Field of Dreams

Hawaii agriculture in transition

For Andrew Hashimoto, Hawaii is a field of dreams. The low-key, soft-spoken dean of the College of Tropical Agriculture and Human Resources at the University of Hawaii at Manoa, Hashimoto dreams of doubling the value of the Aloha State’s $500 million agricultural sector. And he wants to do it in a mere five years. Say what? “We know it’s a lofty goal, but we want to move toward that,” Hashimoto says.

The dean has his work cut out for him. Hawaii’s overall agricultural output has remained relatively stagnant for the past five years in terms of economic value. Total farm revenue for 2001, the latest year for which figures are available, fell 1 percent, to $511 million.

Drought and diminished demand from the visitor industry as a result of Sept. 11 has hampered farmers. Even diversified agriculture, supposedly the growth engine of Hawaii’s farm industry, eked out only a 1 percent increase in 2001 to 2002.

And that’s not all. Simmering issues over water rights continue to create uncertainty that scares off potential investors. Many large landholders remain unwilling to let leases of 10 years or longer, making it hard for farmers to justify high-value-added, but slow-growing nut, fruit and forestry crops. Few young people are moving into agriculture, and the field remains, in the eyes of most Islanders, a dead-end, plantation profession. “We don’t see many young people coming to us at all,” says Steve Bazell, the head of the U.S. Department of Agriculture’s Farm Services Agency in Hawaii, which offers agricultural loans and loan guarantees.

Despite all this, Hashimoto has a reason for optimism. In 2001, the value of sugar and pineapple crops (not including higher-value niche areas in those crops, such as unrefined sugar and organic fresh pineapples) only tallied $154.1 million, according to the Hawaii Agricultural Statistics Service. This represented approximately 30 percent of the total agricultural take and far less than the $356.9 million tallied by diversified agricultural products.

Compare that to five years ago, when the agriculture switchover from plantation to niche crops was barely starting to take hold. In 1997, the two plantation staples pulled in $177.1 million, or 35 percent of the state’s total. In that same year, diversified ag pulled in $327.5 million. While plantation crops have shrunk by 13 percent over the past five years, diversified ag has grown by 9 percent.

			Fruits: Acreage, utilization and value, State of Hawaii, 2000-2001¹
			ACREAGE					UTILIZATION
	FRUIT		Total 2000 Acres	Total 2001 Acres	Harvested² 2000 Acres	Harvested² 2001 Acres		Fresh 2000 Acres	Fresh 2001 Acres	Processed 2000 Acres	Processed 2001 Acres		Total 2000 1,000 lbs	Total 2001 1,000 lbs	Farm Value 2000 $1,000	Farm Value 2001 $1,000
	Avocados	360	360	220	230	640	600	-	-	640	600	371	342
	Bananas	1,710	1,660	1,460	1,490	29,000	28,000	-	-	29,000	28,000	10,440	10,640
	Guavas	800	710	680	610	-	-	15,900	15,300	15,900	15,300	2,051	2,157
	Papayas	2,845	2,860	1,650	1,950	50,250	52,000	4,250	3,000	54,500	55,000	16,007	14,598
	Pineapples	20,700	20,100	*	*	244,000	220,000	464,000	426,000	708,000	646,000	101,530	96,337
	Others³	1,410	1,554	555	728	2,715	2,630	134	166	2,849	2,796	2,495	2,453
	Total	27,825	27,244	4,565	5,008	326,605	303,230	484,284	444,466	810,889	747,696	132,894	126,527
	- = Not Applicable. * = Not Available.
1 Data for current year are preliminary. 2 Average or total during the year. 3 Some of the fruits included in this category are orange (since 1987), lime, grape, grapefruit, lychee, mango, atemoya, passion fruit, persimmon, poha, rambutan, starfruit, strawberry, tangerine, tangelo, and others. Specialty pineapple was excluded from other fruits beginning in 1998 but included in prior years.
SOURCE: HAWAII AGRICULTURAL STATISTICS

Clearly, diversified ag is digging deeper and deeper roots into Hawaii’s rich, red soils. Hashimoto hopes that increased substitutions of local for Mainland crops, combined with a rise in high-end agricultural research in Hawaii, will contribute greatly toward his goal.

