Hawaiian Commercial & Sugar Co. remains an agricultural giant as it looks to the future
POSTED: 1:30 a.m. HST, Sep 8, 2013
LAST UPDATED: 12:55 p.m. HST, Feb 12, 2014
PUUNENE » The steady roar of motors and fans pulsates through the dim, cavernous factory along dusty Cane Haul Road.
An elaborate jungle gym of pipes, conveyor belts, giant rollers and mills stretches the length of the humid building. The damp space smells of wet bark and warm molasses. Stubborn red dirt leaves its mark everywhere.
Outside, tattered smokestacks spewing thick ribbons of steam hint at life inside Hawaiian Commercial & Sugar Co.'s nondescript factory, where sugar has been made for more than a century.
At the HC&S plantation, generations of Maui residents helped shape the island's economy. And it's still one of the largest employers today, with an annual payroll exceeding $35 million for 800 full-time employees ranging from field and irrigation workers to lab technicians and mechanics.
The 143-year-old company runs the state's last surviving sugar mill, having outlived the dozens of kingdom-era plantations that fueled Hawaii's economy for 12 decades — at one time collectively exporting hundreds of millions of tons of sugar each year.
"We've enjoyed a lot of advantages," said Rick Volner Jr., the plantation's general manager.
The 39-year-old, brown hair already graying at the sides, has been with HC&S for 16 years — a third-generation employee whose great-great grandparents emigrated from Portugal to work some of Maui's first cane fields.
He credits the longevity of HC&S to "the right mix of water, land, growing conditions, people and economies of scale."
The plantation's 36,000 acres of crops constitute the state's largest farm. The vibrant green fields — in shades of emerald, chartreuse, mint and honeydew — blanket Maui's low-lying isthmus like a massive patchwork quilt over Paia, Haliimaile, Puunene and Waikapu.
The swaths of cane preserve sweeping views of the Central Valley and northern coastlines — a visual reprieve from surrounding residential and commercial developments that have sprouted as the Valley Isle's population has swelled.
"If you've lived long enough to have flown into Oahu when sugar was being grown, you would look down and see green, green, green. Now, it's gray, gray, gray with rooftops," said Stephanie Whalen, executive director of the Hawaii Agriculture Research Center. "When you fly into Maui, that Central Valley is all green. Without HC&S, it wouldn't be."
After more than 140 years in sugar cultivation, those fields could soon be planted with biofuel-rich crops as HC&S continues pursuing a potential future in alternative energy.
The transformation would signal the demise of Hawaii's last sugar plantation — but not the end of HC&S.
"We understand the importance of not just sitting still and just continuing to do the same things that we've been doing for 140 years. And we understand that we do have to change," Volner said.
OVER THE PAST 15 years, the company has seen fellow large-scale farms on Maui quit the ag business. Haleakala Dairy shuttered its factory in 1998, Pioneer Mill closed down its Lahaina sugar plant in 1999 and Maui Land & Pineapple discontinued its pineapple operations in 2009.
As recently as 1990, 55 farms across the state were producing 6.5 million tons of sugar cane. HC&S became the lone sugar producer in 2009 when Gay & Robinson on Kauai shut down after 120 years.
"We're in the business of agriculture. Currently, sugar cane is the crop. But that doesn't mean that that's what we'll be doing five, 10, 15 years from now," Volner said. "We've got some pretty exciting work we're doing with alternative crops, with different renewable-energy crops."
With help from the U.S. Department of Agriculture, the University of Hawaii and others, the company has been experimenting with different grass species, including sorghum and napier grass, and determining whether HC&S can viably refine them into biofuel — possibly green jet fuel.
"Through this whole thing, the key is making sure that as we make decisions on selecting a crop we have some level of certainty that it's sustainable in the long term," said Mae Nakahata, HC&S' longtime director of agricultural research and crop control. "On the energy side, if we go down that road, the investment is going to be huge. It's not your $10 million, $15 million investment; it's more like $100 million-plus."
