The continuing commercial viability of olive oil production in New Zealand is a question to be considered by any entrant to the Industry. With its relatively high land and labour costs the commercial viability of olive oil production in New Zealand will always be dependant on retail consumers recognising the superiority of locally produced extra virgin olive oil and being willing to pay a significant price premium for the product. The European olive industry with its cheap labour, subsidies and production surpluses, exports large volumes of cheap olive oil in all grades, including extra virgin olive oil, however New Zealanders are increasingly appreciating the fact that cheap imported oils compares very unfavourably with the local product. Internationally, extra virgin olive oil is defined as oil containing less than 0.8% fatty (or oleic) acid. Most imported European extra virgin olive oil is close to this level, while most New Zealand oils average around 0.1% to 0.3%. The effect of significantly lower fatty acid content is appreciably superior natural flavour and colour. Another local advantage is the fact that imported oils are usually over one year old by the time they reach our supermarket shelves and as a result, very often rancid to varying degrees. A comparative tasting of any good New Zealand oil and any common supermarket imported brand will usually establish this fact.

Up to this time the New Zealand market for high quality extra virgin olive oil has proven has been encouragingly strong. Retail prices for locally produced oil range commonly range from $30.00 to $50.00 per litre (sold in 375ml or 500ml bottles) compared to $11.00 to $12.00 per litre for imported oil. It remains to be seen whether these prices can be maintained as much larger volumes of oil result from further large plantings of olive trees coming into production, however New Zealanders are undoubtedly becoming increasingly sophisticated in their culinary tastes and appreciative of the health benefits of a Mediterranean type diet, including the benefits of olive oil compared to our traditional diet, high in animal fats. The New Zealand consumers growing taste for high quality olive oil might very well come to have its parallel with the rapid development of the New Zealand wine Industry through the mid 1970’s to 80’s, when consumers largely out grew the National taste for cheap, sweet, bulk quality wine, (often Riesling and Muller Thurgau in a cardboard cask), in favour of the much superior and more expensive New Zealand Bordeaux style wines and the wine industry underwent a period of major expansion that has lasted to the present day. The continuing development of the New Zealand olive industry oil will of course, in the medium to long term, lead to production surpluses. In the long term the future of this industry, as with all New Zealand agriculture and horticulture industries will depend on our ability to export efficiently and profitably.

At a local level processing fresh olives into extra virgin olive oil using owner operated equiptment or (for growers producing small quantities) by contract pressing, is a relatively strait forward excersise. Growers with sufficient olive production together with the marketing ability to successfully develop their own wholesale or retail brand of olive oil, are likely to have an exiting and potentially profitable future.

While there has been considerable commercial investment in larger scale commercial olive growing in Hawkes Bay, significant proportion of Hawkes Bay’s olive tree plantings have been established by small holders or “lifestyle” growers. Olives are an ideal tree crop for lifestyle growers who for whatever reason (employment off the property or perhaps simply the desire to enjoy a relaxed life style), do not wish to be committed to the full time occupation demanded by most orchard tree crops. This is not to say that for optimum cultivation, olives do not require some intelligent management input. Like all cultivated and managed tree crops, olive trees need to be fertilized, shaped, pruned and when necessary, sprayed. In its formative years the ideal olive tree is created by careful shaping and through ongoing pruning to maintain shape and an ideal canopy (each variety having its own particular growth habit), but do not require the intensive annual winter and summer pruning required to maintain and regulate the annual wood renewal essential to maintain pip or stone fruit production. Spraying operations are generally much less intensive than in fruit orchards and usually involve the use of “soft”, or even organic chemicals, mostly applied in response to periods of excessive rainfall or humidity between tree flowering in spring and autumn harvest. Some growers have developed successful certified organic olive orchards, much assisted by the fact that olive trees and their fruit are not susceptible to the wide range of insect pests that orchardists live with and spray for throughout the year. Like all orchardists commercial olive growers spray for fungal diseases, particularly in periods of high humidity, but the intensity of this operation is generally significantly less. An open tree structure and adequate tree spacing is a primary aid to encourage air movement in the olive grove, minimising humidity and the need for chemical spraying.

