 2006 of olive oil was 2,820,000 tonnes. Some industry figures suggest that production in Australia will reach 30,000 tonnes of oil by 2010 how-ever there appears to be major management difficulties with current olive varieties and grove layout which will make this unlikely.

High Density low vigour grove at Willunga

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Strong demand for extra virgin olive oil is occurring in world markets due to the following • Increasing disposable income

and health consciousness in growth markets of China and India with the move away from Palm oil which has traditionally been used in these markets for cooking

• The movement away from

using saturated fats in United S t a t e s a s t h e m a r k e t increasingly becomes more health conscious.

• The strong uptake of Canola oil

in Europe for biofuel resulting in significantly reduced supply of a major competitor in the supply of oil to the food industry.

• Increasing awareness of the

Mediterranean diet and the role extra virgin olive oil plays in a healthy balanced diet.

Further strong market promotion with the International Olive Oil Council focusing on India and Russia which have been targeted for growth in 2007-2008

Background The Future

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Australian Extra Virgin Olive Oil Competitive Advantages

Australia has the necessary attributes for a successful internationally competitive extra virgin olive oil industry. These are • Relatively low cost land • Highly suited Mediterranean

climate • Access to horticultural skills

and R&D • Strong focus on a clean and

green image. Australia lacks the major diseases and pests that affect overseas producing countries.

• Access to capital • High focus on labour saving

technologies • Organised industry structure • Ability to pay market value for

water • Ability to produce a consistent

high quality extra virgin olive oil to suit a range of markets and tastes

High Density low vigour groves of Signore at Buckland Park, South

Background

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Background - cropping results for Australia’s largest olive grower

Yield and Performance data of Australian Olive Groves

Historical yield and returns data

(Chart 1-3) from Timbecorp

Australia’s largest olive oil

producer with 3500 hectares

planted with olives. In March 2007

an independent review of

performance of plantings and yields

to date by Australian Agribusiness

Group (3) highlights the difficulties

with traditional high vigour olive

groves.

Summary of performance of Timbercorp’s Olive Projects FY2004

Project Indicator Forecast Actual Change

2000 Olive Project Yield 716 litr /ha

160 litres /ha

-77%

2001 Olive Project Yield 716 litres /ha

160 litres /ha

-77%

2002 Olive Project-Early

Yield 716 litres /ha

132 litres /ha

-81%

2002 Olive Project Post June

Yield 716 litres /ha

132 litres /ha

-81%



2000 Olive Project

Yield 2152 litre/ha 620 litres/ha -71%

2001 Olive Project

Yield 2152 litres/ha

436 litres/ha -79%


Yield 716 litres/ha 128 litres/ha -82%



2003 Olive Project




2000 Olive Project

Yield 2000 litre/ha

1182 litres/ha -41%

2001 Olive Project


1064 litres/ha -20%



860 litres/ha -60%



860litres/ha -60%

2003 Olive Project

Yield 964 litres/ha

396 litres/ha -59%

Chart 1

Chart 2

Chart 3

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High Density Low Vigour Olive TechnologyHigh Density Low Vigour Olive TechnologyHigh Density Low Vigour Olive TechnologyHigh Density Low Vigour Olive Technology---- the opportunity the opportunity the opportunity the opportunity

BackgroundBackgroundBackgroundBackground Lewis Horticulture are world leaders in High Density Olive Technology using purpose bred low vigour olive varieties specifically for high density olive groves. This technology is the result of over 25 years of plant breeding, selection and trialing in a range of countries and climates. These olive varieties are protected by international patents, trade marks and Plant Breeders Rights which protect growers while at the same time permitting access to the latest cutting edge research and development which is ongoing to further develop this technology.

Features of High Density Low Vigour Olive TechnologyFeatures of High Density Low Vigour Olive TechnologyFeatures of High Density Low Vigour Olive TechnologyFeatures of High Density Low Vigour Olive Technology High Density Low Vigour Olive technology has the following features • Early to commence cropping-usually after the second full winter in the

ground resulting in early to commence cash flows and earlier breakeven point than traditional groves.

