If we truly want to develop Hawai‘i agricul tural products, it is important that the flow of those products to the mainland market is not monopolized,” irradiator developer Michael Kohn told Environment Hawai‘i in explaining his reason for pushing forward with the Honolulu facility.
Monopoly?
“I can tell you this much,” Kohn contin ued. “I can’t treat at Hawai‘i Pride. I was kicked out – three times. Others have had the same experience.”
Hawai‘i Pride is the electron-beam irradia tor built in Kea‘au, Hawai‘i, in 2000. Its manager, Eric Weinert, says it treats produce grown in Kaua‘i, O‘ahu, Moloka‘i, and the Big Island. Weinert vigorously denied any suggestion that he had a policy that discrimi nated against anyone who might want to use his facility.
Asked specifically about Kohn’s allega tion, Weinert said, “There was a time when there was a glut of papaya. We had treated his fruit for a while, but then told him we wouldn’t,” because of the glut.
“Now, however, he could use our facility,” Weinert said.
Had others been denied use of the Kea‘au irradiator?
Absolutely not, said Weinert. And, he added, “Michael [Kohn] was always a low-volume user – he had just a few cartons at a time.”
Kohn has a different recollection, espe cially of the third time his produce was re jected by Hawai‘i Pride, which he said oc curred about a year ago. Weinert, he said, “told me, ‘Mike, I’m sorry to inform you but I have an email from Lee Cole, who says you’re paying too much for papaya and are stirring up markets on the mainland.’”
Lecil Cole is chairman of the board, presi dent and chief executive officer of Calavo Growers, Inc., a major distributor of avoca dos and, more recently, Hawaiian papayas. According to Calavo’s filings with the Securi ties and Exchange Commission, “In recent years, our distribution of … perishable food products has generally been limited to papa yas procured from a Hawaiian packing opera tion, which is owned by the Chairman of our Board of Directors…. During 2003, we dis tributed approximately half of the papayas sold in the continental United States, based on our estimates.”
Cole owns or leases more than 2,000 acres – including 1,256 acres leased from the state — in the area of Kapoho, Puna, on the Big Island, the center of papaya cultivation for the state. His packing company is Hawaiian Sweet, Inc., which operates under the trade name Tropical Hawaiian Products. The registered agent for Hawaiian Sweet, Lorin Mochida, is also the general manager for the Hawai‘i Papaya Industry Association. In tes timony earlier this year on an Environmental Protection Agency proposal to ban use of certain fungicides, Mochida stated that he was writing on behalf of “seventy-five (75) papaya growers that have contracted with Tropical Hawaiian Products (THP), a han dler, to produce papaya for export to the continental United States and Japan.”
Competition
Is Weinert concerned that the Honolulu facility will take away business? “I don’t believe there’s enough volume to necessitate a second facility,” he said. He went on to explain why he thinks the Kea‘au operation can be competitive. “The main advantage of a Honolulu site,” he said, “is the amount of air lift available. But most of the fruit will still have to be flown to Honolulu” from outer islands.
With an increase in direct flights from the Big Island to the mainland, much of the advantage that Honolulu enjoys in “air lift” has been eroded, he said.
Weinert noted that the decision to go with an electron-beam irradiator grew out of con cerns among Big Island residents about the possible environmental and health effects of employing a radioactive source to treat fruit. After a referendum on a radioactive-source irradiator in 1998 showed an evenly divided public, “It was clear in my mind that the public supported irradiation, but were con cerned with radioactive isotopes,” Weinert said. “Once we decided to go with the elec tron beam, opposition seemed to go away.”
Kohn, on the other hand, sees tremen dous potential for growth in Hawai‘i agri cultural sector, particularly if it is no longer constrained by monopolies or consortia that act as monopolies. “If you only have a few companies controlling supply and the market, there’s a bottleneck,” he said. “And if you control supply, who do you control? Farmers.”
Increased shipping options, increased treatment options, and increased marketing options will work to expand Hawai‘i’s farm exports to the point that a second irradiator will have no trouble staying in business, he said.
Markets in Question
To Tony Corbo, lobbyist with the consumer group Public Citizen, the question is not whether Hawai‘i can support two irradiators, but whether it can support even one.
The company that manufactured the elec-tron-beam facility used in Kea‘au, Surebeam Corporation, “went bankrupt and is in the process ofliquidating its assets,” Corbo points out. “Then CFC Logistics, in Milford Town ship, Pennsylvania, was in the irradiation business for about a year, using the same Gray*Star irradiator proposed for use in Ho nolulu, when it got rid of its irradiator.”
To bail out the Hawai‘i Pride facility, Corbo added, the state Department of Agri culture pushed the U.S. Department of Agri culture to fast-track regulations approving irradiation treatment of sweet potatoes. In the Federal Register where final notice of the new rule was published, specific mention is made of the struggling plant: “The facility currently treats seasonal crops whose volume is more variable than that of sweet potatoes and is thus sometimes underutilized. A steady source of revenues from treatment, such as revenues from treating sweet potatoes to be moved interstate, would help assure this facility’s continued operation and availabil ity for all the producers in Hawai‘i who can use it.”
Further evidence of Hawai‘i Pride’s fi nancial troubles shows up in the Securities and Exchange Commission filings of the Titan Corporation, which assumed certain SureBeam assets. (SureBeam was originally a spin-off from Titan.) Hawai‘i Pride’s facility cost roughly $10 million to con struct and equip. A large part of that was underwritten by a loan of $6.75 million from a private financial institution, WebBank, guaranteed by the U.S. Depart ment of Agriculture. The March 2005 an nual report of Titan reports that in October 2003, “Titan was notified by Hawai‘i Pride that Hawai‘i Pride had stopped receiving financial support from SureBeam and did not have sufficient cash resources to make its monthly principal and interest pay ments to WebBank.” Titan had issued a bank guarantee on behalf of Hawai‘i Pride; in the event of default, Titan could face substantial losses. Evidently for this reason, Titan decided to issue “a new credit facil ity” to Hawai‘i Pride “to cover shortfalls in debt service payments.” As of December 31, 2004, Hawai‘i Pride had borrowed $600,000 against this credit line. Starting October 1 of this year, “all amounts out standing under this facility are required to be repaid in twenty equal quarterly install ments.”
— Patricia Tummons
Volume 16, Number 3 September 2005