Expanding Local Agriculture Into Major Economic Industry Poses Challenges

Jun 15, 2020

Sales of farm products currently represent just 0.6% of Hawaii gross domestic product. Experts say there are opportunities for it to grow, but substantial challenges as well.

Gov. David Ige has extended the mandatory quarantine for travelers arriving in the state through the end of July, meaning Hawaii’s tourism industry will likely remain shuttered for the important summer season.

As the COVID-19 recession pushed statewide unemployment to record breaking levels, leaders around the state have been talking about the need to diversify away from tourism. Agriculture has become a favorite suggestion in the decades-long discussion of diversification, particularly as production of sugar and pineapple has waned.

While there has long been talk about growing more food in Hawaii for the islands to become self-sustaining, it's the economic impact of agriculture that has been gaining attention lately.  And when it comes to the finances of farming, there is one important thing to remember, according to Nicholas Comerford, dean of the College of Tropical Agriculture and Human Resources at the University of Hawaii at Manoa.

“The purpose of agriculture is to make money. Because if you’re not making money, you’re not growing food,” Comerford said. He made the remark when speaking before a state Senate committee in May.

According to the U.S. Department of Agriculture’s latest census, sales of Hawaii-grown farm products are annually worth $563 million. That was less than 1 percent of state GDP using 2017 dollars.

Employment figures are only slightly better. In 2018, there were 6,300 jobs in agriculture, according to the state Department of Business, Economic Development, and Tourism. That works out to 0.9% of total employment in Hawaii.

If policymakers want agriculture to be a bigger slice of the economic pie, they will have to focus on increasing output on farms that are already successful businesses. Comerford says most Hawaii farms don’t meet that threshold.

“Twenty-five percent of our farms report less than $1,000 in annual sales. Twelve percent of our farms report more than 90 percent of the annual sales,” he said in an interview.

What that means, according to Comerford, is that most farms in Hawaii are not truly commercial operations. They are not making enough money to have a significant economic impact. He calls those lifestyle farms.

Comerford himself previously owned such a farm in Florida’s panhandle, where he grew blueberries and raised sheep. He says operations like that tend to fall in the category of a passion project or a retirement hobby, rather than long-term business venture.

“I had a farm instead of a boat,” he jokes. “It was a hole in the ground that I kept throwing money into.”

There are 7,328 farms in Hawaii, according to the USDA census. Two-thirds of those are less than 10 acres in size, meaning their capacity to influence Hawaii’s $89 billion economy will be limited.

Differentiating between commercial and lifestyle farms is a significant task. If government leaders want to make agriculture a bigger share of Hawaii’s economy, they will have to focus resources on farmers who are already commercially successful -- "people who already know how to farm,” as Comerford describes them.

A general framework for increasing agricultural output would be to identify already commercially successful farms, find out what limitations are holding them back from expanding, and addressing those needs.

Limitations can come in the form of access to fresh water, availability of land, having enough workers, or even damage from invasive species. Comerford says those are all constraints that government could help address, and thus expand the total value of agricultural output.

He has three criteria identifying whether a farm is a serious commercial venture: does the farm turn a profit; is the farm environmentally sustainable over time; and is the farm contributing to the local economy?

Comerford notes that the third point is particularly important when assessing the economic impact of a farm on the surrounding community, beyond its proprietors.

“They have to buy supplies at the grocery store, buy supplies at the hardware store. This kind of thing drives the economies of rural areas,” he notes.

The first question to answer is whether or not there are enough farms in Hawaii meeting Comerford’s criteria to make an economic difference. Comerford says that in his opinion, the state does not have accurate enough data to make a proper assessment, although he acknowledges that others disagree.

But he does say that the determining factor will likely be farmers and what they want out of their farms.

“The possibility is there. The big question is ‘How much can it actually do?’ That’s going to depend on the farmers; the people who actually know how to run a business and are actually looking to increase their business,” Comerford says.

That sentiment was echoed by University of Hawaii economist Sumner La Croix, author of the definitive book on the economic history of the Hawaiian Islands.

La Croix said in an interview that the sentiments of farmers, current and prospective, may be the most important limiting factor in expanding the role of farming in the economy.

“We don’t have a lot of people in the state that would like to be farmers. It’s not clear that farming is a high paying profession in the United States nowadays. There are only limited gains that could be made as far as additional pay.”

One possible way around that is the concept of “value added,” not just growing commodity crops, but turning those crops into something more valuable, thus adding value.

Hawaii Island coffee farmers are familiar with that technique. They can make substantially more money selling roasted and packaged coffee beans than they can just by bringing raw, unprocessed cherries to market.

There are also opportunities to capitalize on niche and high-end products. One hundred percent Kona coffee can fetch prices upwards of $50 per pound on international markets because it is viewed as a premium product. Macadamia nuts, one of the most expensive commodity crops by price on the planet, thrive in Hawaii, which is the main source of cultivation in North America.

Comerford says there are products that Hawaii produces better than anywhere else. The state excels in the little-known market for queen honey bees, which have been under stress in hives around the world due to Colony Collapse Disorder and varroa mites.

Commercial hemp also looms in the distance as a new and potentially lucrative product. Although federal regulators paved the way for the commerical cultivation of the long-vilified plant, state authorites have been slow to follow suit.

So while local agriculture does present opportunities to diversify total economic output in Hawaii, they are still modest in comparison to current behemoths like tourism and national defense.  

Agriculture as it is currently constituted is also likely to be a poor candidate for creating large numbers of desirable, well-paying jobs.