Employees Fight to Save the Farm

Hamakua Springs Country Farms, located on the slopes of Mauna Kea on the Big Island of Hawaii, is run by three generations of the Ha family. Richard Ha is president of Hamakua Springs, concentrating on researching and experimenting with new products. Richards farming experience goes way back. When he finished college with an accounting degree, his father asked him to come run his 40-acre chicken farm at Waiakea Uka. Richard decided to grow bananas on part of his fathers farm, and he talked grocery stores into saving him banana boxes. He traded chicken manure to other farmers for banana plants. That was 30 years ago, and that banana business took off and evolved into Hamakua Springs Country Farms, a 600-acre banana and vegetable farm. Although Richard is its president, Hamakua Springs truly is a family business. The family members all have a vote, and I have three quarters of a vote, he laughs.

Richard Ha tends not to take himself too seriously, calling his eco-farming blog Ha Ha Ha! But earlier this year, Ha was not smiling. He made the difficult decision to shut down the banana-growing operation, a move that would leave 400 acres unplanted. His costs were soaring banana prices were flat or declining, and there seemed to be no end in sight. On the first Friday in April, Ha delivered the bad news to his nine full-time banana pickers.

But on Monday morning, Ha was surprised to find that seven of the workers had shown up to discuss keeping the farm going. His crew members had a fairly sophisticated plan: plant a less labor-intensive variety of banana that would require less land and could be grown closer to the packing facilities. That would do away with the need to hire additional workers at harvest time. Ha was tempted. The last thing Ha wanted to do was close down his farm and fire his trusted full-time workers. But all of his business instincts were telling him that was what needed to be done.

Bananas are the most popular fruit in the world and the fourth most important crop on the planet after rice, wheat, and corn. Consequently, banana production operates on a gigantic industrial scale with five huge companies controlling 80 percent of the global trade between them. In Hawaii, most pineapples and sugar cane are sold to consumers off the island. The mainland United States gets bananas from Central America, so Ha primarily sold to the island market. He eventually became one of the states more successful farmers, responsible for as much as a third of Hawaiis bananas. He was among the first in the state to develop the market for apple bananas, a small, extra-sweet variety that carries a premium price. Hamakua Springs is also one of only a few banana farms to receive an Eco-OK certification from the Rainforest Alliance, an influential environmental group. Ha was diversifying operations into other cropsincluding tomatoes, lettuce, and Japanese cucumbersthat he grew hydroponically.

Cheap imports from Central America increasingly flooded Hawaiian markets, forcing a number of banana farms in the state to close, including Has largest competitor. Independent banana producers all over were struggling; in the Westward Islands in the Caribbean, 20,000 out of 25,000 banana farmers went out of production between 1992 and 2010. The prices of fertilizer and energy, always higher on Hawaii than on the mainland, were climbing every day, taking a bigger and bigger bite out of profits. Because of the constant refrigeration needed to control the ripening of green bananas, Has utility bills recently hit $15,000 per month.

Has biggest concern, as with many small businesses, was finding good workers. Our yields were suffering, because we were struggling to keep a stable work force, says Ha, who figured it was only a matter of time before the farm started losing money. For months, he had wrestled with the idea of closing down the banana farm. Ha claims he had carefully calculated operational costs and profitability on weekly spreadsheets that showed a gradual downward trend line for profits. However, the Financial Manager did not agree to Ha observation. To deal with this Ha called for a management meeting to discuss the financial figures for the operating year.

Below is a summary of his financial information.

Items	Amount ($)
Sales	57,050.68
Stocks	7,750.68
Cost of Goods Sold (COGS)	24,984.79
Buildings	32,101.89
Rent	9,000.00
Bank & ATM Fee Expenses	98.43
Equipment Expenses	742.40
Marketing Expenses	503.53
Merchant Fees Expenses	794.19
Interest Expenses	5,000.00
Operating earnings	21,052.34

Finally, in early April, he discussed closing down with the rest of his family, who all agreed that time was running out. We were doing OK, says Ha. But I thought it would be better to shut it down rather than lose money and be forced to shut down later.

Ha was shocked that his full-time pickers made their casehe figured they would go for unemployment or hunt for other jobs. Picking bananas is about as tough as manual labor gets. A banana picker carefully notches away at a banana bunch with a razor-sharp machete. He then positions himself below the bunch so that, with the final notch, it falls on his shoulders. He then carries his bundle over to a nearby trailer. In a typical day, a worker might handle 100 bunches, or more than 10,000 pounds, of bananas. There may be easier ways to make $12 an hour, but the job at Has farm provided full health benefits and lots of free fruits and vegetables. Its hard work, but its good work, says Eric Garcia, whos been picking bananas for Ha for five years and was among those lobbying to save the jobs. You get to work out in the fresh air, mostly by yourself. I said lets do whatever it takes to keep it going.

Other full-time blue-collar jobs with benefits and decent pay were rare. The only other work at similar pay is in hotels and restaurants. But most of those jobs were located on the other side of the island. For Has pickers, that would mean a three-hour round-trip commute by car and hundreds of dollars per month in gasoline. When the workers showed up that Monday morning, they huddled with Ha for several hours. Together they pencilled out a plan that would eliminate the 100 acres of apple bananas, which yield less per acre than regular bananas and are more difficult to pick. A second step would be to move the remaining banana plantings much closer to the packinghouse and chiller room to reduce the workload and speed up turnaround. The workers argued that they could run the operation with a much smaller workforce and get nearly 10 percent more output per acre. The higher productivity would be sufficient to return the banana operation to healthy profitability.

Ha listened to the plan closely. Under normal circumstances, he wouldnt consider such an idea. But he saw some factors changing that might work to his farms advantage. Ha knew that energy savings from a hydroelectric generator he planned to install along a stream on his property would offset increasing oil prices. At the same time, the surge in oil prices was hurting importers far more than it was hurting him. Importers were paying shipping companies a 30 percent or higher fuel surcharge on containers coming to the islands. The weakness in the dollar had further pushed up prices for Central American bananas.

Considering these factors, Ha and his family saw that a sustained period of higher prices for imported bananas and decreased costs could give them the profit margin cushion they needed, and might make the workers proposal tenable. For the first time in recent memory, banana prices did not fall steeply during the summer, says Ha. That made us think something had changed.

Required

Questions 1. Put yourself in Has situation, and analyze the pros and cons of his workers proposition. 2. Since Hawaii is so isolated and Ha sells bananas locally, why is he affected by international competitors? 3. What would you recommend the family running Hamakua Springs Country Farms do?