Export Commodities
Value Chain Analysis
Export crops represent a significant portion of Hawai'i Island's agricultural output, contributing substantially to the island's economy and global reputation. These high-value crops leverage Hawai'i's unique growing conditions and brand recognition to compete in global markets. The primary purpose of focusing on this grouping of agricultural products is to enable HIAP's members to better understand the export-oriented value chains, the market ecosystem that supports these chains, and the economic potential for expanding Hawai'i Island's presence in international markets. By identifying and addressing systemic constraints, this analysis aims to promote sustainable growth and increased competitiveness in the global agricultural marketplace.
The export crops category encompasses four main subcategories: Macadamia Nuts, Coffee, Floriculture and Nursery Products, and Aquaculture. Each of these sectors has its own unique characteristics, challenges, and opportunities within the broader context of Hawai'i Island's agricultural exports. It is important to note that while these crops are primarily oriented towards export markets, they also play a role in local consumption and tourism-related purchases. The balance between export and local sales can vary significantly between products and producers. Additionally, the export-oriented nature of these crops means they are particularly susceptible to global market fluctuations, trade policies, and international competition.
Click on any of the components of the Export Commodities value chain analysis below to explore the details.
System Terms & Definitions
Term | Definition |
|---|---|
Crowding In | The process in which other market actors replicate or adopt successful interventions, leading to broader market transformation. |
Economic Clusters | Geographic concentrations of interconnected businesses, suppliers, service providers, and institutions that collaborate to improve productivity, innovation, and competitiveness. |
Horizontal Linkages | Relationships and connections among businesses or organizations at the same level of the value chain (e.g., farmer cooperatives or industry associations). |
Interventions | Strategic actions designed to address constraints, unlock opportunities, and improve overall system performance. Successful interventions stimulate market-driven growth without creating dependency. |
Market Actors | Individuals, businesses, organizations, or institutions involved in producing, processing, trading, or regulating products and services within a market system. |
Market Systems | A framework that looks at the broader environment in which market actors (farmers, businesses, consumers) operate, including policies, institutions, and support services that shape their interactions. |
Market Systems Development (MSD) | An approach to economic development that seeks to create sustainable and inclusive markets by addressing the underlying constraints and incentives that shape market behaviors. |
Market Systems Facilitation | A strategy that enables market actors to take ownership of solutions, by encouraging partnerships, improving information flow, and aligning incentives to drive market development. Facilitators avoid taking over market functions and instead enable existing actors to succeed. |
Scaling Up | Expanding the reach and impact of an intervention by integrating it into mainstream business practices, government policies, or institutional frameworks. |
Systems Change | A fundamental shift in the way market systems operate, resulting from improved relationships, services, and market conditions that sustain long-term growth and resilience. |
Value Chains | The full range of activities and actors involved in bringing a product from production to final consumption, including input suppliers, farmers, processors, distributors, and retailers. |
Vertical Linkages | Relationships between different levels of the value chain, such as between farmers and buyers, or processors and retailers. |
Market System Map
The system map below outlines the key functions, rules and stakeholders of the island's export commodities market system. Clicking on any of the underlined links below will take you to the relevant information associated with that element of the system.
Value Chain Functions
Value chain functions identify the key activities and value additions 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. See a summary of information about each of the core value chain functions for the island's export commodities below.
Production
Hawai'i Island’s unique growing conditions make it an ideal location for high-value export crops such as macadamia nuts and coffee. However, challenges such as pest control, climate variability, and labor shortages limit production efficiency. Producers are exploring sustainable farming methods and pest management strategies to enhance yields and reduce costs.
Aggregation
Aggregation of export crops is well-established for some sectors like macadamia nuts, where cooperatives help smallholders combine their harvests for processing. However, not all sectors benefit from such aggregation models, leading to inefficiencies in distribution and a lack of market power for smaller producers. Cooperatives and industry groups play a crucial role in addressing these gaps.
Processing
Processing infrastructure is essential for adding value to export commodities, particularly for macadamia nuts and coffee. Processing facilities on the island have developed proprietary techniques that enhance product quality. However, high energy costs and outdated technology remain challenges, and investments in renewable energy solutions are being explored to lower processing costs.
Distribution
Hawai'i's geographic isolation poses significant challenges for distributing export commodities. High transportation costs, particularly for perishable goods, limit access to international markets. Efficient cold chain logistics and better connections to global shipping routes are essential for maintaining product quality and competitiveness in export markets.
Marketing
Marketing for Hawai'i’s export crops leverages the island's brand and reputation for high-quality, unique products. Kona coffee and Hawaiian macadamia nuts are well-known internationally. However, more diversified marketing strategies are needed to expand market reach and position Hawai'i's products in premium market segments globally.
Sales
The export commodities sector in Hawai'i relies heavily on international markets, with significant sales to North America, Asia, and Europe. E-commerce has grown as a sales channel, particularly for smaller producers looking to bypass intermediaries. However, many producers lack the capacity to scale direct-to-consumer sales and need more support in developing online marketing and distribution strategies.
Supporting Functions
The supporting functions within Hawaiʻi Island's agricultural sector are critical to enhancing the productivity, sustainability, and competitiveness of the local agricultural value chains. These functions include input supplies, information, infrastructure, finance, support services, and training and education. Below is an overview of each of these key areas, emphasizing their role in supporting the export commodities being analyzed.
Input Supplies
High input costs, particularly for seeds, fertilizers, and pest control, are a major concern for export commodity producers. Due to Hawai'i's geographic isolation, many inputs must be imported, which adds to production costs. There is also a need for research into and development of local input alternatives, especially for pest-resistant crop varieties.
