Value Chain Analysis
Value chain analysis encompasses all the activities and stakeholders involved in bringing a product from the initial stages of production to the final consumer. This includes every step from cultivation and harvesting to processing, distribution, marketing, and sales. By analyzing the value chain for the island's staple food commodities, we can focus on systemic constraints and identify strategic opportunities for producers.
Horizontal Linkages
Horizontal linkages among producers of similar products are crucial for achieving economies of scale, sharing resources, and collective marketing. The data from various sources highlights several key horizontal linkages on Hawaii Island:
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Hawai’i ’Ulu Cooperative: This cooperative is a prime example of horizontal linkage, enabling breadfruit farmers to pool their resources for processing and marketing. The cooperative's shared processing facilities reduce individual costs and increase collective bargaining power, allowing members to access larger markets and achieve better prices for their products.
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Hawai'i Papaya Industry Association: This organization supports papaya farmers by promoting their products in both domestic and international markets. Collective marketing efforts help increase brand recognition and market reach, benefiting all members by sharing the costs of marketing campaigns and facilitating access to export markets like Japan.
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Farmers’ Markets and CSA Programs: Local farmers' markets and community-supported agriculture (CSA) programs provide platforms for producers to sell their products directly to consumers. These markets foster collaboration among farmers, enabling them to share best practices and coordinate on marketing strategies. CSA programs, where consumers subscribe to receive regular boxes of fresh produce, also strengthen horizontal linkages by creating a steady demand for a variety of products from multiple farmers.
Vertical Linkages
Vertical linkages involve the connections between different functions in the value chain, from production to processing, distribution, marketing, and sales. Effective vertical linkages ensure smooth transitions of products through the value chain, enhancing overall efficiency and profitability.
The relationship between producers and processors is critical for timely and efficient processing of agricultural products. The data indicates that many small-scale farmers lack access to adequate processing facilities, creating a bottleneck in the value chain. Initiatives to develop localized processing infrastructure, such as The Food Basket's Agriculture Innovation Center, aim to address this gap by providing shared facilities for value-added production. This will enable farmers to process their products locally, adding value and reducing the need for costly off-island processing.
Efficient distribution networks are essential for connecting producers with markets. The data highlights several key challenges and opportunities in this area.
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Developing refrigerated consolidation points in key agricultural areas can help streamline logistics and reduce post-harvest losses. These facilities can serve as hubs where farmers can bring their produce for cooling and storage before it is transported to markets or processing facilities.
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Improved cold chain logistics are vital for maintaining the quality of perishable products during transport. The data suggests that investments in cold storage facilities and refrigerated transportation options can significantly extend the shelf life of fruits and vegetables, making it easier for farmers to access distant markets while maintaining product quality.
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Effective market intelligence and demand forecasting are crucial for aligning production with market demand. The data highlights the need for better information flow along the value chain.
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Understanding consumer preferences and market trends can help producers make informed decisions about what to grow and when to harvest. Improved market research and data analysis can reduce the misalignment between supply and demand, minimizing waste and increasing profitability.
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Establishing feedback mechanisms between producers, processors, and retailers can enhance coordination and improve responsiveness to market changes. For example, regular communication and data sharing can help adjust production schedules and processing volumes to meet current demand levels more accurately.
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Building strong relationships with retailers and exporters is critical for ensuring that local products reach both domestic and international markets. The data indicates several successful examples and opportunities for improvement:
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Export Market Development targeting high-value niche markets and exploring more efficient packaging and transportation methods can help Hawaiʻi Island products compete in global markets. The data suggests that focusing on quality and leveraging the unique attributes of local products can create competitive advantages in international markets
Root Causes of Problems
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The data highlights significant logistical challenges due to Hawaiʻi Island's geographic isolation and diverse topography. The distance between farms, processing facilities, and markets increases transaction costs and complicates logistics. This is particularly evident in the distribution of fruits and vegetables, where remote farm locations hinder efficient transportation and timely delivery of produce to markets.
