Many Macadamias, Few Buyers

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. They produced 56 million pounds last year, and many appear to be on track for a good crop this year too.

The concern started with a June 7 letter to macadamia nut farmers from MacFarms of Hawaii, one of the largest growers and processors on the island.

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.”

Honolulu-based MacFarms, which expects a bumper crop from its own nut orchard, cited last season’s 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, owned by Tennessee-based Sparco Management and Monterey, Calif.-based Greater Pacific Food Holdings Inc., grows nuts on nearly 4,000 acres of orchards in South Kona and employs 200 people.

MacFarms has also agreed to buy at least 5 million pounds of nuts next year from Hilo’s ML Macadamia Orchards. But that deal was not the biggest factor in the decision, Brown said.

ML President Dennis Simonis said Macadamia Orchards was considered the world’s largest individual macadamia 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 Co.

Judy Magin, executive director of the Hawaii Macadamia Nut Assn., said she was seeking other processors to help the group’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.’ ”

Richard Schmitzler, president and owner of Hamakua Mac Nut Co. and an association board member, said his company was buying macadamia nuts and would 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.

Although Australia is the world’s largest macadamia nut producing country, Hawaii-grown nuts generally are regarded most highly.

“Hawaii nuts are the best. They taste the best and have the best oil content,” Simonis said.

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 say they offer only Hawaiian nuts.

“Everything we sell in Hawaii is Hawaii grown,” Brown said.

Magin said part of the association’s mission was 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 Hawaiian products by mandating that 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 was encouraged that U.S. Rep. Ed Case (D-Hawaii) had 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 that packages that included the words “Kona blend” have at least 10% 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.”

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

“It’s a lot more important to our economy than people realize,” Schmitzler said.

Last month, the National Agricultural Statistics Service Hawaii Field Office reported that the value of the 2005 crop was $40.1 million, up 24% from 2004, because of an increase in demand. The price farmers are paid has been going up in recent years to more than 70 cents a pound. Processed nuts retail for $8 to $12 a pound in Hawaii.

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

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