• Self fertility, makes groves easy to manage avoiding problems with

performance of pollinators found in traditional groves • Full production achieved between year 5 and year 6 around 2 or more

years earlier than traditional groves. • Low vigour varieties used have high and consistent production without off

years found in traditional varieties. • Mechanical over the row harvesting can commence at first commercial

cropping and is ongoing using modified grape harvesters. • Consistently higher oil content in the fruit of at least 2-4 % higher than

Frantoio and most current varieties at the processing mill. This results in an increase of up to 25 % more oil per hectare compared with traditional varieties and a significant improvement in bottom line profitability.

• Produce premium quality extra virgin olive oil with excellent organoleptic characteristics and long storage life. A range of flavours are able to be produced to suit a range of markets and uses. The High Density olive vari-ety “Signore” as a varietal oil won the best of class-Non Packaged Oils at The Australian Olive Oil Awards 2005.

• The low vigour varieties of olives used in High Density technology are of such a high quality that they are able to be sold as varietal oils whereas traditional varieties require blending to reach the required standards. This complicates storage and marketing while increasing costs associated with traditional groves and where varietal blending is undertaken.

High Density low v i g o u r o l i v e technology is the result of over 25 years of selection and trialing

High Density achieves full production 2 or more years earlier than in traditional groves with commercial cropping occurring after the second full winter in the ground

High Density Olive groves delivers up to 25% more oil per hectare compared with traditional olive groves with correct management

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• Lewis Horticulture is able to provide a range of varieties for high density use to extend the harvest season and optimize the use of harvest and processing equipment while allowing the production of high quality extra virgin olive oil.

• Mechanical hedgerow pruning is able to be commenced from first commercial cropping and is undertaken each year.

Cropping yields using High Density Technology from Lewis HorticultureCropping yields using High Density Technology from Lewis HorticultureCropping yields using High Density Technology from Lewis HorticultureCropping yields using High Density Technology from Lewis Horticulture Chart 4 outlines benchmark yields for High Density Olive technology using low vigour varieties that with correct management and site preparation should be achieved. In reality, yields much greater than benchmarks shown are usually achieved by growers as are shown by our own groves located at Buckland Park in South Australia. While the yields both in tonnage and more importantly litres of oil per hectare are superior to traditional groves and traditional olive varieties most importantly the major cost area of labour is reduced by up to 59% compared with traditional groves due to the high levels of mechanization of key cost areas of harvesting and pruning. The 2007 crop detailed had harvest costs of 11c per kilogram of fruit and processing cost was $0.76c per litre of oil. This gives a combined harvest processing cost per litre of oil of $1.20 per litre

Yields of Signore High Density groves at Lewis Horticulture Buckland Park

South Australia

Year (full winters in

ground) Kilos/hectare Benchmark -

Kilos/hectare

Litres of oil per Hectare. (oil %)

Benchmark –Litres/hectare (25% oil at press)

Year 1 (2003) 0 0 0 0

Year 2 (2004) 2,125 0 467 (22%) 0

Year 3 (2005) 4,137 625-1,250 1315 (31.8%) 156-312

Year 4 (2006) 10,669 3,750-5,000 2880 (27%) 937-1,250

Year 5 (2007) 13,292 7,500-10,000

3323 (25%) 1,875-2,500

Year 6 12,500-15,000

3,125-3,750

Year 7 15,000-17,000

3,125-3,750

The 2007 c rop achieved a harvest and processing cost of $1.20 per litre of oil

The 2007 crop was harvested for 11c per kilogram of fruit with around 95% fruit removal.

High Density Low Vigour Olive TechnologyHigh Density Low Vigour Olive TechnologyHigh Density Low Vigour Olive TechnologyHigh Density Low Vigour Olive Technology

Chart 4

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PruningPruningPruningPruning Pruning in High Density groves utilise high speed blades which prune the hedgerow and skirt to promote higher cropping levels and greater exposure of fruit to light resulting in more even fruit ripening and superior quality oil. A further benefit of this technology is a superior fruit removal at harvest as all the fruit is positioned on the outside of the tree. Normally around 95% fruit removal is expected when this technology is applied.

