Hawaii's sugar industry under stress - Hawaiian sugar cane acreage and production decreases to 26% of U.S. cane production, down from 38% in 1975 - U.S. Dept. of Agriculture, Foreign Agricultural Service report

Agricultural Outlook, Oct, 1991 by Annette Clauson

Sugar cane acreage and production in Hawaii are decreasing. Major factors contributing to the decline are low returns to producers and processors, company mergers and exits from sugar production, high labor and marketing costs, a housing shortage, and competition for land.

Hawaii's sugar production peaked at 1.2 million tons in 1968, has steadily dropped since 1986, and is estimated at 805,500 in 1991. Output has fallen from 38 percent of all U.S. cane sugar in 1975 to 26 percent in 1991. Hawaii's share of combined U.S. beet sugar and cane sugar production has declined from 17 percent in 1975 to 11 percent in 1990.

Total cane acres have continuously declined since 1968 when 242,000 acres were cultivated for cane production, to about 160,000 in 1990. Less than half of the total acres is harvested for sugar each year, since the harvesting-to-planting cycle averages 24 months. With rainy weather adversely affecting the 1989 crop harvesting and replanting schedule, and planned acreage reductions, sugarcane production for 1991 is expected to be down slightly from a year earlier and 35 percent below the 1968 record.

The viability of sugarcane, grown commercially in Hawaii since 1835 and the state's leading crop, is important to each of the islands' economies. Sugarcane is grown on the four largest of Hawaii's islands, provides direct and indirect employment to over 17,000 people in the state, and generates about 10 percent of all electricity in Hawaii.

Marketing & Labor Costs

Higher in Hawaii

Hawaii has several advantages as a sugar producer. At almost 100 tons per acre, its sugarcane yields are the highest in the world, producing from 10 to 18 tons of sugar per acre and averaging 11.5 tons. It is one of the few sugar producing areas in the world where the crop age averages 24 months at harvest, thus minimizing field operations while maximizing sugar output per acre. On the mainland, the planting-harvesting cycle averages 12 months.

Hawaiian sugarcane producers have the highest nonland capital expenses per ton among U.S. producing states, and substantially higher per-ton production and processing costs than Florida, Louisiana, or Texas, the only other sugarcane producing states. The higher costs reduce the competitive advantage of Hawaii's high-yielding cane crop.

Specifically, transportation expenses are higher for Hawaiian producers, partly due to the costs of shipping Hawaiian sugar to California for refining. And because of the greater demand for skilled labor for sugar production in Hawaii and competition from other industries, labor costs (including benefits) per pound of raw sugar are almost double the mainland costs based on data for the 1989 crop. Marketing costs per pound for raw sugar to the Gulf and East Coast markets are about double those of Florida and Texas sugar producers and 4-5 times Louisiana's marketing costs.

And while Hawaii's 2-year crop producers higher yields, harvesting requires larger machines due to the terrain, type of soil, and weight of the crop. Most Hawaiian producers own and operate their own road systems for trucking cane from the fields to the mills due to the size and weight of the hauling equipment. This raises both repair and maintenance costs, as well as necessitating greater capital expenditures.

Also, sugar mills in the Southern U.S. have reduced costs by consolidating operations. Consolidating Hawaiian sugar mills is difficult because sugarcane production areas are dispersed among the four islands, and often widely dispersed on each island. Consolidation would raise transportation costs considerably.

From 1975 to 1985, most Hawaiian sugar cane producers invested substantial capital in installing drip irrigation systems. This method uses a fixed underground piping system in the fields with replaceable tubing. Although requiring substantial initial capital outlays, in the long run this investment should help producers with costs, since drip irrigation is less expensive to operate and maintain than the furrow systems used previously. Drip irrigation is also more efficient and makes more effective use of available water than furrow systems.

Producer Returns

Stagnated in the 1980's

Virtually all sugar in Hawaii is marketed through a producer-owned refining and marketing cooperative, the California and Hawaiian Sugar Company (C&H). Sugarcane producers' receipts equal the refined sugar price plus returns from limited raw sugar sales, less the cost of refining. From these receipts, sugarcane growers pay cash expenses such as labor, fuel, and interest.

Although actual raw cane sugar market prices have averaged 2 to 5 cents above the price established by the sugar price support program since 1982, receipts to Hawaiian producers and processors have not been sufficient to cover cash or total economic costs since 1981 (including returns to ownership and capital replacement). Cash expense for production and processing have averaged 19 to 23 cents per pound of sugar sold from 1980 to 1990.

Receipts to the producer-plantations for refined sugar sold by C&H averaged 17 to 20 cents from 1981 to 1990. Thus, since 1981, receipts have been slightly below producer cash expenses and total economic costs every year.