While few would put money on Hashimoto’s quest, one thing seems clear. While diversified agriculture has been trumpeted as Hawaii’s agricultural savior for some time, the most difficult part of creating a truly diverse ag sector may be behind us. Today, more than ever before, a wider variety of crops is also coming out of the ground, from Asian vegetables to nutraceuticals to melon crops. Meanwhile, Hawaii farmers now hold a significant percentage of shelf space in Island supermarkets, some 30 percent to 40 percent of fresh produce, by some accounts.

Fruits: Value of sales 1997-2001
Year		Pineapples	Other	Total
		$1,000 (Fresh weight basis)
State
1997	91,721	29,564	121,285
1998	92,776	24,530	117,306
1999	101,448	28,525	129,973
2000	101,530	31,364	132,894
2001	96,337	30,190	126,527
SOURCE: HAWAII AGRICULTURAL STATISTICS

Equally important, more and more producers are growing, not with the hope that someone will buy their products, but with a market specifically in mind. One often cited example is Dean Okimoto, whose Nalo Greens does custom growing for high-end restaurateurs around the Islands. “We are going to be looking at a more market-driven kind of agriculture, where we are not producing what we can grow, but growing what people want to buy,” Hashimoto says.

While these efforts collectively will never replace the total acreage under tillage at the apex of the plantation era, the actual economic impact of these new production systems will likely be greater. For example, the total take of the vegetable, melons, herbs and ginger-root farms was $62 million in 2001. The farm value of Hawaii sugar crops, minus processing, was only $57.8 million, even though the sugar crops occupied 46 percent of state ag lands. Those other crop sectors combined occupied less than 20 percent of Hawaii ag lands.

Green Leaves: More and more specialty crops, such as anthuriums, are being grown locally.

“You may lose 10,000 acres of Waialua Sugar, and when you wake up five years later, there are two farmers who have taken up half that acreage. And you might say that’s a sad thing when those two farmers may very well be making more money than Oahu Sugar ever made,” says Paul Brewbaker, economist at Bank of Hawaii, who expects the state’s agriculture sector to grow at a 5 percent to 10 percent clip over the next five years, easily outpacing most other parts of the state’s economy.

Source: Hawaii Agricultural Statistics Service

The shift to higher-value crops typified by the success of the vegetable, melon, herb and root-crop farmers has permeated the cultures of the Islands’ largest ag operations. Take, for example, Alexander & Baldwin Inc.’s (NASD:ALEX) Maui sugar operations. In 2002, about 5 percent of A&B’s sugar crop was in special products, such as turbinado, unrefined sugar or the raw sugar crystals that go into the distinctive light, brown “Sugar in the Raw” envelopes in coffee shops around the country (A&B has an exclusive deal to supply Cumberland Packing Co., which distributes Sugar in the Raw). That’s up from 0 percent five years ago, according to Steve Holaday, who oversees all of A&B’s Hawaii agricultural operations.

And while Holaday won’t disclose how much more money A&B can make on these specialty products, it’s considerably more than the $20 per ton to $40 per ton they pocket selling white commodity sugar. Not surprisingly, he hopes to shift the percentage of his production further to the specialty side. The Islands’ only other remaining sugar grower, Kauai’s Gay & Robinson, likewise hopes to shift its balance away from common white sugar. “You’ve got to get out of the commodity business and into the specialty businesses,” Holaday says.

On the Valley Isle, Maui Land & Pineapple Co. Inc. (ASE:MLP) generated 30 percent of its revenues this year from specialty production. “We are still in transition,” says Douglas Schenk, president of ML&P subsidiary Maui Pineapple. “We want to get close to 70 percent of our revenue from noncanned product and 30 percent from canned.” They are certainly heading in the right direction. Acreage in pineapple has dropped 30 percent over the past five years, but the company’s revenues remain at around $100 million.

Source: Hawaii Agricultural Statistics Service

A quick look at Maui Pineapple’s portfolio reveals how complex diversification can be. First, there is the fresh pineapple segment. That includes fresh-cut, whole and whole organic, all sold on the Mainland. Then there are the company’s deals with Indonesian pineapple canneries to market its products in the United States.

Maui Pine also runs plantations growing hybrid varieties of pineapple in Costa Rica. And they are selling other fresh-cut and whole, tropical fruits as well, imported to the U.S. Mainland from Brazil and Mexico under Maui Pine’s Royal Coast label. That segment of Maui Pine’s business is growing by 30 percent, Schenk says.

