American Business, Culture and Ethics: Hawaii

The history of Macadamia nut industry in Hawaii can be traced back to around the early 1880s with the introduction of the exotic plant from Australia. The nut tree was first planted in the year 1882, curtsey of William Purvis, at Kapulena. Although at the time, the plant served a major role in reforestation and as an ornamental tree (Hawaiian Historical Society Website). Four decades later, an attempt to set up the first plantation by Ernest Shelton Van Tassel near Honolulu hit a dead end, due to the low quality of the nut seeds. Afterwards, the Hawaii University undertook an intense research aiming to improve the nut seed quality. Following the successful research, the first commercial production of macadamia began in the early 1950s with major concerned parties being C. Brewer and Company Ltd: and Castle and Cooke. These two organizations led to the establishment of the modern Macadamia Industry in Hawaii, which would later emerge to be the world’s largest nut producer (Peggy Filippone).

Following the year 1976, Mauna Loa Brand was established and commercial macadamia marketing commenced. Today the brand is popularly recognized worldwide for its high quality roasted nuts. The large corporate are replenished by the small scale macadamia growers among them Kammy Purdy farm in Moloki and Tudie farms. The industry has over 4190 acres of land and over 600 farmers. Ten years after the establishment of the brand, the ML Macadamia Orchards, L.P Company was started. The company is the single largest producer of premium nuts in the world. It is located on the big Island of Hawaii. Its production surpasses a quarter of the World’s production of the nut.

The major objectives of the Company formation were to farm and grow nuts. Besides, it was to provide small scale Macadamia farmers with agricultural services, out sourcing various activities to its affiliate companies and long term service contracts. Among other factors behind the Macadamia Orchards being set up, was to direct on various management fees to its companies and stakeholders at a fixed fee per acre farmed or in other terms percentage of reimbursed costs which was put at a range of between 5-20% (ML Macadamia official website).

Macadamia industry plays an important role to the Hawaiian economy besides the obvious job creation and as source of income to the people. Being the third largest export earner in Hawaii, most of the nuts are exported to overseas destinations such as Japan and Canada, this way, the nuts earns Hawaii foreign exchange. The Hawaii nuts contribute 50% of the world nuts; this has played a significant role of stabilizing Hawaii economy following the sugarcane decline and failure (Sundra Kunimoto). On clean energy, biomass conversion plant has been constracted.

Another major role the nut play is the provision of food security and preservation of Hawaii’s precious ecological flora- a major tourist attraction for the forest industry as millions from around the world pay a visit to the green, lush and vibrant Island vegetation. With continued growth and expansion, the ecotourism offers promising future for Hawaii especially the Macadamia sector (Sundra Kunimoto).Despite the low returns for the year ended September 2008-2009, the Pacific Business News has reported recently that ML Macadamia Orchards, L.P has recorded a December 2009 profit of $198, 000 compared to the previous $68,000 for the year 2008 as the net cash flow reached a high 1.7 million up from a low 1.6 million. The financial improvement come as a result of a large recovery of nuts, higher prices, lower costs of nut shell and settlement of the law suit with the Hamakuma Macadamia Nut Company. Last year the ML Macadamia Orchards, L.P reached agreement with Mauna Loa Macadamia nut Corporation to sell all nut production in the year 2010-2011 at a price of 73 cents per pound (Pacific Business News).

Marketing of Macadamia nuts is mostly done by the L.P Company under long-term nut purchase contracts to Mauna Loa Macadamia Nut Corporation (Mauna Loa). The Mauna Loa incorporates other activities such as; nut processing and marketing under the famous prestigious Mauna Loa trademark brand with the largest consumer being the USA. The rest is exported to Japan and Canada among other consumer destinations.

According to the Macadamia crop data prepared by Hawaii Agriculture Statistics (HASS) In July the tear 2002, the crop performance since the year 1996-2002 had been on a steady decline. This marked Hawaii being overtaken by Australia in the year 1997. The net cash decline was from $44,000 to $29,000 dollars per net farm. This decline was contributed by a number of factors discussed under challenges facing macadamia in Hawaii. Despite the decline, the industry is showing slow signs of regaining its foot as discussed earlier, amid great criticism of the possibilities that of black market deals by the Mauna Loa Company as reported in the Natural News.com “… the industry is about to be devastated in the next five years it may not be where it is today. Sadly,… the tree takes over seven years to give nut and fifteen years to mature, this is not a industry which can recover overnight” (Mike Adams).Dallas Business Journal adds that the “ Hershely owned Mauna Loa Macadamia Nut Corporation add non-Hawaiian macadamia nut to Mauna Loa products sold on the main land.” The obvious outcome of this dubious business deal is decline of quality famous Hawaii roasted nuts.

