Category Archives: Current Affairs

Sobering Price Increases

Aloha Airlines—which has flown all of us between the Hawaiian Islands since 1946—terminates their passenger service today, after filing for bankruptcy protection 10 days ago. We knew the airline was in trouble, but we never expected it would come to this.

Talk about coming to grips with reality. Kimo and I had a meeting with our fertilizer distributor a few days ago, who told us that fertilizer prices have gone up again. Just by itself this fact would not be especially worrisome. But nitrogen fertilizer prices are related to energy prices, and energy prices are likely to keep rising as far into the future as we can see.

The distributor told us some farmers are actually dipping into their savings to buy fertilizer. Not only nitrogen fertilizer, but potassium fertilizer is also rising in price.

It rains a lot here on the east side of the Big Island; maybe 140 inches in an average year. Quite often the fertilizers we surface apply are washed away. With fertilizer prices continuing to rise, it’s just a matter of time before we will not be able to afford broadcasting fertilizer in this manner.

Then he told us that Roundup, the main herbicide we use for our banana operation, has doubled in price. We use Roundup to control the weeds in more than 400 acres of bananas.

Have you noticed there are less abandoned cars now than there used to be? I’m told that tow truck operators are finding that scrap metal prices make it worth their while to haul abandoned vehicles away. Someone told me that one catalytic converter is worth $125.

That’s the other side of the phone call that I got last week asking if I wanted to order more growing houses, because steel prices are going up.

Weyerhaeuser, the corrugated box manufacturing company on O‘ahu, closed a couple of weeks ago. More than half of Hawaii’s agricultural products were packed in Weyerhaeuser boxes. WE used their boxes for many years.

Last week I saw in the paper last week that O’Keefe Bakery here in Hilo is being badly affected by this record increase in electricity costs.

Most of the electricity here on the Big Island is generated using oil. I was told that rising plastic plate costs are hurting Mom & Pop plate lunch places, which cannot raise their prices enough to cover the increase. Plastic is, of course, a byproduct of petroleum.

And medical costs are rising as well. HMSA, which provides health insurance to more than half of Hawai‘i’s population, just announced a substantial price hike in its rates.

It is very sobering to see these cost increases going on all around us.

Most worrisome to me is that farmers cannot control their prices. We are told all the time that farmers are not price makers—they are price takers. In other words, they merely take the price that wholesalers or retailers give them.

We know what is happening. We live in a finite world, and resources are limited. Do we just sit in the pot and wach ourselves cook?

In Support of Farmers

I testified in person last week at the Hawai‘i State Legislature in favor of Senate Bill 2467 and House Bill 2261. This bill, which I helped draft, helps address important issues of food security, high oil prices and economic development.

Hawai‘i has two very serious issues right now. The first is food security—we are very vulnerable out here in the middle of the ocean and must ensure we can produce enough food for our residents.

The second is our need to get off oil, which we depend upon both for transportation and for generating electricity. Prior to the Association for the Study of Peak Oil (ASPO) conference in Houston four months ago, little was reported in the press about the consequences of what are tightening oil supplies. (I was the only Hawai‘i resident to attend that conference; the next one is in Sacramento in September). Since the conference, we are increasingly hearing in the media about oil demand exceeding supply.

The answer to this problem is to generate as much electricity as possible from natural sources here in Hawai‘i, and use as much electricity as possible (vs. oil) for transportation.

Here is my testimony in support of SB2467 and HB2261:

Aloha Chairpersons and fellow representatives:

I am in favor of HB 2261—the Hawai‘i Farm Renewable Sustainable Energy Loan Program. This is a bill that accomplishes three things:

1) It addresses our food security issue by encouraging farmers to farm. If farmers make money, they will farm. This bill will help farmers save money by using alternate energy sources as oil costs rise. If the utilities will buy power from farmers in the future, farmers will make money. Further, farmers can qualify for one hundred percent state income tax credits for alternate energy projects.

2) It helps to wean us from dependence on foreign oil. When farmers produce power, that will help us get off foreign oil.