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Stakeholders consistently identify the high costs associated with compliance, permitting, and infrastructure development as major barriers. For example, the complex permitting process for building agricultural structures and obtaining water and wastewater permits adds financial and administrative burdens on farmers. This is compounded by high transportation costs for both local and export markets.
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There is a clear misalignment between production and market demand, leading to supply constraints and inefficiencies. Seasonal variations in fruit and vegetable production result in periods of oversupply followed by shortages, complicating efforts to maintain consistent supply to consumers. This misalignment is exacerbated by inadequate demand forecasting and market intelligence.
Needs and Opportunities
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Investing in improved infrastructure, such as refrigerated consolidation points and better cold storage facilities, could significantly reduce post-harvest losses and extend the shelf life of perishable products. Developing a robust island-wide transportation network specifically designed for agricultural products can also streamline logistics and reduce costs.
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Simplifying the permitting process and providing financial incentives for compliance with environmental and health regulations could alleviate some of the financial burdens on farmers. Adopting more flexible water and wastewater regulations tailored to agricultural needs can further support farm operations.
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Improving market intelligence and demand forecasting can help align production with market demand. This involves collecting and analyzing data on consumer preferences, market trends, and price averages to inform production decisions. Better market alignment can reduce waste, increase profitability, and stabilize supply.
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Establishing shared processing facilities equipped with advanced technologies can enable small-scale farmers to engage in value-added production without incurring prohibitive costs. These facilities can support the development of new product lines, such as dried fruit powders or specialty dairy products, which can open up new market opportunities and increase farm profitability.
Root Cause Analysis
Market System Facilitators reviewed key challenges identified by stakeholders in the staple food commodities value chain and identified the following root causes or systemic constraints.
Challenges
Workforce Development | There is a need for improved training and education programs to build a skilled workforce, particularly for aquaculture, floriculture, and macadamia nut production. Limited extension services and training resources further compound the issue. |
High Labor Costs and Shortages | Labor-intensive crops like coffee and flowers are heavily impacted by Hawaii’s high wage rates and a shortage of skilled workers. The difficulty of attracting seasonal workers during peak harvest periods further exacerbates this issue. |
Pests and Plant Diseases | Insufficient services and high costs for pest management make it challenging for small farmers to protect crops from pests and diseases. This leads to lower productivity and increased financial strain on producers. |
Aging Producer Workforce | With an average age of 61 and reduced access to extension services, Hawaiʻi Island's agricultural workforce faces a challenge in transferring knowledge and skills to new farmers. This creates gaps in productivity and sustainability. |
Inadequate Technical Assistance | Limited access to technical support services, such as extension programs and research institutions, constrains farmers' ability to implement modern farming techniques and business practices, particularly among small farms. |
Workforce Housing Challenges | A lack of affordable housing and allowances for farmworkers to live on the farm creates challenges for attracting and retaining labor. These housing barriers make it difficult for workers to remain in rural farming areas. |
Cost and Availability of Farm Labor | The high cost and limited availability of farm labor are critical barriers to farmers' ability to maintain operations. This issue stems from competition for labor with higher-paying sectors and unattractive employment conditions for farm labor. |
Root Cause
Underinvestment in Agricultural Education and Workforce Development
Persistent underinvestment in agricultural education, training programs, and extension services has led to significant gaps in workforce development and skill acquisition. This systemic issue leaves many farmers ill-equipped to navigate the complexities of modern farming practices, compliance requirements, and financial management, limiting productivity and the ability to access higher-value markets.
Challenges
Aging Producer Workforce | With an average age of 61 and reduced access to extension services, Hawaiʻi Island's agricultural workforce faces a challenge in transferring knowledge and skills to new farmers. This creates gaps in productivity and sustainability. |
Root Cause
High Barriers to Entry for New and Young Farmers
Systemic barriers—such as limited access to land, capital, education, and training—make it challenging for new and young farmers to enter the agricultural sector on Hawaiʻi Island. Combined with insufficient succession planning for aging farmers, these issues contribute to a demographic shift that threatens the future sustainability of the island’s agricultural sector.
