Share | |

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

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
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

“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

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

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.

Hawaii Business magazine invites you to comment on our articles and the issues they raise. Comments are moderated for offensive language, commercial messages and off-topic posts and may be deleted. Some comments may be chosen for inclusion in the magazine on the Feedback page.

Add your comment:

 

Don't Miss an Issue!
Hawaii Business,March