Bountiful macadamia nut crop may produce glut

KAILUA-KONA, Hawaii — Another bumper macadamia nut crop is expected this year, but Big Island farmers' biggest problem may be finding someone to buy Hawaii's signature nuts.

With only a handful of processors on the island and one of the biggest temporarily out of the market, hundreds of independent farmers are concerned.

Statewide, Hawaii nut orchards are projected to produce 60 million pounds this year, topping last year's crop and creating a potential glut of the local market. They also face increasing competition in export markets from what local farmers say are lower quality nuts grown in Australia and other countries.

The concern started with a June 7 letter to mac-nut growers from MacFarms of Hawaii, one of the largest growers and processors on the Big Island, where most Hawaii nuts are grown.

In the letter, MacFarms President Hilary Brown and Vice President Mark Crawford announced: "We have concluded that until further notice, MacFarms will not be offering to purchase macadamia nut-in-shell from independent farmers."

MacFarms, which expects a bumper crop from its own nut orchard, cited last season's very large crop and costs associated with handling it.

"We have quite an inventory of nuts right now," Brown said. "Also, prices have dropped this year, demand has slowed and we are expecting a large crop this year. That said, if the situation changes, we might be back in the market."

MacFarms of Hawaii, owned by Tennessee-based Sparco Management and California-based Greater Pacific Food Holdings, grows nuts on nearly 4,000 acres of orchards in South Kona and employs 200 people.

In addition, the company has agreed to buy at least 5 million pounds of nuts next year from Hilo's ML Macadamia Orchards. But Brown said that deal was not the major factor in the decision.

ML President Dennis Simonis said Macadamia Orchards is considered the world's largest individual mac-nut farm, with more than 4,000 acres of trees. Despite the ML name, the company is not affiliated with Mauna Loa Macadamia Nut Corp., which is owned by mainland conglomerate Hershey's.

Judy Magin, executive director of the Hawaii Macadamia Nut Association, said she has been seeking other processors to help the association's 100 members.

"It did surprise everyone, but people shouldn't panic," she said of the MacFarms announcement. "There are options. Some of the other big processors are telling us, 'We need Hawaiian nuts.' "

Macadamia nuts are grown by between 650 and 700 independent farmers in Hawaii. Since trees were first planted in the 1940s, they have become one of the state's top crops. Mac nuts are a popular snack, now selling in local stores for about $4 for 5 ounces, and are a gourmet addition to cookies, coffee, ice cream and other goodies.

Last month, the National Agricultural Statistics Service reported the 2005 Hawaii crop amounted to 56 million pounds, up from 53 million pounds the previous year.

The farm value of the crop, hovering above 70 cents a pound, was reported at $40.1 million, up 24 percent from last year due to increased demand.

Richard Schmitzler, president and owner of Hamakua Mac Nut and an association board member, said his company still is buying mac nuts and will continue to support independent farmers.

"We are going to do everything we can to help these farmers," he said.

Hamakua Mac Nut does the processing for private labels that are marketed on the mainland and in Guam, Taiwan and Japan.

"We're continuing to build our value markets," he said, also noting plans to open a visitors' center for the company.

Even though high-quality macadamia nuts are widely identified with Hawaii, local growers face global competition. Australia is the world's largest mac-nut producing country.

"Hawaii nuts are the best. They taste the best and have the best oil content," Simonis insists.

Some processors, however, are tempted to include lower grade, non-Hawaiian nuts in their products.

"Unfortunately, some processors will buy foreign nuts and market them as Hawaii products," Simonis said. "Hawaii marketers should be supporting Hawaii farmers."

Schmitzler, Simonis and Brown insist they offer only Hawaii nuts.

"Everything we sell in Hawaii is Hawaii grown," Brown said.

Magin said part of the association's mission is to promote Hawaiian nuts and protect against misinformation and untruthful labeling.

"That's always been a consideration and concern for us," she said.

Schmitzler, who has 20 years experience in the industry, said he would like to see laws protecting all Hawaii products by mandating packages clearly identify where the product was grown or produced.

"We need a country of origin law," he said. "If we had that, we'd be in much better shape."

Schmitzler said he is encouraged that Rep. Ed Case, D-Hawaii, has introduced legislation to add macadamia nuts to the 1946 Peanut Act, which requires country-of-origin labeling on peanuts.

Such legislation is what Kona coffee farmers have been seeking for decades. Farmers lost a long and expensive battle to completely protect their brand in the early 1990s.

Eventually, a state law was passed mandating packages that include the words "Kona blend" have at least 10 percent Kona coffee. The law, however, does not extend to the mainland or international labels.

"We've been heading in this direction for 10, 15 years. We have the best product, but we haven't done a good job of protecting it," Schmitzler said. "Farmers have to do more than farm these days. They have to stand up for themselves so our great, wonderful Hawaii products are protected."

Schmitzler said the Kona crop was good last year, but rainy weather stunted the Hilo output. Other major growers of macadamia nuts include the states of California and Florida, plus Australia, South Africa, Costa Rica and Guatemala.

The bulk of U.S. mac-nut exports go to Japan, with most of the remainder to Canada, Korea, France, the Netherlands and Hong Kong, according to the U.S. Department of Agriculture.

"It's a lot more important to our economy than people realize," Schmitzler said.