Bozzano Olive Ranch - Prosper: "A Well-Oiled Schem?"

t's not hard to spot the trend. The short drive up I-5 north through rolling hills dotted with olive trees serves as picturesque evidence that agribusiness is back in a big way in California.

The California Olive Oil Council estimates that in-state production of olive oil has increased by as much as 900 percent over the past decade, with many of the newcomers being small, family-owned producers. Some are seeking a second career, some indulging a hobby, but many are simply looking to cash in on the trend.

Combine the wave of agri-investors with the surge of shoppers looking to keep their dollar local, and the once endangered family farm seems primed for a renaissance.

Yet while there's no shortage of romance and buzz around the olive oil industry, do the economic realities stack up?

"There is money to be made, but you need to be realistic about recouping the investment … I haven't seen anyone do it quickly," says Nancy Ash, owner of Strictly Olive Oil, a Castro Valley-based consulting agency for olive oil producers.

Extra virgin olive oil, which, in order to carry the California Olive Oil Council's certification, must be less than 1% in acidity and extracted from the olives mechanically (not with heat or chemicals that could damage the oil), is notoriously costly to produce and often carries a balance sheet that would make most investors cringe. Land prices alone (expect to pay about $5,000-$50,000 an acre, depending on the location and maturity of the orchard) can knock many would-be producers out of the game. Production's not cheap, either -- orchard maintenance, harvesting, milling and bottling can easily push costs to $10,000 an acre, according to a UC Cooperative Extension 2001 publication.

What's more, competition from cheaply produced (and often fraudulently labeled) imported oils confuses consumers and drives down the retail market. While Ash advises clients to price their oils at between $10 and $15 a bottle, that may cut an orchard's profit margin from 50 percent to 20 percent or lower, and boutique operations may not break even at all with such a price point.

Nevertheless, investors are snapping up olive orchards around the greater Sacramento area in a rush reminiscent of the Napa Valley land grab that characterized the birth of the region's wine industry in the 1970s. Do they know something the rest of us don't?

Despite the crowded playing field locally, production outside of California is negligible and the national market remains dominated by imports. Paul Vossen, farm adviser for UC Cooperative Extension, says the United States still imports 35 million gallons of olive oil a year. And while demand for domestic olive oil has skyrocketed, most of the nation's climate remains unsuited for producing it, putting Sacramento-area producers at the industry's forefront.

"As soon as you leave California, the market is completely empty," says Mike Madison of Yolo Press. "The demand is huge. I've got an old college roommate in Ohio willing to buy all that I'll sell to him."

Madison has already sold out of last year's olive oil, and he expects his business to increase by 200 percent a year as he expands his exports. Because retailers often tack the cost of shipping onto the retail price, shipping costs are a concern for Madison, as is the loss of control over how his brand is ultimately marketed once it's out of his hands.

Even for producers with a strong retail presence, profitability is no guarantee. Harvesting olives is time consuming, and because labor can account for 45 percent to 50 percent of total production costs, it's a closely watched expenditure.

Jon Fadhl of Jovia Groves, in Dixon, opted to reduce his labor needs by planting with a method known as super-high density, which involves planting the trees much closer together (600 to 900 trees per acre as opposed to the traditional 100 feet per acre), pruning the trees to remain smaller, and trellising the branches similar to grapevines.

In addition to allowing a greater number of trees to be planted per acre, the method allows for mechanical harvesting. His olive yield is relatively the same, but harvest costs have dropped from $500 an acre for hand-picking to just $125 an acre.

Despite the savings, the physiology of many varieties of olive trees doesn't lend itself to super-high density planting -- a factor that deters many artisan producers looking to achieve specific olive flavor profiles. As a result, most small orchards are planted traditionally and must be hand picked.

Yolo Press found an innovative way to get through the harvest without blowing its labor budget. Borrowing a cooperative model from Europe, Madison invites customers to pick olives alongside his family in exchange for oil, marketing the experience to city dwellers looking for a taste of open space and fresh air. "It drives my insurance guy crazy," laughs Madison. "And it can be unreliable, but it's a lot of fun."

Shermain Hardesty, director of the UC Small Farm Center, in Davis, calls the move brilliant. She adds that while the market for olive oil seems lucrative, it's no easy investment. Even for those who can afford the initial expenditures for land and labor, the delayed return on investment often proves to be fatal.

"The largest constraint for someone starting out is capital," says Hardesty. "It takes about five to seven years to reach a commercial-bearing stage (the point at which newly planted trees produce a large enough crop to make oil), which is a long time to go without revenue."

Rather than fight a battle with the balance sheet, many producers look to supplement their oil ventures through auxiliary income. Stockton-based Bozzano Olive Ranch hopes to establish itself first as a custom mill, pressing olives from outside orchards into oil.

It's a move the Bozzano family believes will turn the industry's typical profit timetable on its head. With trees planted in February, they're still several years away from producing any olive oil of their own but will offer custom milling to other growers in the meantime.

"There are tons of people planting olives, but not a lot of people are milling," says Joe Bozzano. "We're just getting started with our own olives, and this will help get us through those growing pains."

While he declines to share specifics, Bozzano notes that industrywide fees typically range from $300 to $400 per ton. Since even a small mill can cost upward of $100,000, a figure out of reach for most family-owned orchards, there's a healthy demand for the service.

After years of taking his fruit to an outside facility, Madison added a mill to his Yolo Press operation. In addition to revenue from usage fees, the mill provides greater control over the crushing of his fruit and helps foster a sense of community with other small producers.

"It bolsters the bottom line, but it's also part of the culture. I took my olives to another press before I had my own mill. I couldn't have started without that transitional phase, so now I'm returning the favor," Madison says.

Orchard owners Mark Nalley and Kurt Kornchuck took a different approach when they established the California Olive Oil Company. Looking to extract more profit from the olives themselves, they sell 95 percent of their fruit to the Musco Family Olive Co. in Orland. Their olive oil is produced from the remaining olives, as well as olives purchased from outside growers.

With olives generally bringing in $500 to $1,000 a ton, the system is so cost-effective it covers all orchard maintenance costs and earns a profit. Additionally, purchasing different varieties of olives allows Nalley and Kornchuck to create greater flavor variations in their oil without the expense of diversifying their own plantings. "We love olive oil, but selling the fruit pays the bills," says Nalley, who is also the California Highway Patrol's chief helicopter pilot. "We're actually looking to expand our acreage, and we'll probably sell most of that additional fruit."

While a sense of ingenuity helps, it isn't always enough.

"There's an old phrase about planting grapes for your children and olives for your grandkids -- it's trite but true," says Ash. "With land prices in California … I don't know if everyone that's planting (olives) right now will see a return on investment within this generation. For the smaller producers, it's really a labor of love."

Ash helps her clients differentiate their products, either through distinctive packaging or marketing. Ash also helps them explain their prices. "You have to explain to the consumer, who sees olive oil for $5 at the grocery store, why your product is worth the $20 price tag," she says.

The mainstreaming of artisan oils once relegated to specialty shelves, a push for healthier cooking oils and an increased desire to support local agriculture are all signs that the local olive industry has only begun to blossom.

"California is currently producing 400,000 gallons of extra virgin olive oil. In 2008, we'll surpass French production, and by 2009 we'll hit 1 million gallons of oil," says Patricia Darragh, executive director of the California Olive Oil Council. "We'll still have a long way to go. The bandwagon is not full."