Pruning Signore High Density low vigour groves at Buckland Park South. Australia. Trees were planted July 2002.

High Density Olive TechnologyHigh Density Olive TechnologyHigh Density Olive TechnologyHigh Density Olive Technology

Cost of pruning in 2007 was

less than 10c per tree

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Comparison of Traditional vs High Density Low Vigour Olive GrovesComparison of Traditional vs High Density Low Vigour Olive GrovesComparison of Traditional vs High Density Low Vigour Olive GrovesComparison of Traditional vs High Density Low Vigour Olive Groves 1.Ease of management1.Ease of management1.Ease of management1.Ease of management

High Density Low Vigour Groves Traditional Groves High Vigour Groves

Harvesting • Utilise machinery that is mass produced and used exten-

sively for grape harvesting in Australia. This machinery is used from the first commercial harvest and can be used for the entire life of the grove.

• Around 95%+ fruit removal in one pass. • Harvest around 500 tree per hour • Ability to work at night in hot weather to avoid excessive

fruit temperature. • Purchase cost of machines are around one third less com-

pared with Colossus harvesters • Operate at ground speed of around 1.2-1.3 km per hour • Typical harvest cost of less than 20 cents per Kilogram of

fruit depending on crop load

• Utilise specialized purpose built machinery made for

olives with limited application to other crops. Machines are bulky, slow and expensive to manufacture.

• Higher labour component for harvesting compared with

grape harvesters with slow ground speed. • Unsuitable on soft ground.

Pruning • Pruning commences after first commercial harvest to

constantly stimulate new fruiting wood on current seasons growth while training tree habit for positioning the fruit for the harvester at a consistant position on the outside of the tree resulting in high fruit removal.

• Cost of yearly prune around 10 cents per tree • All pruning undertaken mechanically or chemically • Partial canopy renewal required on a regular basis, usually

around year 12 to14

• Traditional olive trees require regular pruning to remove

dead wood let in light and air movement to the tree and renew the canopy to allow long term cropping. This is a high labour cost area.

• Limited use of mechanization able without severe yield

reduction • Due to the varieties used fruit is produced on 2nd year

wood hence any pruning mechanically will result in bian-nual fruiting

• Canopy renewal required on a regular basis to maintain

cropping

Pollinators • Self Fertile, no pollinators required. • Require a range of pollinators (up to 3 varieties or more

for good results) especially for the variety Barnea • Each variety has differing maturation times and

management • Weather can have a big influence as pollination is by

wind.

Weed Management • Using inline drippers there is a requirement for only limited

weed control after the first 18 months as the trees out com-pete the weeds. Substantial savings on labour , chemicals, and machinery

• Due to wide spacing of trees in the grove there is an ongo-

ing requirement for slashing and spraying of weeds along tree line and in the inter-row area.

Pest Management • The improved light and air access keep pests to a low level • Large canopy creates an ideal environment for pests. The

degree of which will depend on the level of pruning.

Frost Management • In frost risk areas the low vigour variety Signore is

recommended having early maturation and in most cases the fruit can be harvested before frosts commence.

• Virtually all varieties are mid or late season maturing

varieties posing a high risk for frost. To manage this re-quires further investment with frost fans (capital cost of approx $75.000 each per 20 hectares)

Soil Management

• No till situation from planting and by using grape harvesters

soil compaction is minimal • Inter-row cultivation is often required for weed control

and aerating the soil after heavy harvesting equipment has been through the groves

Irrigation Management

• Maximum efficiency of water use-age as water only placed

along tree line using low output drippers to optimize lateral movement.

• Requirements of 4 to 6 meg per hectare depending on age,

soil type and rainfall.

