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Hawaii’s Once Dominant Sugar Industry Facing Tough Times

October 3, 1985 GMT

KAANAPALI, Hawaii (AP) _ The fields of green sugar cane sweep down from the edges of the west Maui mountains to lap at the hotels of this beachside resort in a scene of tropic luxuriance.

Long a verdant economic mainstay of the Hawaiian islands, the sugar industry here has been buffeted by worldwide oversupply, declining consumption and competition from artificial sweeteners.

A lively debate continues over sugar’s future in Hawaii.

″I don’t accept that sugar is quite brain dead,″ said Henry Walker Jr., chairman of Amfac, Inc., which owns both the Kaanapali resort and Pioneer Mill sugar plantation here. ″But I’m convinced ... of its ultimate demise.″

In 1932, the sugar business employed 40 percent of Hawaii’s workforce; today it employs about 4 percent. Today’s $408.3 million sugarcane industry is dwarfed by the state’s more than $4 billion tourist business. The total value of goods and services produced in Hawaii each year is about $14 billion.

Hawaii also lost his rank as the nation’s leading sugar producer to Florida.

By about 1910, Hawaii’s sugar business, and by extension the Hawaiian economy, was all but dominated by five local companies. Besides American Factors, the precursor to Amfac, they were Alexander & Baldwin Inc., C. Brewer & Co. Ltd., Theo H. Davies Inc. and Castle & Cooke Inc. They became known collectively as the Big Five.

All five are still engaged in sugar growing to some degree, although all have looked into alternatives. All agree that without continued federal support, the state’s sugar industry would collapse.

On Sept. 26, the U.S. House defeated an amendment supported by the Reagan administration that would have reduced sugar price supports by one cent per pound annually through 1988. The current rate is 18 cents per pound.

″I think it will be enough,″ said Robert Hughes, president of the Hawaiian Sugar Planters’ Association, the non-profit trade association through which Hawaii growers market their crop. ″We need more than 18 cents, but our life has been dedicated to reducing cost.″

At present, the average cost of producing a pound of sugar in Hawaii is 171/2 cents, a reduction of 12.5 percent since 1981, Hughes said.

The industry’s operating profit of $20.7 million last year came from sales of molasses and electricity generated as byproducts of the sugar cultivaion, he said.

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The thin profit margins, and the possibility federal supports may be reduced, have caused Hawaii’s sugar companies to examine alternative uses for the 188,395 acres now used in growing sugar around the state.

″It’s a question of timing,″ said Malcolm MacNaughton, a member of the board of directors of Castle & Cooke.″If sugar’s going to go, wouldn’t it be better to to have it go ... sooner rather than later so there’s an opportunity to study other things, other directions, other payroll opportunities?″

The question has also received a lot of thought at Amfac.

″We have gone through literally scores of different models of land uses ranging from industrial to all sorts of agricultural uses,″ said Amfac’s Walker, who says investigation of diversifed agriculture ″has been upgraded to the front burner.″

Not all accept that idea, however.

In April, Alexander & Baldwin Chairman Robert Pfeiffer declared in a speech that ″there is no alternative to sugar.″ That perception was challenged earlier this year by dissident director Harry Weinberg, but he lost a proxy fight over replacing a majority of the company’s board of directors.

Weinberg told stockholders that Alexander & Baldwin’s management had not done enough to realize the potential value of the company’s 49,000 acres of sugar land in Hawaii. The company says that while it is investigating alternative uses for the land, there are market factors to consider.

″The whole idea of developing and managing property is something we’ve been involved in for some time; the speed of which we are active in it is dictated by the market,″ said Mark Zeug, a spokesman for Alexander & Baldwin. ″It doesn’t do us any good to bring on the market 5,000 homesites if we can sell only 500.″

While sugar employs only about 1 percent of Oahu’s workforce, it employs 29 percent of the workforce on Kauai, 17 percent on the island of Hawaii and 13 percent on Maui, according to the research department of First Hawaiian Bank.

In an examination of the sugar industry published earlier this year, the bank said the collapse of the sugar business in Hawaii would an ″economic disaster of unprecedented magnitude.″ The bank said the effects would be particularly harsh on the Oahu’s neighbor islands, with their greater numbers of sugar workers.

Perhaps the most optimistic sugar grower in the state is Francis Morgan. Last year, the 65-year-old Morgan bought Hamakua Sugar Co. on the island of Hawaii from Theo H. Davies Ltd.

″I’m convinced that with determination and ingenuity we can survive,″ he said. ″The HSPA is coming up with new varieties. Yields are really starting to move up.″

The Hawaiian sugar industry currently produces more per acre with fewer man hours than anywhere else in the world, the Hawaiian Sugar Planters’ Association claims.

The organization, through its research program, has come up with new cane varieties, drip irrigation techniques and improved efficiency methods. It also has developed more effective means of pest control.

″It disturbs me very much when someone comes along and says ″shoot it in the head,″ said Morgan. ″It’s destructive of the kind of support we need.″