Core Value Chain Functions

• Service Development involves creating and designing agribusiness services that cater to the specific needs of Hawaiʻi Island's producers. This function encompasses the identification of producer needs, development of tailored solutions, and continuous improvement of services. Service providers—such as agricultural consultants, educational institutions, and research organizations—are primarily responsible for this function.

• Aggregation refers to the consolidation of services, resources, or producers to achieve greater efficiency and economies of scale. In the agribusiness services value chain, this function can involve bundling multiple services into comprehensive packages or coordinating groups of producers for collective benefits. Entities like cooperatives, producer associations, and brokers often play key roles in aggregation. They facilitate access to shared services such as bulk purchasing of inputs, group training sessions, or collective marketing efforts, enhancing value and reducing costs for individual producers.

• Marketing involves promoting agribusiness services to producers to raise awareness and encourage uptake. This function encompasses advertising, outreach campaigns, informational events, and communication strategies that highlight the benefits and value of the services offered. Both service providers and intermediaries—such as industry associations, extension agents, and cooperatives—can engage in marketing efforts.

• Sales/Contracting is the process through which producers engage with service providers to procure agribusiness services. This function includes negotiating terms, pricing, and formalizing agreements. Service providers handle sales directly, but brokers or cooperative arrangements can facilitate this function by representing groups of producers.

• Distribution is the process of coordinating the availability of agribusiness services to producers across Hawaiʻi Island. This function includes the logistics of service provision, ensuring that services are accessible to producers regardless of their location or schedule. This function enables multiple distribution channels for services to reach producers, which may involve in-person consultations, online platforms, mobile service units, or partnerships with local organizations.

• Service Delivery is the execution phase where agribusiness services are provided directly to producers. This function involves implementing the services as agreed upon, which may include on-site technical assistance, training workshops, consulting sessions, or remote support via digital platforms. Service providers carry out this function, often collaborating with extension agents, specialists, or technology providers.

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Value Chain Analysis

The value chain diagram highlights a significant reliance on government-provided services and support. Government agencies, educational institutions, and non-profits play a pivotal role in offering extension services, research, training, skills development, laboratory services and guidance on pests and diseases. These services are essential, especially for small and medium-sized producers who may lack the resources to access private sector offerings. However, this heavy dependence indicates potential vulnerabilities, such as limited scalability, bureaucratic constraints, and susceptibility to policy and funding changes that can affect service availability and effectiveness.

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Horizontal and vertical linkages are crucial in this value chain. Horizontal linkages refer to the connections among service providers that enables resource sharing, collective bargaining, and knowledge exchange. Vertical linkages connect different levels of the value chain, such as service providers to producers, facilitating the flow of services and information. In the diagram, vertical integration is evident where large private companies offer specialized technical, business, and financial services directly to large commercial operations. Conversely, smaller service providers often rely on intermediaries like digital platforms, collaborative networks, and producer groups to offer services, highlighting gaps in direct vertical linkages between service providers and producers.

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A key systemic problem constraining the growth potential of the sector is the limited capacity and reach of private sector service providers to meet the diverse and specialized needs of Hawaiʻi Island's agricultural producers. Small farms dominate the landscape—over 3,600 farms with two-thirds under ten acres—and they produce a wide variety of crops. The fragmentation and diversity make it challenging for private providers to offer cost-effective services at scale. Moreover, producers' reliance on off-farm income (65% work off-farm) and advanced age (average of 61 years) limit their ability to invest time and resources into accessing and utilizing services. This situation creates a market failure where the demand for tailored, affordable services is not adequately met by the private sector, reinforcing dependence on government and non-profit organizations.

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The diagram also underscores the lack of strong horizontal linkages among producers, which hampers collective action and limits economies of scale. Without the support of producer associations or cooperatives, small and medium-sized farmers struggle to aggregate demand for services, access group discounts, or influence service offerings. Similarly, weak vertical linkages between service providers and producers, particularly for smaller farms, result in gaps where services do not reach those who may benefit most. Intermediaries attempt to bridge these gaps, but their effectiveness may be constrained by limited resources and capacity.

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These systemic issues impact the viability and profitability of the island's farms. Producers are not receiving the necessary support to improve practices, comply with regulations, or access new markets. The heavy reliance on government services, which may face funding limitations or policy shifts, poses risks to the sustainability of support mechanisms. Without addressing these challenges, the agricultural sector may struggle to innovate, grow, and remain competitive, affecting food security and economic resilience on Hawaiʻi Island.

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Key Takeaways:

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1. Heavy Reliance on Government Services: The agrifood cluster's dependence on government agencies and non-profits for essential services indicates potential vulnerabilities and highlights the need to diversify service provision.

2. Weak Horizontal Linkages Among Service Providers: Limited collaboration among service providers hampers collective action, economies of scale, and the ability to influence service offerings to meet Producer needs effectively.

3. Insufficient Vertical Linkages for Small Producers: Small and medium-sized farms lack direct connections with service providers, leading to gaps in service access and utilization, which intermediaries only partially bridge.

4. Market Failure in Private Service Provision: The private sector struggles to offer affordable, tailored services to a fragmented and diverse producer base, constraining the sector's growth and innovation potential.

5. Impact of Producer Demographics: The advanced age of farmers and their reliance on off-farm income limit their capacity to engage with services, affecting the adoption of improved practices and technologies.