 Aloha, and welcome to a Hana Kako on the Think Tech Hawaii Broadcasting Network. I'm Joe Kent, filling in for Dr. KDE Akina. We work at the Grasserie Institute of Hawaii, Hawaii's free market think tank. And across the state, farmers and ranchers are wondering what is the future of agriculture in Hawaii. We're here with Paul Brubaker, one of Hawaii's leading economists. Paul was chief economist at the Bank of Hawaii and is now head of TZ Economics or Tropics Zone Economics. He's the director of the Hawaii Economic Association among many other roles. Paul Brubaker recently completed a study called 50 Years of Seed in the 50th State. Welcome Paul. Thank you, Joe. So, well, recently we've seen agriculture in turmoil and a lot of farmers and ranchers are wondering what's going on with agriculture. As the last sugar plantation has just kind of gone belly up in Hawaii, so what is going on with agriculture in Hawaii, especially when it comes to food production? Well, I think you're right. We should, you know, share a moment of silence for the sugar industry, which after 170 years, 180 years, is coming to kind of a sad end. But I think it's also instructive that the problem, if you will, that Alexander and Baldwin will face redeploying 30 or 35,000 acres of prime ag land is a challenge faced by the state as a whole, by agriculture in the state. How do you transition out of this plantation legacy and into the other crops and livestock agricultural activities that will define Hawaii's agricultural future? And speaking of transition, there's a big transition going right now. A lot of people are thinking about, you know, the future of agriculture is in the paper a lot, but how much does agriculture make up of the state's entire economy, would you say? Yeah, it's about 0.6% of GDP. A hundred years ago it was 60% of employment, so a hundred years ago a majority of people in Hawaii worked in agriculture. And that's really a testimony to the amazing productivity of agriculture, because even U.S. agriculture is only about a percentage point of GDP. Now wait a second, you tell me that agriculture is less than 1%, and that's a good thing. Yeah, we feed ourselves, we're overweight, some people obese and diabetic, and we feed the rest of the world, not to mention throwing away too much food, with less than 1% of GDP. So it's a good thing we don't have to do so much to feed ourselves. Productivity in agriculture has allowed labor and other resources to be redeployed in other economic activities. You recently did a study called 50 Years of Seed in the 50th State, and you showed in the study that few agricultural activities in Hawaii's modern history have so profoundly improved human welfare worldwide through contributions to productivity growth, as has Hawaii's corn seed industry. Yeah, few people realized that 50 years ago, plant breeders from across the country were invited out to Hawaii, literally Molokai is where everything started, as Del Monte pineapple plantation closed and those lands became available, and began developing corn breeding programs in the winter months, when up in Iowa and Illinois where a lot of these people were from, it was too cold and they were hiding out in their laboratories. And that's developed into this seed industry today in which the maize genome has been evolved by scientists through R&D in an industry that started out with 200 companies and is now five and maybe three in a year or two, connected globally, that is there isn't a corn grown commercially on the planet that's not related to something that's been done here in Hawaii over the last half century. So the growth in productivity in the maize genome in corn production worldwide is related to what we've done here. So again the same concept of getting more for less work. Yeah, I mean six or seven times more bushels of corn per acre in the United States than 60 years ago using less agricultural chemical input, a couple of the newer modifications have resulted in reductions of corn insecticide use of up to 90% in the last 15 to 20 years. You're saying that we're using less insecticide because of seed crops or the new seed technologies and everything. That's correct. And using safer herbicides, so the insecticides have been, insecticide use has been mitigated by alternative approaches to deterring insect infestation and the use of herbicides with a different genetic application has allowed the industry to forego the use of more dangerous chemicals. There's a history here. You said that this isn't just a new technology, in other words it's been going on for hundreds of years in a way. Well, so since the dawn of evolution, which in the case of corn, we know is about 9,000 years old. Well, how come people think it's a new thing then? I'm not sure. It's kind of like the B science fiction movie version of genetic modification, but when you make a poi dog you're genetically modifying the canine genome. So humans have been doing this for a long time, selecting the attributes that they want to perpetuate in a crop or a livestock product, and thereby influencing the evolution of those crops and livestock products. And then nowadays with the more advanced techniques, taking a more active role in manipulating, you know, at the molecular level, the instruction set to try to cure human diseases and things of that sort. Right. Well, in your report you also say that, well, you said a study that showed the government has poured more money and support into certain agricultural industries, but when it comes to corn research, this has blossomed with minimal support. Yeah. I mean, the foundation was a land grant college system, the University of Hawaii ag researchers there in the extension service that invited the plant breeders to come out from private industry back in the 60s. But from that foundation, which is an appropriate foundation, research and development in basic science, from that foundation has blossomed an industry that's been fully, privately funded and has, you know, kind of taken its own course. Well, what does that say, though? I mean, other industries need more support. This industry of seed technology doesn't