Information
Access to timely market information is vital for producers in the export commodities sector. This includes market trends, pricing, and regulatory updates. There is a lack of cohesive, centralized information sources, which makes it difficult for producers, especially smallholders, to make informed decisions regarding production and market timing.
Infrastructure
The infrastructure for exporting commodities, such as cold storage, transportation, and processing facilities, is critical but underdeveloped in some areas of the island. High transportation costs and limited access to key infrastructure like cold storage facilities add costs for producers and can reduce product quality, especially for perishable goods like flowers and aquaculture products.
Finance
Access to finance remains a significant barrier for many farmers in the export sector, particularly smallholders. While there are loan programs through the USDA and the Hawai'i Department of Agriculture, many farmers struggle with high interest rates and the risk associated with the long payback periods for crops like macadamia nuts and coffee. Developing more accessible and affordable financing options could support sector growth.
Support Programs & Services
Support services, including financial advice, legal assistance, and marketing support, are essential for the long-term sustainability of the export commodities sector. Currently, there is limited access to these services, particularly for small-scale producers who may lack the resources to invest in professional services. Strengthening access to support services could enhance market competitiveness.
Training & Education
Training and education programs are crucial for maintaining Hawai'i’s competitive edge in export commodities. Institutions like the University of Hawai'i and industry associations provide training on new technologies, sustainable farming practices, and pest management. However, access to these programs is uneven, and there is a need for more specialized and localized training.
Rules
The Rules within the Staple Food Commodities market ecosystem encompass various legislative, regulatory, and informal frameworks at the county, state, and federal levels. These rules significantly impact the operations of farmers, ranchers, and other stakeholders, influencing everything from land use and water access to food safety and marketing standards. Below is a detailed summary of stakeholder feedback on compliance issues and suggested changes in legislation, categorized by the type of rule and the level of government.
County Rules
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Building Permits and Property Taxes: Stakeholders expressed concerns over the cumbersome and costly process of obtaining building permits for agricultural structures. The time-consuming nature and the complex requirements for compliance often discourage small farmers from expanding their operations. Additionally, property tax policies were highlighted as a barrier, particularly when agricultural land is reassessed at higher rates that do not reflect its productive value. There were calls for more agricultural exemptions and streamlined processes to make compliance more feasible for small-scale farmers.
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Ag Tourism Permits: Permitting for ag tourism activities, such as farm tours, faces specific challenges, including requirements for infrastructure like bus turnarounds, which many farms lack. Stakeholders recommended revisiting these regulations to promote ag tourism without imposing prohibitive costs on farmers.
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Wastewater and Water Access: Access to clean water and wastewater management were recurring issues. The current Department of Health rules make it difficult for farms and commercial kitchens, particularly those on catchment systems, to meet compliance standards. There were suggestions to modify these rules to better accommodate the unique needs of agricultural operations on the island.
Hawaiʻi State Rules
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Department of Health (DOH) Regulations: State-level regulations, particularly those enforced by the DOH, present significant barriers to food manufacturing and processing. For example, the strict rules around wastewater and the difficulty in getting permits for commercial kitchens were cited as major hurdles. There is a call for the DOH to adopt more flexible policies that consider the realities of local farming and food production.
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Cottage Laws and Food Safety Modernization Act (FSMA): Stakeholders discussed the need for expanding the range of products allowed under the state's cottage food laws, which would enable more small-scale producers to legally sell homemade goods. Additionally, compliance with the FSMA poses challenges, especially for small farms that struggle with the costs and complexities of meeting federal food safety standards.
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Agricultural Tourism and On-Farm Housing: There is strong support for legislative changes that would allow for on-farm housing for labor, recognizing the critical need for affordable and accessible housing for farm workers. This would also help address the broader issue of housing availability on the island.
Federal Rules
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Food Safety Modernization Act (FSMA): The FSMA is a significant federal regulation affecting local farmers, particularly in terms of compliance with food safety standards. The cost and administrative burden of meeting these requirements can be overwhelming for small producers. Stakeholders suggested that there should be more federal support and guidance to help small farms comply without compromising their financial viability.
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H2A Program and Labor Regulations: The federal H2A program, which allows farms to hire foreign labor, was criticized for being overly complex and difficult for small farms to navigate. Simplifying this program or providing more support for small farmers to use it effectively would help alleviate labor shortages.
Suggested Changes in Legislation
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Streamlining Permitting Processes:
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Simplify the process for obtaining building permits for agricultural structures.
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Introduce more agricultural exemptions for small-scale operations.
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Water and Wastewater Management:
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Modify DOH regulations to better support farms using catchment systems and alternative water sources.
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Develop clear guidelines and support for wastewater management that is feasible for small farms.
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Supporting Ag Tourism:
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Adjust infrastructure requirements to make ag tourism more accessible for small farms.
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Promote policies that support the growth of ag tourism without imposing undue financial burdens.
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Expanding Cottage Laws:
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Broaden the scope of allowable products under cottage food laws to support small-scale producers.
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Provide education and resources to help producers comply with these regulations.
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Enhancing On-Farm Housing:
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Legislate to allow on-farm housing for labor to support the agricultural workforce.
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Provide incentives or support for developing affordable housing for farm workers.
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Federal Support for FSMA Compliance:
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Increase federal assistance and resources to help small farms meet FSMA requirements.
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Consider tiered compliance standards based on farm size and capacity.
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By addressing these challenges through legislative and regulatory changes, stakeholders believe it is possible to create a more supportive and sustainable environment for Hawaiʻi Island's agricultural sector.
Challenges
Challenges, needs and systemic constraints to the efficient functioning of the export commodities value chain have been identified by stakeholders in multiple surveys, discussions and workshops. This feedback is continuously updated, synthesized and summarized to enable a collective understanding of the system needs and strategies for addressing them.
