Sugar survivors' hopes brighten

By Jan TenBruggencate
Advertiser Kaua'i Bureau

KAUMAKANI, Kaua'i — The sight of dusty trucks rattling down dirt roads, hauling tangled loads of sugar cane to aged factories has disappeared from all but two of the Hawaiian Islands in the past 20 years.

A "rake" pushes burned cane into rows for pickup by Gay & Robinson haulers in a former Kekaha Sugar field. Jan TenBruggencate • The Honolulu Advertiser

Only two sugar plantations are still hanging on: A&B's Hawaiian Commercial & Sugar Co. on Maui and Gay & Robinson on Kaua'i.

Their managers say the next decade looks far more promising than the past two. The likely passage of a federal farm program may bring stability to the industry that long ago was eclipsed by tourism.

"The mood in Congress is that U.S. agriculture is in big trouble, and we've got to do what we can to protect the U.S. rural economy from collapsing," said Jack Roney, director of economics and policy analysis for the American Sugar Institute in Washington, D.C.

Hawai'i is a good example of the collapse. Waving fields of cane were once so prevalent in the Islands that it was called "King Cane." But sugar has vanished entirely from the Big Island and O'ahu, and when Amfac's Maui and Kaua'i plantations closed in 1999 and 2000, respectively, that left each of those two islands with only one remaining sugar plantation.

Chronically low world sugar prices doomed the plantations that could not produce high sugar yields per acre. Some plantations were producing only eight tons of sugar per acre. By comparison, in good years with adequate sun and water, the two lone survivors — known by their initials HC&S on Maui and G&R on Kaua'i — produce 14 tons or more per acre.

Sugar acreage plummets

	Hawaiian Commercial & Sugar Co.
•	A division of Alexander & Baldwin
•	37,000 acres
•	Produces 225,000 to 235,000 tons of sugar annually
•	850 employees Gay & Robinson
•	Owned by members of Kaua'i's Robinson family
•	7,400 acres, plus addition over next two years of 4,300 acres of former Kekaha Sugar Co. land
•	Produces 50,000 tons of sugar annually, expected to grow to 75,000 tons in 2003
•	300 employees, expected to grow to about 330

And while HC&S and G&R officials are still holding their breath about recovering prices for their product, they are looking forward to breathing a little easier.

"The Farm Bill is up for renewal next year, and I think we have a very good chance of being in it," said G&R President Alan Kennett. "The 1996 farm bill was an economic disaster."

The proposed farm support legislation that local officials have seen suggests nobody's going to make a killing, but both plantations could do a little better than break even.

"I think this is a pretty good farm bill for sugar," said Steve Holaday, manager of HC&S.

Both plantations have taken recent dramatic steps to survive. HC&S last year closed the venerable Pa'ia Mill and is grinding all its cane on a year-round harvesting schedule at its Pu'unene factory.

With the closing of the one mill, the company laid off 75 workers to cut costs in the face of a year of plummeting sugar prices and its first annual losses in recent memory.

Young sugar plants paint the Central Maui landscape. Maui's HC&S and Kaua'i's G&R are sugar's survivors. Christie Wilson • The Honolulu Advertiser

"We're water-constrained," Holaday said.

Kennett, anticipating that Amfac would close its plantations and shut down its mills, expanded G&R's Olokele Mill capacity in hopes of being able to lease some or all of the nearby Kekaha Sugar Co.'s state-owned fields. Essentially, that would do what Holaday did in closing the Pa'ia Mill: gain efficiencies by running more cane through one factory.

Kekaha Sugar grew cane on 7,700 acres, but Kennett was able to arrange to farm only 4,300 acres of it, the rest being used by a consortium of seed companies, a shrimp aquaculture firm and diversified crop farming.

Value-added niche pursued

G&R is harvesting the abandoned cane on 1,050 acres of former Kekaha fields this year. Kennett said the company expects them to yield only about six tons of sugar per acre. That is far less than G&R's average yield of 14 tons an acre, but he said that after several years of intensive farming, the firm hopes to bring the yields up.

Both companies are spending money on new capacity in anticipation of long-term survival.

"We're not doing it because of nostalgia," said A&B President Allen Doane. "We're doing it because it's a business where we can get an honest return on the investment."

Both Kennett and Holaday say one of the keys to the future of Hawaiian sugar is marketing. Crystaline white sugar — the stuff in restaurant sugar packets and in the five-pound bags at the store — is becoming a product priced too low for comfort.

"To me, white refined sugar is a commodity. I think the future is in value-added niche marketing," Holaday said.

G&R's Olokele Mill, above, processes all of Kaua'i's sugar harvest. HC&S on Maui likewise processes all of its sugar at one factory in Pu'unene. Jan TenBruggencate • The Honolulu Advertiser

Both are considering other products, including selling bulk sugar to local food processors and confectioners, making flavored syrups like those once produced by Frannie Morgan's old Hamakua Sugar, and others.

Both companies are expected to increase their efforts in the value-added area as June 2003 approaches. That's when the sugar growers' marketing contracts with C&H end.

C&H, once owned as a cooperative by all the Hawai'i plantations and later by A&B, is now owned by a Mainland investment group, with A&B as a minority partner. It runs the Crockett, Calif., refinery where Hawai'i sugar has traditionally been refined from raw to white sugar.

G&R must sell all its sugar to C&H, but HC&S already has the right to retain 10,000 tons each year for value-added sales. It sells some sugar to food processors and markets raw sugar directly or through partnerships. Under the "Maui Brand" label, it sells pale-colored Plantation White and darker Premium Turbinado. They come in restaurant sugar packets, small jars and sacks of up to 50 pounds.

Kennett said his plantation is looking at similar options, and also is looking forward to being able to deal with buyers other than C&H if the price is better elsewhere.

No windfall profits

Steve Holaday promotes niche marketing. Christie Wilson • The Honolulu Advertiser

"Traditionally, the secretary of Agriculture had two tools to regulate sugar prices: import quotas and domestic market allotments," Roney said.

But the 1996 bill took away domestic market controls, and international treaties limited import quotas. That let cheap foreign sugar into the U.S. market, damaging the domestic industry. Further, Canadian and Mexican sugar, because of the North American Free Trade Agreement, "leaked" around the import quotas that did exist, he said.

In 2000-01, as an example, European growers were guaranteed by their governments 32 cents a pound for their sugar. The excess was dumped onto the world market at 8.5 cents a pound, depressing sugar prices.

"The average world price for producing sugar is over 19 cents a pound," Kennett said. "We're below that. We can compete against the foreign sugar producers, but we can't compete against their governments."

Efficient Hawai'i plantations would be making windfall profits if they could get 32 cents a pound for sugar. The new farm bill legislation is proposing the sugar price be supported at 18 cents a pound, "essentially the same price in place since 1985," Roney said.

Holaday and Kennett said they'll survive under that price for raw sugar, and will look to the value-added products to improve their bottom lines.