She said the challenge is finding a crop that can be produced both "reliably and affordably."
"If you don't have an affordable feedstock, you're not going to have affordable energy. And that's not in anyone's best interest," Nakahata said.
Whalen, whose nonprofit formerly was the Hawaiian Sugar Planters' Association, a trade organization, said converting to a biofuel producer could prove lucrative for HC&S.
"You really have to look at the value of these promising technologies," she said. "It's not easy. People have to understand that the sugar cane industry here has always been very efficient. It creates energy, molasses and sugar, and you really didn't have anything left over. Companies that went out of business couldn't make it with those three products."
HC&S hasn't abandoned its core sugar business in the meantime. Nakahata's work also focuses on developing sugar cane strains that produce the most sugar from the plant. And the Hawaii Agriculture Research Center helps with the plantation's breeding program to improve crop yields.
"Right now, I believe sugar cane has a place," Nakahata said.
In fact, Volner said the company is on track to have its best production year in 10 years. Last year, HC&S produced 178,300 tons of raw sugar and pulled in profits of $20.8 million on revenues of $182.3 million.
"This year, if we finish strong — and it's always an ‘if' in farming — we're on track to get to 200,000 tons, which is where we'd like to at least get to consistently every year," Volner said.
HC&S' biggest customer is C&H Sugar Co. of Crockett, Calif., whose pink-and-white packages are a familiar sight in Hawaii grocery stores. About 90 percent of the raw sugar produced annually is sold to C&H, which melts down and reprocesses the sucrose into white food-grade sugar.
The rest is made into specialty sugars sold under HC&S' Maui Brand label, and to other distributors that repackage the sweetener. The mill also makes evaporated cane juice for industrial uses (like beverage sweeteners) and molasses, which is sold to mainland and local ranchers for cattle feed and as a soil nutrient.
STAYING AFLOAT in the competitive sugar business in recent years has required reinvesting in the business to increase efficiencies and production. The company sustained millions in financial losses in 2008 and 2009 before turning a small profit the following year. By better managing its field operations, the company says it's seen a 40 percent increase in sugar yields per acre over the past three years.
Whalen said those reinvestments are key for any farm.
"In agriculture, where margins are really small, you need to have enough volume to be able to fund infrastructure needs and renovations," she said. "Sugar is a high-volume, low-margin crop."
Volner said the plantation has also been maximizing its acreage to boost production after downsizing in recent years due to crippling drought conditions on Maui.
"Sugar's a commodity. Somebody else sets the price. You can't control that," he said. "The one thing you can control is production levels. So by having more acres in production, you have a better chance of having a higher production volume, which will offset some of our fixed costs."
Late last month, domestic sugar settled at 20.95 cents a pound — a five-month high — on the ICE Futures U.S. exchange in New York.
Prices have fallen 25 percent over the past year as good weather and a surge in Mexican imports create a large oversupply on the domestic market, the Wall Street Journal reported Aug. 28.
As it pursues other opportunities, HC&S has pledged to keep the Central Valley preserved in agriculture, regardless of the plantation's ultimate future.
In 2009, it designated more than 27,000 acres of farmland — the portion it owns of the 36,000 acres in cultivation — as so-called "important agricultural lands" under state land use law.
"We're very upfront and open about being committed to agriculture here on Maui. We were the first landowner on Maui to do that, to use that state designation, and that basically says that those lands are going to stay in agriculture for perpetuity," Volner said.
The designation would transfer to any future landowner.
STILL, THE COMPANY has its share of critics who claim the sugar plantation is a land-banking front for its parent company, real estate giant Alexander & Baldwin — one of the original Big Five of Hawaii's plantation era and fourth-largest landowner in the state today.
"If we truly were banking that land for development, just look at what we've done as far as the (agricultural) designation. There's some pretty onerous conditions on it," Volner said. "To undesignate it requires two-thirds' vote by the Legislature. It's hard to get the Legislature to agree to anything, let alone a two-thirds' majority."