need as much support. So what does that say about that industry? So it's always kind of a tough question of how you facilitate economic development. Do you put public resources behind private development or do you create a mechanism or an environment in which private capital or private ideas can thrive on their own? And you know, that's a tension we're always going back and forth on. But a counter example would be with the papaya, is it the ring spot virus, right? These were, there were public investments in R&D that enabled a genetic modification to be developed that, you know, like vaccinating against the virus kept the papaya industry from collapsing. So now we have safer food in that area rather than having a food with a virus. We have a food that can withstand it. Well, in that case, the virus is sort of like the rapid ohio death, right? Your choices are wipe out the entire ohio forest, wipe out all papaya production or, you know, inoculate the papaya. And it saved the industry, too. It did save the industry. Wow. And so, but what I'm saying is that the, when the government pours money in research into certain industries, that that's almost like a flag or an indicator of, I guess, future viability or? Well, or not. I mean, very, very often the government is being called upon by special interest groups and so on to pour public resources into an industry to help support it when it's having trouble maintaining its commercial viability. There is that flip side where the government pours resources into developing, say, an infrastructure like the Internet that will allow private capital to flourish. As I say, it's always a tough sort of a tension. I, you know, economists tend to look skeptically on the idea of omniscient governments picking winners. We tend to prefer mechanisms that allow private entrepreneurship and innovation and investment to channel the outcomes into commercially viable, profitable, and socially beneficial outcomes. So, when it comes to agriculture then, the future of agriculture in Hawaii, what can the government do? What should the government do if we want to have a blossoming industry? Here, blossoming, no pun intended. So, here's a, because, you know, cut florals are a big part of industry that aren't food, egg industry that aren't food. I liken it to, you know, here we are on Think Tech Hawaii, right? Think of agriculture as the world's original venture capital industry. Private investors place their bets on a crop, put their money literally into the ground, and wait to see if something comes out, blossoms in the future. And it might not. And it might not. And it might get right to the harvest and then here comes the hurricane. So, it's a risky business. And so the kinds of things government can do is help to ensure against some of those risk exposures or provide a mechanism for private insurance to provide coverage. One of the things I would say is create an environment, so to speak, where in ag entrepreneurs and investors are assured that they can grow the crops that they want to grow and not have to get the community's permission all the time. I mean, that's, to me, that's, you know, one of the things that troubles me is this idea that, you know, I have a house on an ag subdivision next to your farm and now I'm going to tell you what you can and can't grow. It's like I moved next to the airport and I'm going to tell the airport not to take planes. When an entrepreneur can actually plan for the future without a lot of variables and is someone going to take my property either through force or through regulation, then they can plan for a business and they can actually, you know. Government can actually do a lot to assure farmers and the community generally that if it's on ag land and it's legitimate agricultural activity, you're good to go. Governor E. Gay recently pledged to double food production in the next 13 years. It's a laudable goal. And I'm just wondering, is this even possible, though, you know, with the losses we've seen in agriculture in Hawaii, a lot of people are scared. So what would the government then have to do to reach that goal? Well, I guess first we should ask, is it possible? It's definitely feasible. I mean, when Oahu sugar, as an example, when Oahu sugar shut down in the 1990s on Oahu, 10,000 acres of prime ag land in the Everlane up in Kunia were released. And two farmers, Larry Jeffs and Alex Sue, went in and ballooned farms and, I can't remember what Larry's farm is called, but they're farming in roughly two 5,000 acre areas successfully. So you never know. But the trick with those guys is here they're on an island with a million people and more tourists, or half million households. So it's possible on Oahu to scale that kind of activity, a little tougher on the neighbor islands, which have smaller markets, maybe 200,000 on Maui and on the big islands. So you have a shot at it there, if you want to scale production, plenty of ag land. And of course, as white commercial sugar closes this year, even more land on Maui. So there's definitely some upside potential there. So with every loss there's an opportunity? There's an opportunity. I think it's important that we think about commercial viability as the guideline by which we measure success rather than some other metric that may be more squishy. So we're going to talk about some of those opportunities after the break. I'm here with economist Paul Brubaker, back in a minute, on a Hanukkah call. For a very healthy summer, watch Viva Hawaii. We're giving you the best tips and with our best health coach here. So Viva Health Coach, Viva la comida saludable. Hi, my name is Justine Espiritu. This is my co-host, Matthew Johnson. Every Thursday at 4 p.m., we host the Hawaii Food and Farmer series. This is the place you can come to for insight on the perspective and history and passions of Hawaii's farmers and all folks involved in Hawaii's local food system. What kind of folks do we have on? So we have everyone from local farmers. We have foodies, chefs. We also have journalists, researchers, anyone who's actually working to help make Hawaii's local food system that much