As a very general observation it may be stated that other than in large scale commercial plantings, olive cultivation is often a reasonably relaxed operation. There are essential operations that need to be competently carried out from time to time through the year, however such tasks e.g., spraying and the major harvesting operation, do not require timing to the day or even hour as they would do in fruit growing orchards. Most growers find time for another occupation or a genuine “life style”. Harvesting is the most labour intensive operation and constitutes a significant proportion of the overall cost of production. The olive harvest season is conveniently positioned between the end of the grape harvest season and the start of apple orchard pruning, as a result the availability of itinerant pickers is not usually a problem, although the cost of hand picking, especially in immature and low producing groves, may well be. A recent development showing considerable promise for the Industry was the importation by a Hawkes Bay contractor of a machine to remove the olive crop by “shaking” trees and intercepting fallen ripe fruit.

Within Hawkes Bay olive trees are grown on a range of soils types, demonstrating that in this ideal climate, given a well drained and sunny site, olive trees are not over demanding in their requirement. In Mediterranean Europe where olive trees have been cultivated for at least 3000 years, different varieties of olives have evolved to grow on a range of soils, from heavy clay through to free draining alluvial or volcanic ash. Similarly, here in Hawkes Bay olives are successfully cultivated on the clay pan soils of Havelock North (here deep sub-soil ripping is beneficial), on the free draining sandy loam limestone derived soils that form much of Hawkes Bay’s hill country, on the light, porous volcanic ash soils in southern areas of the Heretaunga Plains and on the extensive flat and free draining “red metal” soils (a blend of free draining red volcanic scoria, stone and alluvium) that lie in broad bands through western areas of Central Hawkes Bay and the Hastings District.

While reasonably versatile in their soil requirement olive trees will not tolerate constant wet soil conditions and a free draining site is essential. Olives need the full day’s sun to ripen and express their oil potential. A south facing slope is unlikely to be satisfactory. In exposed areas shelter belts are can be very useful as very strong winds in spring have the potential to decimate fruit flowers and even damage young trees. Olives have a shallow root system and in wet areas prone to high winds, lodging (trees falling over) is likely to be a problem.

The use of a simple single post and wire support system for young trees in their first five years from planting is an excellent investment and defence against wind damage and also an aid to assist when training and shaping trees. A satisfactory alternative is a single post support system for individual trees. A further site consideration is the potential for spring frosts. Mature olive trees are generally quite frost tolerant and indeed, like all temperate climate tree crops, require low temperatures to induce a dormant period, however late spring frosts may adversely affect flowering and consequently fruit yield. Young olive trees having a significant proportion of soft new wood in their first two years from planting can be affected by severe spring frosts.

For a safe establishment new tree plantings need an adequate and reliable supply of irrigation water. While many properties in favourable growing localities have been established without irrigation, such plantings are something of a gamble on the weather. In a good season young plantings might well thrive without the benefit of irrigation, however in Hawkes Bay the potential for early and extended drought is real and needs to be carefully considered. The need for irrigation through the establishment phase, and in subsequent year’s for maintenance and growth, should probably be determined by the physical nature of the planting site. Olive tree plantings on exposed sites or on shallow or very free draining soils should definitely be established with in line drip irrigation in place. Sheltered sites having heavier, deeper soils and superior water holding capacity are more likely to support healthy tree growth without irrigation, especially in favourable seasons. Following their second winter from planting, irrigation becomes less critical and in fact needs to be carefully controlled. Excessive watering will discourage the development of the strong relatively deep root system needed to support a productive mature tree, especially in exposed locations. Irrigation becomes important again for mature trees which need an adequate water supply to grow and develop each seasons olive crop.

There are numerous varieties of olive trees commercially available and suitable for oil production, fresh olive processing, or duel purpose. It is not a purpose of this article to advise growers on the selection of varieties, but rather to emphasise that variety selection and planting layout is important and that inexperienced growers need to obtain qualified competent advice on this subject. Some of the most productive varieties are not self pollinating and must be established in close proximity to another different variety that will provide cross pollination. The choice of the pollinator is important as different varieties flower at different times over an (approximately) six week period. Some of the early olive groves planted in Hawkes Bay were established before the importance of cross pollination was appreciated. Despite promising flowerings, fruit set and production was very low until in later years when suitable pollinating varieties were established in these groves.

Hawkes Bay now has a number of experienced and capable management consultants and contractors who are available to advise and assist new investors, or even to establish and manage groves for absentee or busy owners. Good advice is probably the best investment any new investor can make and further information on this subject is available on request.