3) It addresses an economic issue of balance of payments. A dollar saved from having to buy foreign oil is a dollar that can revolve in our local economy.

This bill is necessary because energy projects cost money and in many cases, the savings is in the future. In order for farmers starting energy projects to obtain a positive cash flow sooner rather than later, they must have a lower loan payback for doing energy products as compared to present electricity/power costs. A low down payment and long payback period helps to accomplish this.

Alternate energy projects qualify for one hundred percent state income tax benefits though Act 122. While it is true that investors in these projects can qualify for favorable tax treatment, investors require a return on their investment. If investors finance farmers’ alternate energy projects, the project’s value goes to the investors, not the farmers. If that’s the case, farmers will not waste their time starting alternate energy projects in the first place. That is the main reason this bill is so effective.

Aloha,
Richard Ha
President,
Hamakua Springs Country Farms

The reason this bill is so significant is because it positions farmers to sell electricity to the grid. Instead of sending all our money to foreign countries, why not have our own people generating electricity? It keeps our money circulating in our own economy. And it also aids in our efforts to make ourselves food secure—because if farmers can make money, by selling electricity along with their food products, farmers will farm.

I believe this bill will pass “as is,” along with an amendment that expands its scope and does not detract from the original intent. Because it will be incorporated into an existing Department of Agriculture loan program, there will no need to go through the Attorney General’s office for scrutiny. And since there is no request for funding at the present time, it also will not need to go through the House Finance committee or the Senate Ways and Means committee.

On another, related, topic, we are also working with the U.S. Department of Energy to develop alternate energy projects here on the Big Island.

Things are starting to move! I’ll write about those efforts in another post.

What I can tell you now is that it is all very encouraging.

Huge Energy News for Hawai’i

The U.S. Department of Energy and the State of Hawai‘i announced an unprecedented partnership Monday. The Hawaii Clean Energy Initiative is a brand new partnership between the state and federal governments that aims to have Hawai‘i producing 70 percent of its energy from renewable sources by 2030.

At this point everything is still conceptual, but the state has signed a Memorandum of Understanding with the U.S. Department of Energy and this is a major step in the right direction.

I am very much encouraged by this collaboration between the State of Hawai‘€˜i and the U.S. Department of Energy.

It was two years ago that I started noticing creeping price increases. Farmers are some of the first people to see the effects of rising oil prices. Fertilizer, chemicals, irrigation, cooling packaging and transportation costs are directly related to oil prices. A year ago, it started to be very worrisome and I knew there was something serious going on.

In October I was the only person from Hawai‘i at the Association for the Study of Peak Oil (ASPO) conference in Houston, where I learned more about Peak Oil’s consequences than I ever wanted to know. Because Hawai‘€˜i is 90% dependent on foreign oil, I knew we were dangerously vulnerable.

I returned from that conference knowing that we in Hawai‘i needed to wean ourselves from fossil fuels or else would go into an unimaginable downward spiral. So I volunteered to sit on the Hawai‘€˜i County Energy Commission. I also volunteered to sit on the Kohala Center’€™s board, because of its good work in the alternate energy field.

Until Monday, though, when the Department of Energy announced its Memorandum of Agreement with the state regarding alternate energy, I really did not see how we could educate enough people in a short enough time to ensure political support for serious alternate energy projects.

This announcement is a very big deal.

I now feel we have enough momentum to start moving forward. In fact, I think we have enough momentum now to do what we need to do in order to protect ourselves from the consequences of Peak Oil.

ASPO Conference

I’m in Houston to attend the Produce Marketing Association tradeshow, which started last Friday.

I decided to stay on for the Association for the Study of Peak Oil (ASPO) conference, which started Wednesday. ASPO is a non-partisan, non-profit association dedicated to the study of “Peak Oil.” That’s a term describing the last point at which the world’s supply of oil can accomodate the demand for oil. After that, demand will permanently exceed supply.

I became aware of ASPO while scanning the Internet. Its supply-and-demand, common sense approach to the problem resonated with me, so I started to read its daily report. I followed those reports and came to the conclusion that ASPO does offer a balanced approach.