Challenges
Inadequate Technical Assistance | Limited access to technical support services, such as extension programs and research institutions, constrains farmers' ability to implement modern farming techniques and business practices, particularly among small farms. |
High Input Costs | The high costs of imported agricultural inputs, such as seeds, fertilizers, and equipment, significantly raise production expenses. This reduces profitability and scalability, especially for small and beginning farmers. |
Root Cause
Lack of Support for Transition to Diversified Agriculture
The decline of the sugar plantation industry was not accompanied by adequate investment and policy support for developing a diversified agricultural services sector. This systemic oversight has led to a gap in critical support services—such as technical assistance, equipment repair, and access to affordable agricultural inputs—impairing the growth potential of small farms and the overall agricultural economy on Hawaiʻi Island.
Challenges
Data Gaps in the Value Chain | Data collection, especially from smaller farms and backyard producers, is insufficient. Without comprehensive data, it is difficult to make informed decisions regarding market opportunities and areas for improvement within the value chain. |
Market Access and Promotion | Smaller producers struggle to access international markets due to limited promotion and branding efforts. Expanding the promotion of Hawaii’s premium agricultural products and establishing unified marketing strategies is seen as a priority. |
Lack of Available Data and Market Information | Insufficient access to reliable market data and demand information constrains decision-making for both producers and buyers. This results in inefficiencies in pricing, production volumes, and market opportunities. |
Misalignment of Supply and Demand | There is a frequent misalignment between farm production and market demand. Poor demand forecasting and issues with harvest timing lead to inefficiencies, resulting in food waste and revenue losses for small-scale producers. |
Root Cause
Fragmented Market Information Systems and Lack of Data Infrastructure
The absence of integrated and accessible market information systems, due to underinvestment in data infrastructure and coordination mechanisms, leads to information asymmetry and inefficiencies in the agricultural value chain. This systemic issue hinders effective decision-making by farmers and other stakeholders, resulting in mismatched supply and demand and limiting market access, especially for small-scale producers.
Challenges
Pest and Disease Management | Coffee and macadamia nut producers face persistent challenges from pests such as the Coffee Berry Borer and macadamia felted coccid, which lower yields and increase costs. Research into pest-resistant varieties is critical for mitigation. |
Pests and Plant Diseases | Insufficient services and high costs for pest management make it challenging for small farmers to protect crops from pests and diseases. This leads to lower productivity and increased financial strain on producers. |
Root Cause
Inadequate Biosecurity Infrastructure and Policy Implementation
Insufficient funding, coordination, and enforcement of biosecurity measures have led to inadequate pest and disease management services on Hawaiʻi Island. This systemic lack of robust biosecurity infrastructure increases vulnerability to pests and diseases, resulting in crop losses and higher costs for farmers, particularly affecting fruit and vegetable production.
Challenges
Workforce Development | There is a need for improved training and education programs to build a skilled workforce, particularly for aquaculture, floriculture, and macadamia nut production. Limited extension services and training resources further compound the issue. |
High Labor Costs and Shortages | Labor-intensive crops like coffee and flowers are heavily impacted by Hawaii’s high wage rates and a shortage of skilled workers. The difficulty of attracting seasonal workers during peak harvest periods further exacerbates this issue. |
Workforce Housing Challenges | A lack of affordable housing and allowances for farmworkers to live on the farm creates challenges for attracting and retaining labor. These housing barriers make it difficult for workers to remain in rural farming areas. |
Cost and Availability of Farm Labor | The high cost and limited availability of farm labor are critical barriers to farmers' ability to maintain operations. This issue stems from competition for labor with higher-paying sectors and unattractive employment conditions for farm labor. |
Misalignment of Supply and Demand | There is a frequent misalignment between farm production and market demand. Poor demand forecasting and issues with harvest timing lead to inefficiencies, resulting in food waste and revenue losses for small-scale producers. |
Root Cause
Socioeconomic Barriers to Attracting and Retaining Farm Labor
Structural socioeconomic factors—such as the high cost of living, lack of affordable housing, low agricultural wages compared to other sectors, and limited social support—create significant barriers to attracting and retaining a stable farm labor force on Hawaiʻi Island. These systemic issues make agricultural jobs less viable and unattractive to potential workers, leading to labor shortages that constrain farm productivity and scalability, especially for small farms.