• Water wasted along tree line due to large gaps between

trees promoting weed growth and requiring use of addi-tional chemicals for weed control

• Requirements of 6-8 meg per hectare depending on age,

soil type and rainfall

Tree Varieties • Low vigour varieties especially bred for high density

production with continuous high levels of cropping • High vigour varieties are unable to be used in closer spac-

ing density without loss of yields

Fruit Management • Fruit produced on first year wood and on the outside of the

tree to allow even ripening and superior quality oil • Fruit produced on second year wood,further back inside

the tree resulting in uneven ripening and lesser grade oil without regular pruning.

Traditional vs High Density Low Vigour Groves

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2. Yields of Oil per hectare2. Yields of Oil per hectare2. Yields of Oil per hectare2. Yields of Oil per hectare

Comparison of Traditional vs High Density Low Vigour GrovesComparison of Traditional vs High Density Low Vigour GrovesComparison of Traditional vs High Density Low Vigour GrovesComparison of Traditional vs High Density Low Vigour Groves

Comparison of oil yields per hectare

High Density Grove-Buckland

Park S.A. (Planted July 2002)

Traditional Grove-Timbercorp 2002

Olive Project (Planted May 2002)

Harvest Year Litres of oil per hectare Litres of oil per hectare

2003 0 0

2004 467 132

2005 1,315 128

2006 2,880 860

2007 3,323 No Information available

3. Cost of establishment3. Cost of establishment3. Cost of establishment3. Cost of establishment The cost of establishment (excluding land and capital costs) of a high density grove will be around $22,000 per hectare as opposed to around $15,000 per hectare (4) for traditional groves. The additional costs associated with high density establishment can be recouped in the above example after the second harvest.

4. Financial returns4. Financial returns4. Financial returns4. Financial returns For High Density groves using low vigour olive varieties the cash flow commences after the second full winter in the ground with correct management and breakeven usually occurs at around year 5 to year 6.This is also the point at which full and constant cropping occurs. For traditional groves using high vigour olive varieties cash flow commences depending on the variety at between year 3 and year 4 and breakeven may not occur to around year 8 to year 11. The biannual bearing nature of high vigour olive groves results in large fluctuations in cropping and costs of production.

5.Quality of the Oil5.Quality of the Oil5.Quality of the Oil5.Quality of the Oil Oil from traditional groves usually needs to be blended with a number of varieties to improve the organoleptic characteristics and shelf life. Arbeqina and I-18 have a very short shelf life, other varieties like Picual often have quite metallic flavours while Koreneiki has a very strong oil. Barnea has chemical characteristics which make it unacceptable to IOOC countries so without blending with higher quality oils it will be rejected from these export markets. Each of these factors make the growing of high vigour traditional varieties an additional cost as storage of oil from these varieties requires each variety to be stored separately to allow blending to meet an acceptable quality for the market. Oil from High Density low vigour groves are of a high organoleptic quality and can be sold as a varietal oil with excellent shelf life. This reduces storage costs considerably. Further if a selection of flavours are required for differing uses then harvest dates are able to be varied with the earlier harvest producing a robust oil while a later harvest producing a mild oil.

Higher initial cost of establishment of High Density groves are recouped usually after the second harvest.

Traditional vs High Density Low Vigour Groves

High density low vigour groves consistently outperform traditional groves in key areas of yield of oil per hectare, nett returns per hectare and ease of management

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High Density Low Vigour Olive Technology Water Efficiency High Density low vigour olives have a high efficiency of water usage when planted with low output drippers placed in a row either side of the tree line. This combined with the latest fertigation techniques applied via the drippers equates to a very high

efficiency of water and fertiliser use. The emerging free market for irrigation water will ensure that precious water is allocated to crops that produce the highest values. This provides exit strategies for those farmers wishing to leave the irrigated industries that have relatively lower returns. In comparison to most other tree crops High density olives are also able to tolerate lesser quality water or recycled water while still producing high yields. Lewis Horticulture has also been undertaking trials with closer row spacing of 3 metres between the rows as an option for grape growers seeking to switch to high density low vigour olive growing while using existing irrigation framework of vines. Yields to date have been very promising at this closer row spacing.