better. So join us every Thursday and tweet in the us and ask us some questions and leave your comments as well. Welcome back to a Hanukkah call. I'm Joe Kent filling in for Dr. Kaylee Iakina. We're here with economist Paul Brubaker. On Maui, we just ended with there's an opportunity for growth. The last sugarcane plantation has now evaporated, it looks like, and winding down. We have a lot of fallow fields there. Some people see fallow fields as a bad thing, others see it as a good thing, depending on your outlook. Half full. Half empty. Exactly. I want to ask you then, when it comes to just the different industries across Hawaii and their economic viability, what do you see as most viable? Sure. If you think about what has been successful as sugar and pineapple, sugarcane and pineapple have wound down over the last 30 years or so. It's been a diverse mix of agricultural activities ranging from livestock and aquaculture, which is up and coming. To some food products, the fresh fruit and vegetable market has always been an active one and import substitution in those areas, an area of opportunity. In addition, it's important to remember that agriculture, not to mention the seed industry, which is now about a quarter of all agriculture in Hawaii, but cut florals and ornamentals. We have a slide on this titled, a global commodity pricing supercycle unwinds. What a great title for a slide. I made it for another purpose, but yes, we've had an unwinding in global commodity prices, including corn, other grains, energy commodities, metals and minerals. That's taken the seed industry, the derived demand for the seed and for the R&D activity downward. Okay, so we can see in that yellow line is the seed industry, and you're saying it went downward recently. It's a big downward adjustment because the price of a bushel of corn went from $7 to $3.50. A reduction in the price of corn means the fewer farmers want to grow it. The reduction in the prices of oil and other energy commodities meant the demand coming from corn as a biofuel came down. Oil is tied to corn, and because the price of sugar went down, the demand for corn sweeteners came down. The demand for corn seed, like the demand for fertilizer or land or labor and whatnot, is derived from the final product. And similarly, the demand for R&D activity in corn is derived from demand. And compared to the seed industry on that global commodity pricing slide, I see aquaculture as well. Yeah, aquaculture is kind of an up and coming area. You can just make it out there at the right end of the trajectory. The backdrop, you can see the great heyday of sugar cane in the 1960s and 70s, and the slow decline in the backdrop. But all of these other... I mean, there's room for everybody. You can run this room for the nuts, there's room for the fruits, there's room for the cattle, there's room... I mean, it's kind of nothing but upside. The amount of cultivated acreage in Hawaii has decreased from about 250, 255,000 acres 30 years ago to only about 55,000 today. So that's... Even if you were just looking at the best land that was already in cultivation 20, 30 years ago, there's hundreds of thousands of acres already available, even before A&B shuts down HC&S. So what's the hold up then? Well, commercial viability. Your competition as a farmer is all the globally sourced food that the miracles of modern transportation logistics and supply chain management make available to us on a daily basis. You can get fresh strawberries on Maui, on every day of the year. Think about that for a second. Imported. Fresh strawberries, yeah, imported on airplanes. So I mean, that's amazing and it's a good thing. It means we have fresh strawberries every day. Now when we talk about food sustainability, some people say that, you know, we grow 10% of the food that's grown here is consumed here and people would like 100% of the food that's grown here to be consumed here. Yeah, but that's a little like saying, I'd like 100% of the smartphones used in Hawaii to be made in Hawaii. I mean, really? In other words... It's part of that because what? In other words, why? Yeah. Why would you do that? I mean... So I'm an economist. So when you learn the economic secret handshake, right, you realize that if something is not commercially viable, it doesn't pay for itself, it's probably not worth doing. If you can come up for another reason for doing it, sort of national defense, does national defense pay for itself? Well, consider the alternative, right? So we engage in some collective activities that are designed to provide us with services that the private sector probably wouldn't do. But food's not one of them and my guess is if we create an environment in which agricultural entrepreneurs and innovators can go out there and take advantage of these released ag lands and the infrastructure that's available, irrigation and whatnot. Nothing wrong with growing food. Nothing wrong with growing food. You know, I'm down with all of the above, organic, conventional, big farms, small farms, farmers market, supermarket, you know, it's all good. But it just seems so sad to think that we've got some of our food leaving the state and instead we're importing food that wasn't grown here. I mean, isn't there some sort of emotional argument there? Yeah, no sadness, that's not what comes to my mind. No, I mean, I'm happy to eat, you know, drink French wine or Australian wine and hopefully someday we can send them some of our papayas. It's a good thing that we can import. It's good both directions, imports and exports, the more the better. And we don't just export food, though, we export tourism in a way, too. Yes, so we specialize in the production of tourism-related goods and services, mostly services, and we earn our external receipts, our foreign income, our export income in that area, which enriches us to the point where we can afford to buy our food from elsewhere. You know, the thing, you mentioned sustainability, that's a slightly different thing, which is about, you know, sort of responsible resource stewardship and that's a good thing. But I think the aspiration to self-sufficiency