Testimony of E. Alan Kennett

Gay & Robinson

Kaumakani, Hawaii

to the

Senate Agriculture, Nutrition and Forestry Committee

July 26, 2000

Washington, DC

Good morning, Chairman Lugar and the Members of the Senate Agriculture Committee. I appreciate the opportunity to testify before you today on the state of the domestic sugar cane industry.

My name is Alan Kennett. I am President and General Manager of Gay & Robinson (G&R). G&R is a family operated sugarcane farm and mill and cattle ranch. I have been involved in the sugar industry for 35 years beginning my sugar career in England. I have worked in Africa, the Caribbean and now fortunately, in Hawaii. Today I speak for the sugarcane farmers of Hawaii.

The Hawaiian sugar industry began commercial operations 165 years ago on the island of Kauai. G&R began sugar operations in 1897, over 100 years ago. For many years, beginning in the 1950's up through 1986, Hawaii's annual production exceeded 1 million tons sugar. It was after the 1985 Farm Bill that Hawaii's sugar production began a dramatic fall and today Hawaii produces only 330,000 tons sugar annually from 4 operating factories.

In 1986, there were 13 operating factories and sugar was grown on all of the four major islands: Hawaii, Maui, Oahu and Kauai. Today, sugar is grown only on Maui and Kauai. And earlier this month, AMFAC Sugar on Kauai announced plans to furlough 100 of its workers. [Refer to Map 1: Hawaii mill closures]

Unfortunately, since the demise of sugar on the big island, nothing has replaced sugar as a viable agricultural crop and the former cane lands remain idle, overgrown with weeds. Unemployment is high and drug usage, marijuana growing and drug trafficking have increased dramatically, as have the social problems that are created by high unemployment and drug usage. There is a great deal of concern that both Maui and Kauai will see the same occurrence should we lose our sugar industry.

G&R is a family owned farming operation employing 270 people. We also provide housing for 350 families of both current and former employees. I promised our workers that I would do my best to impress upon you the importance of this issue. I hope I have not let them down. One of my workers

suggested, " have the Senate and the House Agriculture Committees come visit and see first hand the communities that remain but more importantly, the communities where sugar once thrived."

Because of Hawaii's isolation relative to our market (mainland USA) Hawaii producers incur high freight costs, which puts us at a disadvantage relative to other US sugar producing areas. We in Hawaii, like our fellow American sugar producers, are extremely concerned at the misrepresentation often directed at us by the opponents of US sugar policy. Clearly, Hawaii has not received the Congressionally approved returns from the sugar program, nor have many US sugar farmers whose livelihoods are being threatened by the dramatic fall in prices over the past year.

Oversupply and loss of market confidence in the ability of USDA to maintain a viable program have resulted in severely depressed producer prices for raw and refined sugar. The U.S. raw sugar price has plummeted about 25% since July 1999. Raw cane sugar prices have fallen from about 22.5 cents per pound to 17 cents, the lowest level in 18 years. Given current production estimates, this represents a $400 million drop in the value of the domestic cane sugar crop. [Refer to Chart 1: U.S. Raw Cane Sugar Price]

Sugar has been overlooked in government market loss assistance efforts during the farm crisis of the past several years. Net CCC outlays for other program crops exceeded $10 billion in fiscal 1998 and $19 billion last year; sugar revenues totaled $30 million in 1998 and $51 million last year. Nearly $30 billion is budgeted for other program crops this year. Sugar farmers are hurting too and should be included. [Refer to Chart 2: Government Revenues from U.S. Sugar Policy and Chart 3: CCC Outlays for Other Crops, Revenues from Sugar, 1996-2000]

Government action to address this problem is appropriate because so many of the factors leading to the price drop are more closely related to government action and inaction, than to producer decisions. Furthermore, the government has responded to similar price drops for other program crops by providing tens of billions of dollars in assistance over the past several years. While these expenditures on other crops are appropriate, they have had the unintended effect of worsening the beet and cane sugar price crisis, as this financial relief enables many farmers to invest in new or additional beet and cane sugar production.

Mr. Chairman, American sugar farmers ARE efficient by world standards; two-thirds of the world's sugar is produced at a higher cost than the United States. American cane growers are in the top third in global efficiency, despite domination by developing countries with little, if any, of the labor and environmental costs we face. Hawaii has the highest yields in the world in sugar per acre, sugar per worker.

However, despite these efficiencies, domestic sugar producers are facing the worst prices in two decades. But do you see any price decreases in the food you purchase at the grocery store? No. Tell me, do you ever hear your wife complain about the price she pays for sugar in the market place? On the other hand, does she complain about the increased price she pays for cereal or ice cream? The fact is prices for sugar-containing products have continued to increase even though the price that the farmer receives for his sugar has decreased. [Refer to Chart 4: Farm Prices vs. Sugar Containing Prices and Chart 5: Sugar Containing Products Survey]

In conculsion, sugar farmers in Hawaii are in serious danger of going out of business. If sugar was no longer grown in Hawaii, that would have a devastating affect on the Hawaiian economy as stated earlier in my statement.

The Hawaiian sugar industry has done much to look for ways to survive the changing economics of the US sugar industry. We have made significant efforts to become more efficient, we have continued investing in our farming operations and we have pursued alternative sugarcane by-products to provide additional and independent sources of income to the plantation. The US Government has shown compassion for other farmers in crisis, why not for sugar farmers? Please remember that sugar farmers want what all other program crops want, a fair opportunity to farm and make a reasonable living. American sugar producers' competitiveness and their disastrously low prices parallel the plight of other American farms. Sugar farmers do not want to be treated more favorably than other farmers are, just equally.