Hawaii lawmakers are considering a bill that both sides of the debate say could have a profound effect on Hawaii’s beef industry — a key source of locally produced protein — as the state seeks to produce more of the food it consumes locally.
The issue is whether it is beneficial to Hawaii for one person to own approximately 70% of the state’s capacity to process beef. In this case, the processor has vowed to increase processing capacity and there is no indication that he has engaged in anti-competitive business practices.
The Hawaii Senate Agriculture Committee is scheduled to hear arguments Wednesday on this question when it considers SB 692, a measure that would impose several restrictions on the meat processor, Idaho billionaire Frank VanderSloot. Although he owns ranches in the western U.S., VanderSloot made his fortune through a wellness products company called Melaleuca.
Through a series of acquisitions, VanderSloot now operates Hawaii’s two largest slaughterhouses: the Hawaii Meats plant on Oahu near Kapolei and the Hawaii Beef Processors plant at Pauiilo on the Big Island. Although both facilities are owned by the state, VanderSloot has leases for them and has pledged to expand their capacity, an announcement that has resonated with small ranchers who say it is hard for them to find space at the slaughterhouses.
Designed to “institute safeguards to prevent anti-competitive practices in the meatpacking industry,” the bill would allow VanderSloot to use only 50% of his capacity for meat marketed under his own brands. The rest would have to be dedicated to competing brands, such as Parker Ranch’s Paniolo Cattle Co. brand and Kuahiwi Ranch’s eponymous brand.
The bill also would require VanderSloot to submit an annual report to the Department of Agriculture describing his “efforts to invoke stakeholders in ensuring that the vision and direction of the meat processing establishment is in the best interest of the State and its food security, sustainability, and safety goals.”
The required report would have to include VanderSloot’s business plans, including “existing and projected markets and sources of cattle supply.”
Perhaps more important, the measure requires VanderSloot to provide processing services without requiring ranchers to give up title to their animals.
The bill’s supporters say it will ensure that VanderSloot will not be able to use his position to control the market. Customers will have to be treated fairly and Hawaii ranchers given access to the processing plants: a key to maintaining a local food system that lets local ranchers raise cattle for people in Hawaii to eat.
Opponents say it’s not necessary and, in fact, would hinder VanderSloot’s ability to expand and give access to small local ranchers. There are also questions about whether it’s legal to impose such restrictions on businesses that have leases with the state that contain no such provisions.
The chief antagonists are VanderSloot on one side, and on the other, Parker Ranch, the historic Big Island ranch. But the debate has drawn in numerous players in Hawaii’s agriculture and food industries.
On Parker Ranch’s side are players like the Hawaii Cattleman’s Council, the Hawaii Food Industry Association, KTA Superstores and the Hawaii Food Service Alliance. All of these testified in favor of the House companion to the Senate bill, although the House version has stalled.
Also supporting the bill is the Ulupono Initiative, Parker Ranch’s joint venture partner in the Paniolo beef brand.
Opponents of the measure, along with VanderSloot, include a number of small ranchers as well as the Hawaii Attorney General’s Office, which has questioned the bill’s legality. VanderSloot has also enlisted some high-profile consultants, including Scott Enright, a former chair of the Hawaii Board of Agriculture and Honolulu attorney Paul Alston.
The bill’s sponsor, Hawaii island Sen. Lorraine Inouye, said her chief concern is to protect the industry, which is a major force in agriculture in her district.
“My concern is I want to preserve our Big Island cattle industry,” she said. She added that she was concerned that VanderSloot had been able to acquire what amounts to a monopoly stake in Hawaii’s meat processing capacity — a point raised by the bill’s proponents.
“I certainly understand that, and I believe their concerns are true,” she said.
Dutch Kuyper, Parker Ranch’s president and chief executive, declined to comment for the record. But Kuyper laid out several compelling arguments in favor of the bill in a message to ranchers sent out late Monday.
Perhaps most persuasive was an argument about beef prices and what might happen if VanderSloot forced ranchers sell their cattle to him rather than processing the cattle for ranchers marketing the beef under their own brands.
“As most of you know, the price for grass-fed market cattle was $1.05 10 years ago, whereas it is $2.00+ today,” he wrote. “A competitive market for cattle is good for all producers.”
“Without the right to retain ownership, there would be no serious competition for market cattle on the Big Island, and prices for cattle likely would be markedly lower,” he wrote. “Producers should not be forced to surrender the title to the packer in order to pursue their own markets.”
The overarching point is that VanderSloot’s ownership gives him such a dominant role in the market – Kuyper argues it amounts to a monopoly — that the processor could do any number of things to interfere with fair trade in the Hawaii beef market.
But not all are convinced VanderSloot is out to hurt local ranchers. In fact, several small ranchers accused Parker Ranch of dominating the industry for years – something Kuyper denies in his letter.
“We’ve been in this business for years, and we are just happy he came to town finally,” Waianae rancher Frances Kama-Silva said in an interview.
Kama-Silva, who runs Barbed S Ranch with her husband Henry Silva, said gaining access to the Oahu slaughterhouse has been difficult. She said she has had virtual meetings with VanderSloot, and he’s promised to change that.
“We’re happy with him,” she said.
Alston, the Honolulu lawyer, said VanderSloot provides such a large amount of his limited space to Parker and Kuahiwi ranches that the little guys often have to wait unless they are willing to join in with Parker and Kuahiwi for a fee.
“The reality is if you raised cattle on the Big Island, you could have to wait six to eight months to slaughter your animals,” he said.
VanderSloot can change that by expanding capacity, he said.
In the meantime, there’s a final argument that might stop the bill, which Kuyper says he helped draft. According to Deputy Attorney General Jennifer Waihee-Polk, the measure could be unconstitutional.
“Because the bill would prohibit them from using their property fully, they might claim that this bill constitutes a taking of property requiring just compensation or is an impairment of contract, all in derogation of the Constitutions of the United States and the State of Hawaii,” she said of VanderSloot’s businesses.
David Callies, a professor who teaches property law at the University of Hawaii William S. Richardson School of Law, said it is important to note that a lease is a property right and that even if the state owns the land, it could be considered a taking by the government if the state were to restrict VanderSloot from using his property as the lease allows.
“Someone who has a lease is in pretty good shape,” he said.
“Hawaii Grown” is funded in part by grants from the Ulupono Fund at the Hawaii Community Foundation, the Marisla Fund at the Hawaii Community Foundation, and the Frost Family Foundation.
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