Export Commodities VCA 2

Hawai'i Island

Export Commodities

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 export commodities, we can focus on systemic constraints and identify strategic opportunities for producers.

Understanding the value chains of the island's agricultural products from production to consumption helps to identify the factors that determine the prices producers get for their products and where different market opportunities might exist, particularly for more value-add to products that can increase farm profitability. Analyzing vertical linkages amongst value chain functions and horizontal linkages amongst producers can yield potential new opportunities. The following diagram displays each of the value chain functions and market segments determined by farm size and income.

The export commodities value chain on Hawai’i Island includes key sectors such as coffee, macadamia nuts, floriculture and nursery, aquaculture, and papayas. Each of these sectors has unique production systems and market channels but also shares several commonalities. These commodities rely on Hawai’i’s unique climate, soils, and reputation for high-quality products. Most producers are small to medium-sized farms, but there is a trend of increasing vertical integration, particularly among larger operations that handle processing, distribution, and marketing in-house. Value chain functions such as aggregation, cold chain management, and distribution are critical in reaching local, domestic, and international markets, with transport costs being a significant challenge due to the island’s geographical isolation.

Common constraints across all five industries include high transportation costs, labor shortages, and regulatory challenges. These sectors face high production costs because of Hawaii's reliance on importing inputs such as feed, energy, and fertilizers. Labor, particularly skilled and seasonal workers, is scarce and costly, which impacts production and harvest schedules. Pests and diseases are another shared challenge, with industries like coffee grappling with the Coffee Berry Borer and Coffee Leaf Rust, while macadamia nuts contend with pests like the macadamia felted coccid. However, despite these constraints, sectors like coffee and macadamia nuts have been able to leverage Hawaii's strong branding and international demand to maintain competitive positions in global markets.

While the industries share these broad challenges, they also have distinct differences in value chain dynamics. The coffee and macadamia nut sectors have long-established infrastructures for processing and distribution, which help with scalability and market access. Floriculture and aquaculture, on the other hand, rely heavily on air freight for fresh exports and have higher input costs for packaging and preservation. Papayas, being highly perishable, face greater challenges in maintaining freshness and quality during distribution. The diversification in products also means that industries like aquaculture and floriculture have specialized value chains, where small producers often handle their own aggregation and distribution to meet niche market demands.

Key Takeaways

Transportation Costs: All export industries face significant challenges with high transportation costs, particularly for perishable products.
Labor Shortages: Skilled and seasonal labor shortages are a shared constraint, driving up production costs and limiting scalability.
Pests and Diseases: Coffee, macadamia nuts, and other crops continue to struggle with pests, impacting yields and quality.
Infrastructure Needs: Improvements in processing facilities, cold chain logistics, and distribution infrastructure are essential to reduce costs and improve product quality.
Market Intelligence: There is an opportunity to enhance market forecasting and demand analysis to better align production with market needs.
Branding and Marketing: Strong branding for Hawaii-grown products remains a valuable asset, but further development of sustainable and niche marketing strategies could expand market reach.

Root Cause Analysis of Key Challenges

Market System Facilitators reviewed key challenges identified by stakeholders in the export commodities value chain and identified the following root causes or systemic constraints.

Systemic Constraints

Potential for System Change

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.

Enhancing biosecurity measures is pivotal for safeguarding agricultural productivity. Producers can test collaborative approaches to pest and disease management, such as coordinated monitoring or shared response strategies. By piloting these initiatives, producers can evaluate their impact on reducing crop losses. Successful models can be scaled up, fostering a proactive biosecurity culture within the agricultural community that protects staple food commodities and contributes to overall sector resilience.

High Energy Costs and Lack of Sustainable Solutions

Hawaiʻi's energy sector is heavily reliant on imported fossil fuels due to its geographic isolation, resulting in some of the highest energy costs in the nation. This dependence affects the agricultural sector significantly, particularly for producers engaged in energy-intensive activities like drying, processing, and cold storage of export commodities such as macadamia nuts and coffee. The systemic issue lies in the limited investment in renewable energy infrastructure and energy-efficient technologies within the agricultural sector. Contributing factors include inadequate access to capital for renewable energy projects, insufficient policy incentives, and a lack of technical expertise or awareness among producers to implement sustainable energy solutions.

Addressing this root cause requires a systemic shift towards sustainable energy integration within the agricultural sector. A market systems development approach can facilitate partnerships between agricultural producers, renewable energy providers, financial institutions, and policymakers. By developing accessible financing models and providing technical assistance, producers can adopt renewable energy technologies and energy-efficient practices. Policy interventions could include creating incentives such as tax credits or subsidies for renewable energy investments in agriculture. Capacity-building initiatives can raise awareness and build technical expertise among producers. These systemic changes can reduce energy costs, enhance profitability, and improve the competitiveness of Hawaiʻi's export commodities in global markets while contributing to environmental sustainability.