Despite the above highlighted factors concerning the success of the macadamia industry in Hawaii, the industry is also faced by quite a number of factors which have threatened its operations, For example in 1997 it was overtaken by Australia as earlier stated.

In the year 2006, the Hawaiian macadamia industry’s production was decreasing largely due to a number of factors. First, factor is stiff competition from other macadamia nut producers worldwide such as from Australia, Brazil, South Africa and Malawi. The entry of these countries in the global market as expected in any business, has affected Hawaii which largely enjoyed the lion’s share. The second challenge is the issue of low global prices with Australia most likely to take the lead in its production. Tree exposure to drought, disease or exposure to excess wind reduces the rate to develop or mature thereby reducing the net production (Yamaguchi).

Tropical nut Borer which is the major pest and threat to the macadamia industry is the major pest of economical significance (Jones, 24-25). As a result, the total estimated crop loss for example in the year 2001 was 6% or a sum of %313,000 (Hawaii Agricultural Statistics). In addition, the pest reduces the quality of the nut especially the dried nuts in the store or mature ones which have fallen on the ground (Delate et al, 46-50).

Another pest of economic importance to the macadamia farmers in Hawaii is the Southern Green Stink Bug which sucks on the succulent tissues and destroys flowers and young immature fruits. Heavy pest infestation on the nut trees bring about premature or destroyed nut development and abscission (Sugano and Mau). Mite pests (broad mites) majors in destruction of macadamia which are mainly planted in regions with a higher water content or moisture. They destroy the leaves flowers and young immature fruits. Effects on the flowers with lead to their falling off and as a result no fruit formation which lead to low or no harvests (Jones).

Other macadamia diseases such as Rot root destroys trees which in most cases cause tree death between the ages 2-5. Besides, weeds and roof rats damage an approximate total nut production of 8% in Hawaii (Tobin). Macadamia Quick Decline (MQD) also has been the leading cause of loss for the industry since being overtaken by Australia. The condition occurs largely in areas of large down pour leading to foliage and tree death (Lee and Ko). This has posed a hard challenge on the industry since it has been hard to rectify since 1998 (Martin) a factor which has largely contributed to high operational expenses and high export treatment for the nut industry.

 Meanwhile, interests are being shifted to come up with ways of eradicating pests which have so far heavily affected operations in the nut industry. The researchers are also keen to come up with a high quality seeds and tree nuts resistant to most pests. In addition the research also includes examining other factors such as the soil type and pH not forgetting other environmental factors such as the average rain received in selected regions (Sagano and Mau). Quarantine of newly introduced to Hawaii has also been introduced to curb with any pest or disease threat from the exotic countries (Kunimoto).

For the case of MDQ, a program has been set up since 1997 to manage the disease better and as a result maximize on production of the nuts (Macadamia Nut IPM Program).The future outlook for the industry seems to be a two way challenge should there be any unpredicted drought conditions as in the year 1999. Moreover, the output for 2010 is expected to remain at the same level as last year. Exports in the year are forecast to decrease to 5 percent from last year due to decrease in demand from Asia, the largest market for U.S. macadamia exports. Secondly, due to increased competition from imports, the industry may take some time before it gets on its feet. With the global meltdown which recently paralyzed most businesses, sales to the Asian market have remained down significantly compared to this same period last year. With weak recovery expected in Asian demand, macadamia exports for the year are forecast to remain the same as last year (FAS online).

On the other hand, the Hawaii Seed Crop industry estimates that Current and Potential Economic and Fiscal Contributions in Hawaii macadamia industry, has a bright future according to the Hawaii business magazine that “utilized production from Hawaii’s macadamia nut harvest is estimated to be high, according to the USDA National Agricultural Statistics Service, Hawaii Field Office. The estimate represents over 20 percent increase compared to last season.” The season overview of timely showers and an increased demand for in shell nuts will contribute to this season’s higher output. Processors have already noted some improvement in the quality of nuts delivered this season. On the other hand, growers did report the prolonged dry conditions, pests, pigs, and volcanic haze adversely affected orchards and harvesting. Others mentioned it was economically unfeasible to pick their crop and may switch to other commodities or temporarily stop farming (Hawaii business Magazine).

Generally, despite the tree being exotic, it has turned out to play a major role in the economy of Hawaii, from tourism, employment, foreign exchange earner, biomass production, among other areas of diversification such as production of biomass, just to mention a few of the major objectives and achievements of the “magical” nut tree to the Hawaiian people. In coming five years or a decade, the industry will be blooming just as in the 1990s.