Tomatoes: Acreage, production and price, State of Hawaii, 1997-2001
YEAR	JAN.	FEB.	MAR.	APR.	MAY	JUNE	JULY	AUG.	SEP.	OCT.	NOV.	DEC.	TOTAL OR AVG.
HARVESTED ACRES¹
1997	36	33	37	35	32	29	32	26	36	28	40	40	340
1998	44	43	46	40	30	22	13	11	9	25	57	46	300
1999	48	48	38	37	41	37	33	32	38	41	45	50	420
2000	49	49	43	50	58	56	33	40	42	47	44	48	500
2001	48	47	61	64	60	49	49	47	44	50	55	60	580
PRODUCTION - 1,000 POUNDS
1997	610	770	835	1,190	1,281	885	906	482	532	592	949	1,168	10,200
1998	853	1,060	1,264	1,196	880	915	139	153	150	781	1,287	1,522	10,200
1999	1,413	1,493	1,599	1,423	1,386	1,650	1,339	1,582	1,007	1,436	1,182	1,290	16,800
2000	1,138	1,318	1,208	1,347	1,423	1,414	1,252	1,372	1,173	1,381	1,727	1,747	16,500
2001	1,423	1,316	1,402	1,394	1,453	1,805	1,547	1,502	1,577	1,463	1,283	1,335	17,500
FARM PRICE - CENTS PER POUND
1997	52.8	58.7	65.8	59.4	49.1	50.5	45.1	48.3	52.8	44.7	58	57.3	54
1998	51.4	47.7	54.9	51.6	57.9	48.2	65	75.2	73.8	58.2	57.5	58.5	55
1999	56.6	45.1	42.1	48.7	51.4	50.1	43.3	39.1	48.5	38.3	51.9	52	47
2000	46.4	43.9	46.8	56	49.9	45.8	43	46	64.9	59.8	62.1	52	52
2001	58.8	63.2	61.6	55.6	56.6	51.5	43.5	49.7	43.7	45.9	55.3	54.7	53
1 Sum of monthly data exceeds total because harvest period is longer than one month.							SOURCE: HAWAII AGRICULTURAL STATISTICS

“We have a strategic initiative to increase the gross margin of our business. When we looked at how best to do that, we had certain limitations by continuing to operate in Hawaii only,” Schenk says.

Green Leaves: Papayas still offer plenty of value to local farmers.

Looking beyond Hawaii has become a key growth initiative for many growers in the state. Sandra Kunimoto, the newly appointed head of the Hawaii Department of Agriculture, says building export markets will be a priority for her. And some Asian fruit crops, such as lychee or rambutan, are selling at premium prices. Hawaii growers can’t ship enough out of the Islands. The total value of Hawaii agricultural exports has risen smartly from $132.1 million in fiscal 1997 to $162.7 million in 2001, according to the USDA.

Selling to locals has also gained in allure. Whereas a few years ago, most of the Hawaii products found in Honolulu supermarkets were local papayas, Maui onions, pineapples and bananas. The diversity of locally grown crops has soared due to import substitution.

Take Hawaii’s onion crop, for example. It has risen from 1.7 million pounds in 1997 to 5.4 million pounds in 2001, according to the Hawaii Agricultural Statistics Service. Harvested acres have risen from 185 to 300 and value of onion sales, spurred by the introduction of sweet onions from Kunia and Ewa, has risen from $1.7 million in 1997 to $4 million in 2001. Best of all, farm prices coming from the increase in scale have dropped from 98 cents per pound on average to 75 cents per pound, bringing the local product much closer in price to its Mainland counterpart.

Dry Onions: Acreage, production, and price, State of Hawaii, 1997-2001
YEAR	JAN.	FEB.	MAR.	APR.	MAY	JUNE	JULY	AUG.	SEP.	OCT.	NOV.	DEC.	TOTAL OR AVG.
HARVESTED ACRES¹
1997	6	3	14	16	19	22	32	18	16	11	14	14	185
1998	14	11	16	37	45	36	21	23	22	13	21	11	270
1999	11	11	29	51	52	42	21	21	13	17	24	18	310
2000	5	9	56	59	28	32	25	21	43	35	17	10	340
2001	10	33	28	29	29	30	16	20	21	25	15	44	300
PRODUCTION - 1,000 POUNDS
1997	48	17	135	189	203	140	285	133	178	102	134	136	1,700
1998	129	138	299	607	611	534	227	279	186	179	158	153	3,500
1999	112	131	332	332	436	394	307	355	204	217	351	229	3,400
2000	61	97	880	771	422	667	337	296	241	241	166	121	4,300
2001	108	165	927	1,355	568	848	418	289	263	135	188	136	5,400
FARM PRICE - CENTS PER POUND
1997	121.6	131	166.6	117.2	84.2	74.8	71.9	68.5	84.8	93	109	128.7	98
1998	143.4	142.9	142.2	76.7	45.2	37.5	39.3	49.7	48.2	70	110.7	122.6	73
1999	129.5	134.8	110.5	65.6	42.3	34.6	36.4	51.6	67.5	71.7	75.6	86	67
2000	105.7	126.9	89.7	64.6	51.7	56.6	57.3	64.4	56.7	71.8	94.6	108.5	71
2001	113.5	93.1	73.9	68	81.5	58.1	55.4	73	98.9	113.3	109	110.9	75
1 Sum of monthly data exceeds total because harvest period is longer than one month.							SOURCE: HAWAII AGRICULTURAL STATISTICS SERVICE