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.

Access to reliable market information is essential for informed decision-making. Producers can pilot data-sharing initiatives or develop networks that provide timely market insights, pricing trends, and demand forecasts. By evaluating the benefits of improved information flow, producers can adapt production plans to better meet market needs. Scaling up these initiatives can lead to a more transparent and efficient market system, enhancing opportunities for staple food commodity producers to optimize profitability.

Lack of Coordination Among Stakeholders

The export commodities value chain in Hawaiʻi is fragmented, characterized by weak institutional frameworks and a lack of effective collaborative mechanisms among stakeholders. Historical factors, such as the transition from plantation economies to smallholder farming, have led to a dispersed industry structure with many small-scale producers operating independently. This fragmentation is exacerbated by limited trust, inadequate communication channels, and the absence of strong industry associations or cooperatives. As a result, there is poor horizontal coordination among producers and weak vertical linkages with processors, distributors, and marketers. This systemic issue leads to inefficiencies, such as duplicated efforts, underutilized resources, and missed opportunities for collaborative marketing, joint investment in infrastructure, and advocacy.

A market systems development approach can address this fragmentation by strengthening institutional frameworks and fostering collaboration across the value chain. Facilitating the formation or enhancement of producer associations, cooperatives, or clusters can build trust and improve communication among stakeholders. Establishing platforms for regular dialogue, information sharing, and joint decision-making can align objectives and strategies. Encouraging collaborative initiatives—such as shared marketing campaigns, collective bargaining with buyers, or joint investment in processing facilities—can enhance efficiencies and market competitiveness. Policy support to incentivize collaboration, such as grants for cooperative projects or streamlined regulations for collective enterprises, can further promote coordination. By transforming the value chain into a more cohesive and collaborative system, stakeholders can leverage shared resources, reduce costs, and better position Hawaiʻi's export commodities in the global market.

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.

To ensure the sustainability of the agricultural sector, it's important to make farming more accessible to new and young producers. By piloting initiatives that lower entry barriers—such as resource-sharing models, access to mentorship, or innovative financing mechanisms—existing producers can help create pathways for newcomers. Demonstrating the success of these approaches can inspire systemic changes that support the next generation of staple food commodity producers, ensuring the continuity and vitality of the sector.

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.

Transitioning to diversified agriculture can be facilitated by experimenting with new farming practices and market approaches. Producers can pilot diversification projects—such as introducing new crop varieties or adopting sustainable practices—to assess their viability and market acceptance. Sharing outcomes and lessons learned can encourage wider adoption among producers. This strategic shift can enhance resilience, open up additional revenue streams, and strengthen the position of staple food commodities within a more diverse agricultural landscape.

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.

Building capacity within the agricultural workforce is crucial for adapting to evolving challenges. Producers can test collaborative training programs or establish knowledge-sharing networks to enhance skills and competencies. By focusing on areas like modern farming techniques, financial management, and regulatory compliance, these initiatives can improve productivity and innovation. Scaling up successful programs contributes to a more skilled and adaptable producer base, strengthening the overall performance of staple food commodity production.

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.

Addressing labor shortages requires innovative strategies that can reshape how labor is accessed and utilized within the agricultural sector. By exploring collaborative models that enhance labor efficiency—such as shared labor pools or flexible scheduling—producers can pilot new approaches to optimize the existing workforce. Implementing technology or mechanization where feasible can also alleviate labor demands. Testing these solutions on a small scale allows producers to assess their effectiveness and scalability, potentially transforming labor dynamics in a way that benefits staple food commodity production without imposing unsustainable costs.

Challenges, representing problems and needs identified by stakeholders, are clustered below into a set of root cause constraints.

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 Constraint

Fragmented Market Information Systems and Lack of Data Infrastructure

Challenges

High Energy Costs

Processing facilities, especially for energy-intensive processes like drying and roasting, face high energy costs. These costs impact profitability for macadamia nut and coffee producers, prompting interest in renewable energy solutions.

Root Cause Constraint

High Energy Costs and Lack of Sustainable Solutions

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 Constraint

Inadequate Biosecurity Infrastructure and Policy Implementation

Challenges

Lack of Coordination Among Stakeholders

There is limited coordination between producers, government agencies, and industry groups, hindering collaboration and the development of unified strategies to address systemic issues like transportation, market access, and workforce shortages.

Root Cause Constraint

Lack of Coordination Among Stakeholders

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 Constraint

Regulatory Frameworks Misaligned with Small-Scale Farming Needs

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 Constraint

Socioeconomic Barriers to Attracting and Retaining Farm Labor

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 Constraint

Systemic Underinvestment in Essential Agricultural Infrastructure

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 Constraint

Underinvestment in Agricultural Education and Workforce Development

Recommended Interventions

Below are the recommended interventions for market system change that the value chain analysis identified to improve the profitability and growth of Export Commodities.

