Heading toward recovery

KEKAHA — Recent numbers show Hawaii’s seed industry could be nearing the end of stabilization and heading into a period of recovery, as seed crop value shows its first increase since the 2011-12 season.

According to the United States Department of Agriculture National Agriculture Statistics Service, the seed industry’s value is estimated at $151 million for the 2015-16 season, a 7 percent increase from the 2014-15 $141 million estimate.

Paul Brewbaker, an economist who owns TZ Economics and has been doing market research for the Hawaii Crop Improvement Association, said while the 7 percent year-over-year increase is positive, it’s important to look at the whole picture.

“The trend is it (seed industry value) has gone up for the past 50 years more or less,” Brewbaker said. “So starting from zero dollars on Molokai in the winter of 1966 or 1967, it went to $250 million.”

He explained that was the industry’s “discovery phase” and now the industry is on a more “mature trajectory that has modest prospects.”

From 2012 forward, the industry has experienced a decline from its best years, which were 2009-12 when the industry reached $250 million.

Brewbaker said the trends of the seed industry fit directly in the trends in the global economy and the cycle of commodity prices, particularly between 2005 and 2011, when squirrely oil prices threw the global economy into unrest.

“The price of oil made corn-based ethanol look really attractive so at that point, U.S. corn yields were never higher. Corn and grain prices were running $7 a bushel,” Brewbaker said.

But, in 2013 and 2014 the oil market was flooded and corn prices fell to half the amount per bushel.

“The entire agriculture sector has been making these adjustments, as has the mining sector and oil, everyone is backtracking to find a new level that’s appropriate,” Brewbaker said. “That’s what the industry has done — it’s found a new level.”

At $7 per bushel, the value of research and seed production is very high, but it plummets when prices drop to $3.50 a bushel, he explained.

“We’ve carved out the bottom of the cycle and now we’re finding our way back to an appropriate level of production for today’s configuration of global commodity prices,” Brewbaker said.

He explained that the longer trends of the seed industry and its correlation with the global economy can be seen by looking at the cycle of energy prices going back to the 1950s.

“We saw the cycle of energy prices from the 1950s to the 80’s when oil went from really cheap to going up in the 70’s,” Brewbaker said. “There was the unwinding of the 80’s and in the 90’s and early 2000s commodity prices came up, accompanied by emerging economies on the global scene.”

He said this kind of economic uptick could be a foreshadowing of the next start of a phase when “the global economy comes out of the shadow of the great recession.”

What’s good for the seed industry is that with the emerging economies in sub-Saharan and Eastern Africa, Eastern Europe, China and India, comes an increase in the number of people who join the western world’s standard of living.

“So you’ll see more consumption and this may be the start of the next long phase (of commodity prices),” Brewbaker said.

Within the entire trend of the Hawaii seed industry’s history, he said, this is a moment for seed companies to evaluate which direction they want to take with the industry.

“Now we take this opportunity against the backdrop of the commodity prices, to think of the right size of the industry,” Brewbaker said.


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