When I learned ASPO’s U.S. conference was occurring just after the PMA trade show and in the same city, I decided to attend. So here I am.

This conference is, by far, the most interesting and important one I have ever attended. Its panel members and presenters have stellar credentials—they are former CIA officials, executives from major oil companies, investment advisors, university researchers, etc. The presentations have been full of substance. I’ve sat through presentations from 8 a.m. to 9 p.m. without wanting to skip out.

I am now absolutely certain that ASPO is credible and that its web information update on the Oil Drum is also credible.

A relatively few giant oil fields produce most of the world’s oil. There have not been any significant new oil fields discovered in the last 20 years, and the older, super-giant oil fields are declining in production. Discoveries of new, smaller oil fields are barely keeping up with the fields that are declining.

The big problem is that the demand for oil is increasing at an alarming rate. China is growing at an incredible rate. It has 10 times our population, and right now only 16 percent of its people own cars. And then there’s India, too. Soon we will reach the point where oil production cannot keep up with world demand for oil.

No one knows when, but ASPO feels this will occur around 2012, which is just over four years from now. Others think it will occur 10 years later. Many think that it has already happened.

No one debates whether or not Peak Oil will occur—they only disagree about when.

Regardless of when, it is prudent to take action before we get to that point. We need to spread the word that we are close to a serious turning point regarding our oil supply. And we need to get people’s advice about what actions we should take.

More than 60 percent of America’s oil use is for transportation. Can we adjust to our gas prices rising four-fold? Agriculture, too, depends on fossil fuels, as do fertilizer, chemicals, packaging and transportation. Therefore, imported food prices will start to rise.

Can we make the adjustments we need to do? Will we be able to feed Hawai‘i’s people?

In Hawai‘i, I believe we can make the adjustments we need to keep our food distribution dependable. But it is going to require thinking “outside the box.” We all can do this!

Frog in the Pot

Lately I’ve been talking a lot here about how rising oil prices are worrying me, and what we’re doing at the farm in response. Today I want to back up a little bit and tell you about how I have become aware of this, and why I’m worried.

For the past few months, something has been bothering me. I’ve been feeling like a frog in a pot on the stove. As the temperature is increased a little bit at a time, he does not notice the water getting hot until he is, well, done. “Hmm, it’s getting warmer—kinda cozy. But, wait. How come bubbles are starting to rise? I’m getting outta here!”

If I were a frog I would have jumped out of the pot and landed on the floor, and I would be heading for the door by now.

What’s been bothering me is something that has become known as “Peak Oil.” It’s when the demand for oil exceeds the ability to flow enough to meet demand. And we all know that when demand exceeds supply, prices go up.

When we started planning to diversify our business five years ago, oil prices were $30 per barrel. Now, five years later, oil is more than $80 per barrel. On CNBC this morning, the business channel, they were wondering if oil will go over $84 per barrel and set another record. I heard someone on the program say that $4 per gallon gas is in our not too distant future.

Since we started our diversified agriculture five years ago, conventional wisdom has been that nothing unusual is happening. But we have noticed that the phrase “fuel adjustment” has been added to our language.

In our business, we have noticed that fertilizer, chemicals, packaging and transportation is more expensive than before. But the news says that inflation is under control and everything is all right and the stock market is at near record levels. So if everything is all right, how come fertilizer costs so much more now? And how come plastic clamshells and plastic bags cost so much? How come supplies of all types cost so much?

Lately I’ve realized that petroleum products are involved in almost every facet of our lives, though we don’t always realize it. So when prices rise, it’s easy for us to miss that it is due to a rise in petroleum prices. It’s like the frog, sitting in a pot on the stove, who doesn’t realize that the temperature is going up.

I knew that agricultural costs were steadily rising, but what raised alarm bells for me was when I complained to a lawyer friend that the rise in oil prices was affecting us in many ways. He said, “Oh yeah, and the mom-&-pop plate lunch places are suffering because the plastic containers and utensils are rising in price and they cannot easily pass the costs on.”