Efficiency of water usage on some key tree crops

Crop Water use per hectare (ML/Ha)

Gross margin per meg of water used

High Den-sity Olives

4-6 $2,916-4,375

Tradi-tional Olives

6-8 $1,875-2,500

Almonds 13-17 $861-1,126

Pistachios 6-9 $1,800-2,200

Citrus 12-14 < $100/meg

High density olives have a high gross margin per meg of water used compared with many other tree crops grown in Australia

Australia’s Competitors The increasing demand for extra virgin olive oil has put pressure on supply that has resulted in steadily increas ing pr i ces . Increased production from traditional growing areas of Italy and Spain is unlikely due to limited available land and water. Production increases will come from southern hemisphere countries of Australia, Argentina, Chile and South Africa. Of these Australia is best situated having an excellent growing environment, flat land, access to skilled horticultural workers a n d o n go i n g r e s e a r c h a nd development. The high levels of mechanisation associated with High Density low vigour Olive Technology and high and consistent yields allows Australia to be competitive with third world countries with lower labour costs as well as those with subsidies as is the case with the European community. The Opportunity Currently there is an opportunity

to establish a significant and

profitable olive oil industry in

Australia using the latest proven

production techniques and genetic

material based on High Density

Olive low vigour technology as used

by Lewis Horticulture. The rapidly

growing markets of United States

and China together with the new

markets of India and Russia will

quickly take existing production

while requiring over the next 7

years an estimated 40,000 tonnes

or more additional extra virgin

olive oil. This equates to an

immediate export market of

A$200m and necessitates the

planting of 11,500 hectares of High

Density groves.

Growth in the markets of China and United States over the next 7 years will require the immediate planting of 11,500 hectares of High Density groves to meet the anticipated demand.

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High Density Olive Technology

ConclusionConclusionConclusionConclusion It is time for the Australian Olive Industry to take the next step and move

forward. The industry needs to accept new technology that offers lower cost of

production, improved returns and cash flows and the ability to mechanize groves

on a large scale while still produce a high quality product is paramount.

High Density olive technology using low vigour olive varieties from Lewis

Horticulture achieves these requirements while offering consistent cropping

using high levels of mechanisation and a low cost of production to achieve a su-

perior quality extra virgin olive oil which has a ready international market.

Opportunities exist to immediately develop in excess of 11,500 hectares of High

Density Olive groves to supply this developing market with further growth

High Density Olive Groves • High gross return

per meg of water • Early cash flow • Full production

year 5 to year 6 • Superior oil yields

per hectare • High levels of

mechanisation • Low labour costs • Self fertile • High Quality extra

virgin oil • I n te rnat iona l ly

competitive

Lewis Horticulture for-

Grove management

Consultancy

Agronomy

Tree Supply

Project Design and Management

Contact:- Hartley Lewis B.Ag.Sc Email:[email protected] Malcolm Lewis Adv.Dip.Hort Email:[email protected]

Ph +61 8 8380 9598 Fax +61 8 8380 9774

www .lewishorticulture.com.au

Signore is protected by Patents in Australia and New Zealand. Don Carlo is protected by PBR no 2003/342

Unauthorised propagation prohibited.

Bulk Olive Oil being loaded for export—Buckland Park, South Australia

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References 1. Australian Olive Association –Australian Olive Oil Exports 2006 2. International Olive Oil Council –Olive Oil Production and Consumption data November 2006 3. 2007 Timbercorp Olive Project, Retail Investment Research by Australian Agribusiness Group March 2007.

4. S. Sweeney, G. Davies The New Rural Industries– The Olive Industry, Jan 1998 5. Overview Paper-2nd China International Olive Oil Forum 2006

High Density low vigour olive grove 3 years old planted at Willunga, South Australia,

Lewis Horticulture—Leaders in Horticulture

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