is probably misdirected. We are an interdependent economy and that's the reason why we have the high standards of living that we do, because of the interdependence. We can share with others and we can- Well, I would have said that a couple of years ago, but now sharing means Uber or some Airbnb. It's not just sharing, it's economy. It's just the economy. That's funny. And speaking of the economy, especially when it comes to agriculture, you have kind of a history in, well, you're an economist, but your family was part of the agriculture community. Yeah, so my grandfather was a plant breeder, got his PhD in genetics in the Cretaceous era in 1926. My dad was a plant breeder and he was active with the seed industry from the beginning. And I got out of it because my cousin became a plant breeder, so I got to be an economist. But it's like a lot of families in Hawaii. Many of us have roots in agriculture, however distant and remote now, a couple generations later, and it is a different world. Even when I was a kid, you knew somebody who grew up on a farm or maybe your parents grew up on a farm, as was the case in my family. Now, most people think that food comes from the supermarket. Well, people want to get back to the farm, though. Their idea is a different idea from getting up at dawn every morning and working out in the field all day. They're thinking of the guy driving in the John Deere tractor with the GPS changing the nutrient admixture as they drive across the field plowing 20 rows at a time. People romanticize. A little bit. We tend to romanticize everything, but yeah, that's, you know, Hanabata day. Wasn't it better back in the day? Some things were, but yeah, starvation wasn't. When it comes to agriculture on Maui, though, all eyes are on Maui right now as we see what's going to be grown in those fallow fields. What would you predict? Or what would you kind of guess would be the best thing for them to try? Oh, I have no presupposition about what's going to work. You know, I'm pretty sure A&B knows what they're doing. And I imagine a fair amount of it will involve ag leasing to people who make a pitch to them. Hey, I think I can grow this and make some money doing it. Can I, you know, can we get a lease to use some of this land? Because coming up with it, look, if they had a brilliant idea, they probably would have come up with it already. It's hard to be optimistic because you can look at West Maui where the plantations closed down a long time ago. And, you know, it's tough. We're talking about hundreds of thousands of acres over the last couple of decades. At the same time, I'm a proponent of preserving ag land for the following reason. You don't know what crops in the future are going to be either commercially viable or make a contribution to the production of it. Nobody could possibly know what kind of crop. But if you pave over that land, you'll never be able to exercise that option. You may wake up 20 years from now and realize, wow, we can grow the cure for cancer. Except oops, we built a subdivision. So, you know, I'm a big favor of keep the country country and make the city city. Those are not mutually exclusive. You can have both. And what about, though, the idea that because agriculture is so expensive to try to compete with other places? No question about it. And Hawaii, a part of that cost, is housing. And so, you know, don't we need more houses in Hawaii to try to pay for the labor that's living in those houses to actually work on, someone's got to work on the farm. Look, I don't want to presuppose the outcome on Maui, but let's face it, if 30,000 acres of flat ag land on the edge of the Kauhau-Lui Wailuku conservation can be redeployed in urban uses, I mean, you could only have to carve out a small part of it to satisfy housing need there and still preserve tens of thousands of acres of ag land. Or to try to keep the city city and try to, you know, I mean, there's a lot of different options if we're talking about it. There are many options. And again, I think commercial viability is a good way to sort of organize your thinking about it. But I'll also say that preservation is important because you need to keep your options open. Okay. Now, when it comes to the rest of this day, you were just on Kauai, Big Island, Oahu. What do you see when it comes to talking, you're talking to- Yeah, sure, every, you know, it's kind of like the tourism, right? Every island offers a slightly different destination experience and every island also has a slightly different history, both in terms of success and demise of agriculture and in terms of the, you know, the resource endowment. So Big Island, just say, you know, it's Big Island. All the other islands fit into the Big Island with land leftover. So you can do something like ranching as you can on Maui. But the pattern that you see with a lot of Hawaii crops and livestock activities is something that's really a niche product that can extract value from a particular attribute, a particular characteristic that's unique to a particular island or an island environment, microclimate that may be in one place or another, or in the case of the intellectual property associated with the development of the maize genome and something that literally you've created applying science to, you know, through agronomy to get a better widget and all things are possible. Who knows what's gonna happen with ocean fishing? I mean, these aquaculture fish farms, you know, I keep hearing about this stuff. That thing's taking off right now. Well, and not to mention the made in Hawaii sticker that everybody seems to have. Yeah, well, that's still good to go. You know what I mean? While people still, you know, we can still fake people into thinking that's a good thing. No, I mean, we've got a number of great brands, you know, the Kona Coffee brand, for example. People still associate Hawaii with both pineapple and sugar, C and H, really? Are they gonna change their name? I think so. Well, thanks so much for coming on the show and helping to educate us about agriculture in Hawaii. My pleasure, Joe. And thanks, we'll have you on any time here, so.