Beefing over management of Hawaii’s meat processing business

Hawaiian lawmakers are considering billing that both sides believe could have a profound impact on Hawaii’s beef industry – a major source of locally produced protein – as the state tries to produce more food that it consumes locally.

The question is, is it beneficial to Hawaii for a person to have approximately 70% of the state’s beef processing capacity? In this case, the processor has promised to increase processing capacity and there is no evidence that it has engaged in anti-competitive commercial practices.

The Hawaii Senate Agriculture Committee is expected to hear arguments on the matter on Wednesday when it comes to SB 692, a move that would place several restrictions on meat processor, Idaho billionaire Frank VanderSloot. Despite owning ranches in the western United States, VanderSloot made his fortune from a wellness product company called Melaleuca.

Through a series of acquisitions, VanderSloot now operates Hawaii’s two largest slaughterhouses: the Hawaii Meats facility on Oahu near Kapolei and the Hawaii Beef Processors facility in Pauiilo on the Big Island. Although both facilities are state owned, VanderSloot has signed leases for them and committed to expanding their capacities. This announcement was well received by small ranchers who say it is difficult for them to find space in the slaughterhouses.

Some ranchers fear that an Idaho billionaire could slaughter the local beef industry. Allan Pararchini / Civil Beat

VanderSloot is expected to “take protective measures to prevent anti-competitive practices in the meat packaging industry” and allow VanderSloot to use only 50% of its capacity for meat marketed under its own brands. The rest would have to be devoted to competing brands such as Parker Ranch’s Paniolo Cattle Co. brand and Kuahiwi Ranch’s brand of the same name.

The bill would also require VanderSloot to submit an annual report to the Department of Agriculture outlining its “efforts to engage stakeholders to ensure that the vision and direction of the meat processor is in the best interests of the state and its food security, sustainability and safety goals.” “

The required report should include VanderSloot’s business plans, including “existing and proposed markets and sources for livestock supplies”.

Perhaps more importantly, the measure will require VanderSloot to provide processing services without the ranchers having to give ownership to their animals.

Proponents of the law say it will ensure that VanderSloot cannot use its position to control the market. Customers must be treated fairly and Hawaiian ranchers have access to processing facilities: a key to maintaining a local food system that allows local ranchers to raise cattle for the Hawaiian people to eat.

Opponents say this is not necessary and, in fact, would hamper VanderSloot’s ability to expand and provide access to small local ranchers. There are also questions about whether it is legal for companies that have lease agreements with the state and that do not contain such provisions to impose such restrictions.

A good work horse is essential for cattle roundups.  The horse is the paniolo's main tool for herding animals.Hawaii’s paniolo culture, captured in this 2014 photo, has been part of the islands for more than 100 years, and Senator Lorraine Inouye says her bill was designed to preserve it and the livestock industry. PF Bentley / Civil Beat

The main opponents are VanderSloot on one side and Parker Ranch, the historic Big Island Ranch. However, the debate has attracted numerous players in Hawaii’s agriculture and food industries.

On the Parker Ranch side are players like the Hawaii Cattleman’s Council, the Hawaii Food Industry Association, KTA Superstores, and the Hawaii Food Service Alliance. All of these statements spoke in favor of the House Companion, even though the House version has stalled.

The Ulupono Initiative, Parker Ranch’s joint venture partner for the beef brand Paniolo, is also supported.

Opponents of the measure include VanderSloot, a number of small ranchers and the Hawaii Attorney General, which has questioned the legality of the law. VanderSloot has also hired some high profile advisors, including Scott Enright, former chairman of the Hawaii Board of Agriculture, and Honolulu attorney Paul Alston.

Bill sponsor, Island of Hawaii Senator Lorraine Inouye, said her main concern was to protect industry, which is a major force in agriculture in her district.

“My concern is to maintain our Big Island livestock industry,” she said. She added that she was concerned that VanderSloot had been able to acquire a monopoly stake in Hawaii’s meat processing capacity – a point that advocates of the law had raised.

“I definitely understand and I believe your concerns are true,” she said.

Dutch Kuyper, President and CEO of Parker Ranch, declined to comment on the minutes. However, Kuyper put forward several compelling arguments in favor of the bill in a message to ranchers sent late Monday.

Perhaps most convincing was a dispute over beef prices and what could happen if VanderSloot forces ranchers to sell their cattle to him instead of processing the cattle for ranchers who market the beef under their own brands.

“As most of you know, the price of grass-fed market cattle 10 years ago was $ 1.05 compared to over $ 2.00 today,” he wrote. “A competitive cattle market is good for all producers.”

“Without the right to keep ownership, there would be no serious competition for market cattle in the Big Island, and cattle prices would likely be significantly lower,” he wrote. “Producers shouldn’t be forced to leave the title to the packer in order to pursue their own markets.”

The overall point is that VanderSloot’s ownership gives it such a dominant role in the market – Kuyper argues it is a monopoly – that the processor could take a number of steps to keep the Hawaiian beef market fair trade affect.

Small ranchers like the big investor

But not everyone is convinced that VanderSloot wants to hurt local ranchers. In fact, several small ranchers accused Parker Ranch of dominating the industry for years – which Kuyper denies in his letter.

Parker Ranch on the Big Island is a major producer of local grass-fed beef in Hawaii. Courtesy Parker Ranch

“We’ve been in this business for years and we’re just glad that he finally came to town,” said Waianae rancher Frances Kama-Silva in an interview.

Kama-Silva, who runs Barbed S Ranch with her husband Henry Silva, said it was difficult to get access to the Oahu slaughterhouse. She said she had virtual meetings with VanderSloot and he promised to change that.

“We’re happy with him,” she said.

Alston, the Honolulu attorney, said VanderSloot is offering Parker and Kuahiwi ranches so much of its limited space that the little boys often have to wait when they are unwilling to work with Parker and Kuahiwi for a fee.

“The reality is, if you raise livestock in the Big Island, you may have to wait six to eight months to slaughter your animals,” he said.

VanderSloot can change that by adding capacity, he said.

In the meantime, there is one final argument that could stop the bill. Kuyper says he helped design it. The move could be unconstitutional, according to Assistant Attorney General Jennifer Waihee-Polk.

“Since the bill would prohibit them from having full use of their property, they could claim that this bill is an acquisition of property that requires compensation only, or is a breach of contract, all contrary to the constitutions of the United States and the state of Hawaii . She said about the business of VanderSloot.

David Callies, professor of property law at the University of Hawaii’s William S. Richardson School of Law, said it was important to note that a lease is a property right and that even if the state owns the land, it is considered a right could take from the government if the state prevented VanderSloot from using his property as the lease allows.

“Someone who has a lease is in pretty good shape,” he said.

Hawaii Grown is funded in part by grants from the Hawaii Community Foundation’s Ulupono Fund, the Hawaii Community Foundation’s Marisla Fund, and the Frost Family Foundation.

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