Based on the Export Commodities Value Chain Analysis Workshop held on October 3rd, 2024, participants identified systemic constraints facing Hawaiʻi Island's export crop producers and proposed targeted interventions, incentives, and actions designed to stimulate system-wide change. The following interventions align with Market Systems Development (MSD) principles, emphasizing sustainable, scalable solutions.

Proposed Interventions and Incentives for System Change

1. Labor Pooling and Workforce Management Solutions

Intervention: Establish a managed labor pool system where farmworkers are employed by a central organization that contracts with multiple farms. This model would allow farmers to access reliable labor without the burden of direct management. Models like Mahi Pono in Maui, the ʻUlu Cooperative and Akoni Nursery were identified as references for adaptation.
Incentives for Change: Offer financial incentives or subsidies for farmers who participate in cooperative workforce models. Developing a group insurance plan for farmworkers could reduce costs while improving worker retention.
Market System Change Potential: A managed labor pool would improve labor reliability, reduce administrative burdens on farmers, and lower labor costs through shared resources.

2. Aggregated Housing Solutions for Farmworkers

Intervention: Develop a coordinated housing program that pools resources for shared workforce accommodations, reducing the logistical and financial burden on individual farmers.
Incentives for Change: Engage in advocacy to adjust farm housing regulations and create shared investment models that reduce costs for farmers. Potential partnerships with cooperative housing developers can unlock new financing options.
Market System Change Potential: Stable, affordable housing for farmworkers can significantly reduce turnover rates and improve labor stability in the export commodities sector.

3. Cooperative Resource and Equipment Sharing

Intervention: Establish a shared tool and equipment library where farmers can access specialized equipment (e.g., processing tools, harvest equipment) without large upfront costs. Including an equipment operator as part of the rental model will ensure safe and effective usage.
Incentives for Change: Provide grants or subsidized memberships for cooperative participants. Incentivize participants by linking equipment access to participation in training or data-sharing initiatives.
Market System Change Potential: Equipment-sharing services can reduce costs, improve productivity, and enable smallholder farmers to scale their production.

4. Expanding Farmer-to-Farmer Learning Models

Intervention: Develop peer learning programs that leverage experienced producers to train and mentor other farmers. This could involve regular farmer meetings, on-site demonstration days, or mentorship programs tied to cooperative groups.
Incentives for Change: Offer stipends for experienced farmers who provide mentorship. Develop joint marketing opportunities for participants to encourage involvement.
Market System Change Potential: Building local expertise and knowledge-sharing networks will improve farming practices and support industry-wide growth.

5. Organizing Export Crop Producers for Collective Action

Intervention: Establish a centralized convening point where export crop producers can collaborate to align around shared policy, labor, and marketing strategies. Groups like the Synergistic Hawaiian Agriculture Council (SHAC) and HEFNA could play key roles in organizing these efforts.
Incentives for Change: Provide technical assistance grants or funding support for cooperative development. Encourage larger export businesses to co-invest in cooperative efforts.
Market System Change Potential: A coordinated export crop coalition can collectively advocate for better trade terms, stronger infrastructure support, and improved labor conditions.

6. Promoting Turnkey Farm Models to Lower Entry Barriers

Intervention: Develop turnkey farm models that combine land access, mentorship, and technical support to lower entry barriers for new farmers and streamline their path to profitability. Puna Flower Power’s pooled labor model and NYPO's turnkey operations were cited as potential references.
Incentives for Change: Provide startup grants or revolving loan funds to support the launch of turnkey operations and new entrants into the export commodities sector.
Market System Change Potential: Turnkey models improve market access for new farmers while reducing the risks and challenges of scaling up.

Scaling Up Potential

To ensure these interventions create lasting, systemic change, the following strategies are recommended:

Public-Private Collaboration: Engage public institutions, industry groups, and producer cooperatives to coordinate resources, advocacy efforts, and training support.
Incentivizing Change: Align incentives such as access to shared services, insurance, or marketing resources to encourage farmer participation.
Leveraging Existing Models: Draw on successful models like the Maui labor pooling system, SHAC's cooperative efforts, and the ʻUlu Cooperative’s innovations.
Technology Integration: Develop data-sharing platforms to streamline coordination, track workforce needs, and improve access to market signals.

By embracing a Market Systems Development approach, these interventions align with HIAP's focus on public-private collaboration to stimulate sustainable system change. The suggested strategies aim to address key labor challenges, improve resource sharing, and create more efficient pathways for Hawaiʻi Island’s export commodity producers to thrive. These interventions are designed to scale over time, ensuring both immediate benefits and long-term resilience for Hawaiʻi’s agricultural sector.