HC&S also has its hands full with community opposition to its pre-harvesting practice of setting fields ablaze to burn off the leafy tops of the cane, sending plumes of smoke and ash into the air. With its crops staggered on a two-year harvest cycle, half of HC&S' fields are harvested every year.
The burning, and the soot it leaves behind, prompted Christina Mnatzaganian to launch a study in 2011 on the possible health effects while completing her residency for medical school at Maui Memorial Medical Center.
"I'd be driving and black ash would be raining down. I would wake up and it would smell like a campfire," said Mnatzaganian, now a junior specialist at the University of Hawaii at Hilo's College of Pharmacy.
"Aside from getting congested whenever the fields were burned, I noticed a film on my car, my floors. It was not your normal brown dust. I could not get my house clean from the residue," she said. "I thought, if it's coating my floors like this, what's it doing to my lungs?"
With the state Department of Health taking the lead on the project, Mnatzaganian said a team of researchers analyzed pharmacy data for acute effects — prescriptions for respiratory complications and eye irritations — on burn and nonburn days in areas where people may have been exposed to cane smoke.
The study is still ongoing, she said, and it's too early to reach an accurate conclusion of the data so far.
The project came to a standstill last year when researchers tried to obtain patient information from Maui Memorial and other medical clinics to expand the study beyond pharmacy prescriptions.
"We're still pursuing it and exploring other avenues to continue the research," she said.
HC&S OFFICIALS say the long-standing burning practice is critical to the company's bottom line.
Burning the leafy trash reduces the amount of plant material that's harvested and transported to the mill. It also helps concentrate the amount of sugar in the cane stalks.
The company has looked into alternative harvesting methods, but "the burning process that we've used for over a century continues to be the most viable means" for the crop, Mark Lopes, manager of harvesting and land preparation, recently wrote in a letter posted on HC&S' website. Unlike other countries that can mechanically harvest, he wrote, "Maui's unique climate, topography and geography limit our options."
Irene Bowie, an environmental advocate and director of the Maui Tomorrow Foundation, said HC&S needs to adapt to 21st-century sustainable practices, especially in light of the suspected adverse health impacts of cane smoke.
"I've seen their smoke blown all the way out to Kahoolawe. But whenever you take issue with their practices, the company says we'll lose our green fields and 800 people will lose their jobs," Bowie said. "I think we can do a better job and there can be a happy medium."
Bowie cited Australia as an example, where sugar cane is mostly harvested green, without burning.
Residents and community groups have protested the burning and sought help from the state Health Department's Clean Air Branch to crack down on the plantation's smoky harvesting.
HC&S holds an annual agricultural burning permit from the branch that expires in March.
The health department said the permit conditions include notification requirements, when and what time burning can occur, what can be burned and what fields will be burned during the burn season. The permit also includes measures to minimize dust and smoke fallout at schools, highways, airports, and other sensitive areas, a department spokeswoman said.
"To make complaints about violations, the department says they need complete and accurate information to act — time, location, photos," Bowie said.
Her foundation is developing a smartphone app to help facilitate real-time complaints. "This will really allow the community to become involved and give accurate information," Bowie said.
Maui Tomorrow also launched a Clean Air for Keiki campaign (cleanairforkeiki.org) to educate the community and allow people to send complaints to the Health Department, U.S. Environmental Protection Agency and county officials. The website says the prevalence of asthma among Maui County children is higher than the state average, citing 2010 data from the U.S. Centers for Disease Control.
HC&S says it is mindful of the impacts.
"We all live, work and play here, too," Volner said. "We're not going to do something that'll hurt the public. We take all the precautions that we can."
BACK AT the Puunene Mill, a massive tournahauler tractor rumbles by with charred cane spilling out the sides of the trailer.
The factory runs 24 hours a day, every day, during the nine-month harvest season. A red light atop a smokestack blinks slow and steady, like a sluggish heartbeat.