Hawaii hanging on to sugar heritage

[September 24, 2008]    HONOLULU (AP) -- Sugar was once king in Hawaii, steering the economy and politics while shaping the multicultural identity and colorful pidgin English language of these islands.

But the once sweet and thriving industry has moved closer to extinction here with Gay & Robinson Inc.'s announcement it is leaving the sugar business after 119 years because of skyrocketing costs and mounting multimillion-dollar losses.

Sugarcane will still be raised in G&R's red volcanic soil on the lush island of Kauai. Rather than catering to America's sweet tooth, the crop will be converted into ethanol to feed vehicles and the nation's growing appetite for renewable energy.

The family-owned business will lease its 7,500 acres and facilities to other companies that plan to produce ethanol and electricity, but not sugar.

"Our losses were simply too great. We just had to stop the bleed," said E. Alan Kennett, G&R's president and general manager.

G&R, with its Sept. 10 announcement, is the latest Hawaiian sugar grower to abandon the business or close in the past two decades, leaving deteriorating smokestacks as aging monuments to the industry's heyday.

After the company harvests its final crop in mid-2010, it will end the storied sugar-producing history on Kauai, where the first successful sugarcane plantation in the islands was started in 1835.

It will also leave Hawaiian Commercial & Sugar Co. (HC&S), which has a 35,000-acre operation on Maui, as the lone sugar producer in the state.

"We've seen the closure of all the other plantations over the course of the last 20 years, so it's not a wake-up call," said Frank Kiger, general manager of HC&S. "It's an acknowledgment that it's a really tough business to be in."

Some fear HC&S, a division of Honolulu-based Alexander & Baldwin Inc., could be the next casualty of soaring costs and low margins. Its closure would be the end of sugar in Hawaii.

"HC&S does not have any plans to go out of business, period," Kiger said. "But I continue to say, we're under a lot of stress from a number of factors."

Many of the challenges facing the dying island sugar industry today are the same as those a century ago -- thin margins, competition, pests, disease, labor shortages, rising costs, trade barriers and drought.

This year, the industry has been hit hard by record fuel prices. The sugar industry is heavily dependent on fuel for its heavy equipment, ranging from cranes to tractors. G&R was paying $2.85 a gallon for diesel fuel 18 months ago. Recently, it hit $5.05 a gallon.

In addition, G&R's fertilizer and herbicide costs have doubled in the past year and the cost of providing medical benefits for workers has soared 41 percent since 2006.

While costs have soared, the price of sugar has remained virtually flat since the early 1980s. G&R currently earns about 18 cents a pound.

"It's inflation that ate up all the other sugar companies, and it was doing the same to us. You can't make it if you can't pass on the costs," Kennett said.

G&R is a relatively small operation, producing about 42,000 tons of sugar a year.

Hawaii, one of just four states that raise sugarcane, is projected to produce 1.7 million tons of the crop this year, about the same as Texas. Florida is the largest producer in the U.S. with 15.8 million tons forecast this year, followed by Louisiana with 11.3 million tons, according to a Sept. 8 report by the U.S. Department of Agriculture. Eleven states, however, produce sugar from sugarbeets, from Washington state to Michigan.

Hawaiian Commercial & Sugar, meanwhile, has managed to survive with its specialty sugar products, from evaporated cane juice to its popular Sugar In the Raw, a golden-colored sugar that isn't bleached or heavily processed. It expects to grow that business to 30 percent of its production, up from 10 percent.

"That's an example of adding value to a commodity," said Kiger.

HC&S also produces electricity by burning sugarcane fiber. It has also studied going into ethanol, but currently doesn't have plans to follow G&R's lead of leasing its lands to produce sugarcane for energy.

At its height, sugar was the biggest employer in Hawaii. It's since been supplanted by tourism.

From 1852 to the end of World War II, nearly 400,000 contract workers came from places like China, Japan, Korea, Portugal, Russia, Puerto Rico and the Philippines to work long days in the dusty fields, under scorching sun, for a few dollars a month. They also brought their cultures, cuisine and language, making Hawaii the melting pot it is today.

"Sugar is what created this very unique place," Kennett said.

Stephanie Whalen, executive director of the Hawaii Agriculture Research Center, a 113-year-old group formerly known as the Hawaiian Sugar Planters' Association, said many of the plantations survived by increasing productivity, reducing costs and producing their own power. But there's only so much they can do.

"How long can you do that when you're competing against the world in a low-value product?" she said.

With the demise of sugar and pineapple, Hawaii's agriculture industry has remained stable over the years, buoyed by the growth of macadamia nuts, papayas, coffee and tropical flowers.

"Agriculture is not dead and dying. It's alive and well," she said. "It's changing, and sugar is part of that change."

[Associated Press; By JAYMES SONG]

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