Unlike the pastoral industry (especially the sheep and lamb trade) which enjoys a substantial cost of production and efficiency advantage over most overseas competitors, the apple industry faces intense competition from a number of regions e.g., South America, South Africa and China, who have, or are rapidly developing, substantial apple industries. This competition has intensified as northern hemisphere growers and wholesalers have adopted new, extended apple storage techniques enabling their produce to be sold out of season at a time New Zealand southern hemisphere growers and exporters traditionally enjoy a substantial quality and price advantage.

An important factor behind the ability of overseas growers to compete successful with New Zealand has been the New Zealand Industries past failure to license the many outstanding apple varieties bred or discovered within New Zealand (a shortcoming shared with the Kiwi Fruit industry – with similar results). New Zealand bred apple varieties such as Royal Gala and Braeburn, are now grown in large quantities throughout the world, successfully competing with our own exports.

A current Industry strategy likely to have long term implications in re-establishing a competitive edge in world markets is the continued breeding and development of new and better export apple varieties – and their commercial protection through international plant patents. The objective is that these new varieties are grown in controlled quantity under license in New Zealand (as well as overseas in controlled numbers to ensure a seasonal continuity of supply) to avoid over production, so maintaining satisfactory market demand and prices.

Competition from overseas growers within over supplied export markets significantly lowered the export price for apples paid to
Hawkes Bay growers for the 2005 harvest season. 2005, returns for conventional orchards, especially those with predominantly older apple varieties now grown in quantity by overseas competitors, were been described by Pipfruit New Zealand as “a catastrophe”. Earlier projections to growers from exporters – of $16 to $22 per carton on the swamped European market, were followed by actual returns of around $8; approximately half of the production and marketing cost to growers. The immediate result was a drop in the price expectation for apple orchards, now commonly quoted in the range of $60,000 per canopy hectare (for conventional orchards – as opposed to high density dwarf plantings), compared to the 2003 – 2004 (approximate) average price expectation of $70,000 per canopy hectare for well managed properties.

A more substantial collapse in orchard prices (expected by many on-lookers) was due in large part to significant competition for orchard quality and horticultural land for alternative uses such as Japanese export squash (pumpkin) prices. This price buffering effect undoubtedly had a significant influence on the majority of orchard bank managers and lenders who, seeing the value of their client’s equity largely maintained in the face operating losses, chose to support loss making orchards through to another season.

The 2006 export season experienced significantly improved apple prices. Early market reports suggest that these improved prices have been sustained for much of the recent 2007crop. As a direct result orchard prices have stabilized at about 2004 levels.

A more substantial collapse in orchard prices (expected by many on-lookers) was in part due to significant competition for quality horticultural land for alternative uses such as Japanese export squash (pumpkin) prices. This price buffering effect undoubtedly had an influence on the majority of orchard bank managers and lenders who, seeing the value of their client’s equity largely maintained in the face significant current operating lossesand overdrafts, chose to support their clients through to another season.

The 2006 export season experienced significantly improved apple prices. Early market reports suggest that these improved prices have been sustained for much of the recent 2007crop. As a direct result orchard prices have improved and stabilized at about 2004 levels.

In Hawkes Bay there is substantial ongoing buyer enquiry for good quality “lifestyle with income” rural property, a demand largely met with small orchards and vineyards. In the late 1980’s prospective investors and young orchardists might well have been advised to avoid purchasing small properties of fewer than 10 or even 15 hectares, these being commonly considered at that time uneconomic to develop because of their inherent unfavorable scale of operation. This situation has changed considerably, in part because competitive orchard leasing has taken over a substantial proportion of the Hawkes Bay orchard industry and in part also, because organized, skilled, casual contract labor has replaced the need for permanent orchard and vineyard labor. Within reasonable boundaries it is entirely practical for a lifestyle buyer to have major orchard or vineyard labor tasks (pruning, thinning, spraying, harvesting, etc,) performed at an economic cost by skilled, supervised contract labor at an economic cost to their operation.

Orchard leasing however is the preferred option of most lifestylers who purchase orchards. For large orchard operators, leasing small orchard blocks adds significantly to their scale of operation, efficient use of resources and overall profit potential. For the lifestyle buyer there are the advantages of a guaranteed fixed income – free of the inherent risks of orcharding, as well as time for a genuine quality “lifestyle”.