Right then, I realized that rising oil prices were affecting many people in many businesses. So I started reading a lot of articles about oil supply and demand. That was my wake-up call. I decided right then to “jump out of the pot of warming water.”

Frankly, there are a lot of alarmist websites about “Peak Oil,” which sell books and videos about “the end of the world as we know it,” and about how to protect oneself. Looking at some of those websites, one could easily dismiss Peak Oil as a made-up problem being touted by those who are trying to make a buck by scaring people.

But that wouldn’t be correct. “Peak Oil” is not at all merely some sort of alarmist nonsense. It is nothing more than oil prices rising higher and higher. The question is: “How will we adapt?”

A highly credible site on the subject, if you’d like to read more, is that of the Association for the Study of Peak Oil (ASPO). ASPO is a “Non-profit, Non-partisan Research and Public Education Initiative to Address America’s Peak Oil Energy Challenge.”

Its board of directors is impressive, as is its advisory board, “a volunteer group of recognized experts in energy, science, geology and business,” consisting of petroleum geologists, physicists, retired government analysts and more. Here is the association’s mission statement.

Where am I going with all this? I think oil prices will continue rising steadily, and as a result, things will start to change in ways we have not yet considered. But we will adapt by car pooling, using clotheslines to dry our clothes, catching drinking water, etc.

I am mostly concerned, as prices rise, about our most basic need—the ability to feed ourselves. Before industrial agriculture we relied on the sun to provide one hundred percent of the energy to grow our food; directly for the greens, and indirectly for the animals that ate the greens. Industrial agriculture relied on cheap oil, as low as $3 per barrel, to fuel its growth. As oil prices rise, more and more of our income will go to buy food.

However, I don’t believe in the doomsday scenarios like on those alarmist sites. I believe we can absolutely influence the course of events to come.

We are lucky here, because we know that the ancient Hawaiians were able to sustain a population that was nearly the size of today’s population. We know it can be done. That knowledge, along with modern technology, should allow us to produce enough food for this entire island if we put our minds to it, and contribute to the needs of the state, as well.

We also need to engage youngsters—our next generation—at the earliest levels. We should frame the issue and pose the question to elementary school kids: “How can you help us feed Hawai‘i?” I can see them jumping on their computers and proudly pointing out different methods that people in other parts of the world use to grow food.

This is one of my missions now—to make people aware that we need to address this issue, and to show how it can be done; how all farmers, large and small, working together can make Hawai‘i self-sufficient in food once more.

We can do this!

Legislative Visitors

Last week the Hawai‘i State Legislature’s Senate Ways and Means committee visited us. This is the first year we’ve had legislative committees visit us and we were very happy to share with them our history, our philosophy, our present situation and our plans for the future.

I told them we started with no money except for a $300 limit credit card, which I worked hard to qualify for. But Dad had a chicken farm and we were able to trade chicken manure for banana keiki.

I told them something I learned as a former Army office in Vietnam—that leaving someone behind is never an option—and that I carry this forward to my relationships with our employees. We make sure that the most defenseless of our employees are looked out for. And we have profit sharing, so if the farm does good we all do well.

If we are anything, we are survivors. We always ask: “Where do we need to be five years from now?” And we start right away to position ourselves for that future.

I told them that what they were looking at was a result of decisions we made five years ago, back when a barrel of oil cost $30. We all knew then that China was growing fast and would cause oil prices to rise. So we set out to avoid petroleum-based costs as much as possible. But we had no idea oil prices would rise to $80 per barrel.

Today we are looking at Peak Oil, where the demand for oil will eventually exceed the ability to sump that oil. That means prices will rise even further. We are preparing for the possibility that oil will hit $200 per barrel in less than five years.

We doing that by building a hydro-electric plant. We are in the process of decoupling ourselves as much as we can from fossil-fuel based energy. We love and thrive on change. Adversity brings opportunity, and that makes life exciting. We love it!r 

I told them that we are a family farm and that our blog, HaHaHa, represents three generations of Ha’s working on the farm. I told them that without my mom—who, in the old days, worked late at night packing bananas so we could take the only trailer we owned and refill it the following day—we would never have made it.

