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LIHUE, Kauai — The coronavirus crisis is having profound implications in an unlikely quarter — the island’s beef industry.
Kauai County has committed nearly $4 million of its allocation of $28.7 million in state money under the CARES Act to try to rejuvenate Kauai’s agriculture industry by helping some of the largest operations on the island and some of the smallest.
Except for Kauai Coffee and a couple of seed companies on the west side, the county lacks anything that could be described as industrial scale agriculture.
The approach recognizes a reality. Kauai has thousands of acres of agricultural land — much of it fallow since the demise of the sugar industry. But it has few farmers and fewer people who are willing to become farmers.
So in the midst of a pandemic, Kauai County has committed a huge stake — $1.75 million — in CARES Act funding to a gamble that growing alfalfa cheaply enough on Kauai can permit the island’s beef industry to go to scale.
Many of the people who farm are older — at or past the traditional retirement age. Worst of all, though, the economics of farming in Hawaii are brutal, with the advantage falling to food imported from the mainland or other countries.
It has been traditional on Kauai for cattle ranchers to raise calves until they are about a year away from when they can be slaughtered. But because Kauai’s extensive grass pastures — an inadvertent legacy of Big Sugar — don’t provide the depth of nutrition to make such cows competitive in the meat market, the island practice has been to ship the cattle to feed lots on the mainland.
Statewide, Hawaii has also been hamstrung by a lack of slaughterhouse and processing capacity. There are only a couple small facilities on Kauai and a larger one on Oahu, but none of them is capable of operating on a commercial scale, said Josh Uyehara, general manager of Hartung Brothers. The company is best known as a seed producer.
Two or three years ago, in response to demand from horse ranchers, Hartung Brothers began growing alfalfa. A troublesome limitation on Kauai agriculture, Uyehara said, is that mainland alfalfa growers enjoy such overwhelming economies of scale that they could grow the alfalfa there, ship it to Kauai and still undercut local producers on price.
Then along came the coronavirus, which created a livestock traffic jam that almost immediately threatened Kauai’s beef industry. First, processing plants had to shut down because workers became ill. That caused the number of animals waiting for slaughter on feedlots to increase exponentially.
That, in turn, meant that Kauai ranchers could not dispose of locally produced calves because the feedlots were over capacity. It sort of forced the hand of the local beef industry, which has struggled to make the transition from specialty producer focused on restaurants and high-end boutique food sellers to a source capable of contributing consistently to the ongoing supply chain for super markets.
In that sense, the beef industry has the same fundamental problem as many Kauai farmers. They can’t grow enough to be able to guarantee long-term supplies to big retail customers. That’s where the alfalfa comes in.
Uyehara and Howard Greene, a manager for Gay & Robinson, a secretive family-owned company with some of the largest land holdings on Kauai, talked about the synergy the two dissimilar companies found in the cattle business. Hartung Brothers is prosperous, one of the backbones of the nation’s seed industry. Gay & Robinson was one of titans of the days of Big Sugar, but with sugar gone, it has struggled to find a new corporate identity.
When sugar collapsed, Gay & Robinson was left without much of an ongoing business plan.
In that sense, Greene said, “I would call us a significant company. I would not call us successful.”
Until quite recently, he said, Gay & Robinson had declined to dabble in beef “because it’s not a money maker. I have to present the board here with projects that can show a profit. Cattle and taro and all those other crops are very hard pressed to make a decent return. That’s why we have so much fallow land.”
Headquartered in Kaumakani, Gay & Robinson’s offices are hidden behind a small neighborhood of former sugar plantation worker homes around which “no trespassing” signs dominate. Greene said the company owns about 350 such homes, which are at the moment its main source or revenue.
Alfalfa made sense to Hartung because it is a logical candidate for use as a cover crop. There was limited demand for it on Kauai, from people who own horses. Hartung had found a small market for baled alfalfa, but it was extremely small scale.
But Uyehara said there was also a potential market selling alfalfa to island cattle ranchers. Kauai beef is typically marketed as grass fed, but Uyehara said grass that covers the former sugar fields is nutritionally insufficient to fatten calves enough for the broad beef market.
So ranchers use alfalfa as a supplement. Baled alfalfa was also more difficult for the ranchers to deploy than compressed pellets, which Hartung didn’t have the ability to make. That requires a special machine that costs about $700,000.
After several years of working on alfalfa production techniques, he said, Hartung had finally arrived at a point where its Kauai alfalfa was competitive in price with imports from the mainland.
With the impact of the coronavirus, Hartung Brothers and Gay & Robinson submitted related grant applications for CARES money. Hartung received $750,000, which will allow it to purchase a used alfalfa pellet processing machine. Gay & Robinson got $1 million.
It’s not a sure bet for Gay & Robinson. The company’s livestock business, Greene said, is “in flux.”
In 2013, Gay & Robinson formed the Makaweli Meat Co. While its beef is considered top-of-the-line, Greene said Makaweli has not been a commercial success.
“It’s definitely a loss business,” he said. “We’ve lost money every year (on Makaweli). Our original goal was local beef for local people. But you can’t compete with Costco. We can’t even get into those stores.”
For Gay & Robinson, Greene said, the CARES grant money was a last ditch opportunity to improve the efficiency of its operations and try to become more competitive in Hawaii.
The backup in the supply chain caused by the coronavirus, he said, made an already bad situation worse. The backup made it impossible to ship many calves to the mainland.
“We’re in a pickle because we have too many of these animals,” Greene said. “We’re struggling for water, grass and other things. We’re stuck with older animals” that may have missed their opportunity to get to market.
So, Gay & Robinson will become a customer for Hartung’s alfafa pellets and will hope other efficiencies and market conditions improve. The company will also invest in additional fencing, irrigation and other agricultural infrastructure.
“The grant was there to create opportunities that would not otherwise be acted upon,” he said. “I hope it’s successful. It seems like there’s a need for it.”
Nick Courson, a deputy county attorney who was detailed to work on the CARES grant program at the Office of Economic Opportunity, said the county found beef an interesting target for help because “we didn’t have the facilities, or the feed, and no cooperation among cattlemen.”
Hartung, he said, represented a successful company trying to enhance use of cattle feed technology. Gay & Robinson, he said, “are not money rich. They have been struggling just to keep their workers.”
Courson said he realizes the $1.75 million bet on the Kauai beef industry is, in most respects, a gamble.
“This is mostly an opportunity for (the beef industry on island) to get together and finish cattle on Kauai and try to actually produce product,” he said.
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