Challenges
Permitting Delays | Lengthy permitting processes, particularly for infrastructure projects like cold storage and processing facilities, delay necessary investments. Producers face significant challenges navigating Hawaii’s regulatory and permitting framework. |
High Labor Costs and Shortages | Labor-intensive crops like coffee and flowers are heavily impacted by Hawaii’s high wage rates and a shortage of skilled workers. The difficulty of attracting seasonal workers during peak harvest periods further exacerbates this issue. |
Complex Food Safety Compliance | Small farmers face difficulties complying with the Food Safety Modernization Act (FSMA) and other food safety standards. The cost and complexity of compliance prevent many from accessing certain markets and limit their ability to scale. |
High Transaction Costs for Small Farms | The lack of aggregation infrastructure leads to high transaction costs for buyers and processors when dealing with small farms, reducing the incentive to source from local smallholders. |
Workforce Housing Challenges | A lack of affordable housing and allowances for farmworkers to live on the farm creates challenges for attracting and retaining labor. These housing barriers make it difficult for workers to remain in rural farming areas. |
Permitting and Regulatory Delays | Lengthy and complex regulatory processes, such as building permits and environmental compliance, disproportionately affect small farmers. These delays hinder the timely expansion of farms and limit infrastructure development. |
Compliance | Stakeholders consistently identify the high costs associated with compliance, permitting, and infrastructure development as major barriers to inclusive agricultural development. |
Root Cause
Regulatory Frameworks Misaligned with Small-Scale Farming Needs
Regulatory systems and compliance requirements are predominantly designed for large-scale commercial operations, lacking adaptation or flexibility for small-scale farmers. This misalignment results in disproportionately high compliance costs and complexities for small farms, restricting their ability to expand infrastructure and meet food safety standards. The systemic lack of tailored regulations and support mechanisms inhibits growth and market access for small producers.
Challenges
Cold Chain Management | Maintaining the cold chain is critical for export commodities like flowers, fruits, and seafood. The absence of adequate refrigerated facilities and inefficient cold chain logistics leads to higher post-harvest losses and reduced quality. |
Limited Processing Infrastructure | There is a lack of local processing facilities for export crops, forcing producers to rely on off-island processing, which increases costs and risks. Investments in local processing facilities for macadamia nuts and coffee are essential. |
Logistical Inefficiencies | Inefficient distribution networks and a lack of cold storage facilities increase the risk of product spoilage during transportation. These inefficiencies disproportionately affect perishable products, such as tropical flowers and seafood. |
High Transportation Costs | Hawaii's geographic isolation makes it difficult for producers to compete in international markets. High shipping costs and fuel prices significantly impact the profitability of crops like macadamia nuts, coffee, and floriculture. |
Limited Cold Chain Capacity | Inadequate cold storage and distribution infrastructure for perishables (especially fruits and vegetables) result in post-harvest loss, lower quality produce, and missed opportunities in high-value markets. |
Inadequate Aggregation and Processing Facilities | Hawaiʻi Island lacks sufficient aggregation and processing facilities, making it difficult for small-scale farmers to reach markets efficiently and profitably. This infrastructure gap exacerbates post-harvest loss and limits access to markets. |
Compliance | Stakeholders consistently identify the high costs associated with compliance, permitting, and infrastructure development as major barriers to inclusive agricultural development. |
Root Cause
Systemic Underinvestment in Essential Agricultural Infrastructure
Chronic underinvestment by both public and private sectors in critical agricultural infrastructure—such as processing facilities, aggregation centers, and cold chain logistics—has led to significant gaps on Hawaiʻi Island. This systemic issue results in high transaction costs, substantial post-harvest losses, and reduced access to high-value markets, making it difficult for small farms to scale up and remain competitive.
Recommended Interventions
Below are the recommended interventions for market system change that the value chain analysis identified to improve the profitability and growth of Staple Food Commodities.