In the tomato sector, total acreage has increased from 340 in 1997 to 580 today. The value of tomato sales was $5.5 million in 1997, and soared to $9.3 million in 2001. That’s in line with Dean Hashimoto’s hopes that Hawaii can achieve greater food self-sufficiency, a goal that seems more urgent now that the international food supply could be threatened by terrorists or further transportation disruptions. “If you can conjure up some way to grow the product on Oahu and deliver it to the local household, there are enormous opportunities for import substitution,” says Brewbaker.

Another area to watch closely is seed crops and the next generation of agricultural research that may take place in the Islands. Seed crops (mainly corn) have been a strong player in the state’s agricultural economy. The biggest seed companies in the world, such as Pioneer Hi-bred and Dow Agrosciences subsidiary Mycogen Seeds, have come to Hawaii because they can jam four growing seasons into a single year, the only place in the United States where this is possible. It allows them to arrive at experimental conclusions and grow seed for Mainland fields far more quickly. In 2001, seed crops were valued at $32 million, well up from $24 million in 1997.

Few expect seed-crops companies to continue growing their operations here at that pace, but what Hashimoto and others hope is that the success of seed crops will lure research to Hawaii in exotic agriculture, such as so-called “biopharming.” This is the nascent science of genetically engineering food products that contain vaccines, proteins, nutrients or other substances that could be used for medical treatments. Since they would be priced more like drugs than food crops, the potential for high-value research and development work in this area is enormous, Hashimoto says.

It’s a touchy subject, however, as genetically modifying crops remains a political lightning rod –- and one that has perhaps hurt Hawaii already in the papaya market. “There is a lot of uproar going, and I have a concern that the Hawaii rainbow-papaya growers have not been forthright with the customers,” says John Roberts, senior vice president for Medford (Oregon) Bear Creek Corp., the parent company of Harry and David’s, America’s largest food catalog business, which sells Hawaii apple bananas and pineapples, but not papayas.

Dry Onions: Acreage, yield, production, price and value, by counties, ‘97-’01
Year	Harvested Acres	Yield/Acre 1,000 lbs.	Production 1,000 lbs.	Farm Price cents/lb.	Value of Sales $1,000
STATE¹
1997	185	9.2	1700	98	1666
1998	270	13	3500	73	2555
1999	310	11	3400	67	2278
2000	340	12.6	4300	71	3053
2001	300	18	5400	75	4050
COUNTIES
HAWAII/HONOLULU/KAUAI²
1997	5	2	10	80	8
1998	35	14.3	500	37.5	188
1999	120	4.2	500	43.2	216
2000	150	10.7	1600	61.7	987
2001	150	21.7	3250	63.3	2057
MAUI
1997	180	9.4	1690	98.1	1658
1998	235	12.8	3000	78.9	2367
1999	190	15.3	2900	71.1	2062
2000	190	14.2	2700	76.5	2066
2001	150	14.3	2150	92.7	1993
1 Sum of county estimates may not add to State total due to rounding. 2 Honolulu and Kauai are combined with Hawaii to avoid disclosure of individual operations.
SOURCE: HAWAII AGRICULTURAL STATISTICS SERVICE

Another touchy subject is the role of the state in the agricultural sector. A&B’s Holaday says that up to now, the state Department of Agriculture has focused far more energy on enforcement of regulations than on building agriculture in the state. That’s something that incoming director Kunimoto aims to change. She will likely get the mandate to do it with a pro-business Lingle administration at the helm. For sure, Hashimoto and his troops at CTAHR will need all the help they can get from the state and others to make their ambitious goal a reality and convert ag from a sector in transition into a much-needed economic dynamo in Hawaii.

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