I told them I was reluctant to tell them that story because it might appear that I was enslaving my mother. And yet I also told them that I had to admit I still buy Mom dumbbells, treadmills and stationery bikes so she can keep on working hard. She’s 82 years old now. We had a good laugh.They all knew that I do it for Mom’s health.

It was great to meet these people who will make the decisions that direct Hawaii’s future. It seemed like they were happy to see an organization positioning itself to be able to feed Hawaii’s people, in an environment of rising fuel prices, because it was the right thing to do. My impression was that they are very sharp and will do the right things for our future.

Peak Oil 2

The United States’ Government Accountability Office (GAO) has an interesting report about peak oil concerns here.

This is a time of increasing concern over the security of our oil supplies—in particular, the fear that, after 150 years of growth, the industry is now facing what is known as “Peak Oil.” That’s the point at which the production of petroleum reaches its maximum before entering a terminal decline.

The big question right now is “When will demand permanently exceed supply?” It used to be that the year 2030 seemed a reasonable estimate. Now, more than a few people are saying it could be as soon as two years from now. Some are even saying we may have already passed the peak.

It is not a question of whether or not we have oil reserves. There is a lot of oil in the ground. It’s more a matter of whether we can replace expiring oil fields with new production in a timely manner. Many of the professionals feel that we cannot. Furthermore, oil reserves of the OPEC producers are suspect. There are indications that they don’t have the reserves they say they have. We don’t know because they won’t show us proof.

And so what will happen? Likely, prices will rise slowly and steadily as oil supplies decline. People will probably adjust their behavior and conserve. Whatever happens, it seems certain that supply will not be able to keep up with demand.

Fertilizer, packaging and other farm expenses have risen steadily over the last few years. I wonder if we have already reached “Peak Oil.” If that has occurred, there’s no better place to be than here in Hawai‘i. We are fortunate to have abundant natural resources that we can use to generate electricity. If we react in a smart way, we should be fine.

Maybe we should hedge our bets and start to position ourselves for “Peak Oil” sooner, rather than later.

Peak Oil

Lately there has been much discussion about energy security—or lack of security—and what, if anything, we can do about it. The term “peak oil” means we are at or very near the point where maximum oil production equals our oil demand. After the peak, demand will outstrip supply.

We all agree that this is true. We differ only about how bad it will be. Some people are predicting the collapse of civilization. Others think we can make the necessary adjustments.

We in Hawai‘i are especially vulnerable. In addition to the prospect of having to pay unbearable fossil fuel costs in the future, we currently import more than 70 percent of our food—a highly fossil-fuel-dependent method of taking care of the basic need of feeding ourselves.

We have abundant natural resources available to us that could help us find a solution to the “peak oil” problem. But we need to take action NOW!

Solar, hydro, wind and geothermal power are available to us on each island, in varying degrees, and they are not tied to fossil fuel costs. They can all be converted to electricity. With electricity, we can produce food and get work done. And with electric cars, we can also get from one place to another.

What about bio-diesel and ethanol?

It does not look as though farmers would work for the returns that these fuels would bring. For example, ethanol and biodiesel can be brought into Hawai‘i for approximately $2 per gallon. Presumably that is what a farmer would be paid for a gallon of bio-fuel, which weighs roughly 8 pounds.

Therefore a farmer would get approximately 25 cents/pound of liquid bio-fuel. If it took, say, two pounds of a farmer’s product to make one pound of bio-fuel, that would mean a Hawai‘i farmer would get 12.5 cents per pound for growing bio-fuel crops. Under those conditions, farmers would not grow bio-fuel crops.

We may have to be content with buying them from overseas.

Truly, the answer is that we should be focusing on our natural resources as sources of electricity. And we should focus on supporting our farmers, as well—on every island, at every elevation: windward and leeward, big and small. We need to know that we can produce the food we need here.

We can do this.