The staple food commodities value chain on Hawaiʻi Island faces systemic challenges that limit the growth, resilience, and inclusiveness of local food production. Key constraints include fragmented information resources, limited land access, high entry barriers for new farmers, and inadequate coordination among stakeholders. This summary outlines the proposed interventions developed during the staple food commodities value chain analysis workshop on September 25th, 2024 to address these challenges.
Proposed Interventions and Incentives for System Change
1. Centralized Information and Resource Platforms
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Intervention: Develop a shared digital platform where farmers, service providers, and other stakeholders can access comprehensive data, funding resources, and technical support. This platform should consolidate resources from multiple organizations such as HIAP, HFUU, and CTAHR to ensure inclusivity.
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Incentives for Change: Offer discounts for cooperative purchasing or access to subsidized services for participants who engage with the platform. AI tools can further improve accessibility by automatically collecting and synthesizing information.
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Market System Change Potential: Improved access to data can enhance production planning, market intelligence, and resource sharing, fostering a more coordinated and informed agricultural sector.
2. Land Access and Linking Solutions
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Intervention: Establish a centralized land linking tool to connect landowners with aspiring farmers. This tool can include features for matchmaking, legal agreement templates, and resources for cooperative land-sharing arrangements.
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Incentives for Change: Introduce rent-to-own models and alternative financial mechanisms (e.g., shared equity models) that reduce barriers for new farmers while supporting landowners.
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Market System Change Potential: A transparent land access system can reduce inefficiencies, support long-term agricultural investment, and expand production capacity.
3. Education and Training Initiatives
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Intervention: Develop a coordinated network of training programs that connect educational institutions, vocational training centers, and agricultural groups to build clear career pathways in farming and food systems.
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Incentives for Change: Offer credit transfer agreements between training programs and develop employer partnerships that provide mentorship and equipment donations.
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Market System Change Potential: A better-trained workforce will improve farm management practices, increase productivity, and enhance the resilience of Hawaiʻi's agricultural sector.
4. Innovations and Best Practices
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Intervention: Adapt innovative models from other regions, such as Belize’s rent-to-own land model and cooperative mentorship programs. Expand farmer-to-farmer learning models to improve knowledge sharing.
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Incentives for Change: Provide cooperative funding to incentivize knowledge sharing, resource pooling, and mentorship initiatives.
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Market System Change Potential: Scalable innovation models can improve market linkages, increase resilience, and accelerate the adoption of best practices.
5. Coordination and Support Structures
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Intervention: Establish a centralized coordination agency at the county level to streamline access to training, funding, and compliance tools. This agency could facilitate mentorship programs, manage knowledge-sharing hubs, and promote technical assistance.
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Incentives for Change: Provide financial incentives for participation in cooperative or centralized initiatives. Funding mechanisms could be introduced to compensate coordinators.
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Market System Change Potential: Improved coordination will reduce administrative burdens for farmers, improve service delivery, and streamline market access.
6. Addressing Barriers to Entry
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Intervention: Develop simplified compliance tools, mentorship networks, and financial literacy programs to reduce the complexity of farm business operations.
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Incentives for Change: Provide subsidies for equipment-sharing programs and grants to new farmers who successfully complete targeted training.
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Market System Change Potential: By improving access to resources, finance, and knowledge, these interventions can lower entry barriers, promote market inclusion, and enable more diversified production.
Scaling Up Potential
To scale these interventions effectively, the following strategies are recommended:
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Public-Private Collaboration: Leverage partnerships with industry groups, cooperatives, and nonprofits to build sustainable support networks.
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Incentivizing Participation: Engage market actors by highlighting the commercial benefits of improved data, better land access, and stronger coordination.
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Technology Integration: Digital tools, AI-driven data platforms, and online matchmaking services can streamline services and create greater reach for rural producers.
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Capacity Building: Develop leadership roles within cooperatives, producer groups, and local institutions to ensure continuity and ownership of change efforts.
By embracing a market systems development approach, these interventions align with HIAP's focus on public-private collaboration to stimulate sustainable system change. They provide pathways to improve access to information, land, and training while encouraging greater investment in Hawaiʻi Island’s staple food commodities sector.