Parker Ranch announced Friday that it has launched a new venture aimed at statewide local beef production.
The Waimea-based ranch, which is the state’s largest cattle operation, has partnered with investment firm Ulupono Initiative LLC to form Paniolo Cattle Company in a bid to tap into “a growing demand for high-quality, affordable, locally raised beef,” according to a press release.
Paniolo Cattle Company will begin this season with 1,400 head of cattle to be raised at Parker Ranch’s pastures in Waimea and Kohala. It represents the largest commitment of grass-fed beef by a single ranch in the state, and is expected to increase the supply of grass-fed steers to the market by nearly 35 percent.
“Just so you get a sense of scale, the entire local market for beef is 8 percent or 9 percent market share, today,” said Kyle Datta, general partner of Ulupono Initiative. “We see there’s a lot of upside for this venture, and actually for every ranch in Hawaii. There is much more demand than there is supply.
“The challenge has always been that the ranchers want a commitment from the consumers and wholesalers … and the consumers and wholesalers want a commitment to providing the consistency and quality they’re looking for. It’s a dance. But we know we’re here for the long term.”
Dutch Kuyper, CEO of Parker Ranch, agreed, saying the new company would be using new methods to act as a balancing act between supply and demand.
“This joint venture is about trying to level the cost of beef, creating an at-home thriving cattle industry that is energy-efficient and protects us against volatility in fuel and feed costs,” he was quoted as saying in the release. “Restaurants, food markets and consumers want quality and consistency in beef, at reasonable prices.”
The partnership between the two companies calls for Parker Ranch to provide pastures, calves, cowboys, and its cattle management expertise, while Ulupono provides capital, as well as its commercial expertise, business relationships, and “our ability to create synergies with the businesses we’re a part of,” Datta said.
The Paniolo Cattle Company is the result of a successful pilot project to explore more efficient and profitable methods of raising cattle on Hawaii Island.
“In the initial grass-fed stage, cattle are free to roam and graze pasture until they reach about 800 pounds,” Friday’s press release reads. “The finishing stage requires active management to assure consistent nutrition to grow to 1,150 pounds, which produces high-quality meat that has the tenderness consumers seek. Paniolo Cattle Company will operate irrigated finishing forage pastures and employ rotational pasture techniques to achieve consistency and quality, an approach not widely practiced in Hawaii.”
The high costs associated with feed and production forced Parker and other Hawaii ranchers to drastically change their business models in the 1970s and ’80s, with cattle being transported to the mainland for fattening, slaughter and production. Local beef dwindled in Hawaii’s market share, from about 30 percent in 1986 to currently less than 10 percent, according to a 2003 report by the University of Hawaii Cooperative Extension Service.
Additionally, the price of cattle over the past decade has increased about 57 percent, while the price of feed has increased 129 percent, cutting into Hawaii ranchers’ bottom lines, according to Paniolo Cattle’s press release. But with recent shifts in fuel costs associated with shipping cattle, as well as increasing public demand for locally grown produce, Ulupono and Parker Ranch feel they can compete in the local market with the larger beef producers of the mainland.
“We actually did a study about demand in 2010 … with a portion of the population, about 16 percent or so who have the disposable income, that would be willing to pay more for locally produced foods. Meanwhile, two-thirds of the market really wants local food, but would be much happier if it could be the same quality and at (equal) or better prices (than mainland food) that they could afford,” Datta said.
Alex Franco, president of the Hawaii Cattlemen’s Council, said that the new Parker Ranch venture “is definitely needed.”
“The whole local food movement has created a great demand for locally produced beef. I’m happy they’re working on cattle committed for that market,” he said. “It’s a good thing for the industry, and it’s a good thing for the consumers.”
For the new venture to really take off and cement the locally produced movement, Franco added that Hawaii ranchers will have to continue to commit to holding back more cattle for local production.
“In order to compete against product being brought in from the mainland, it’s going to take a lot of numbers of cattle here to be kept back in Hawaii. … The whole purpose is to try and drive down our processing costs — both slaughter and processing costs — which is a big bottleneck for us here in Hawaii,” he said. “As our mainland competitors are processing 1,000 head (of cattle) a shift, we’re doing that many head a week. It’s a big difference there. We need to be very, very efficient, and the only thing is critical mass: keeping more cattle here in Hawaii.”
Established in 1847, Parker Ranch is one of the largest land owners in the state. Its cattle business helped build the legendary reputation of Hawaii’s paniolo, and has served as a tourist destination for decades. But recent economic pressures have cut into the business’ profits, forcing it to sell acreage and limit public access to some attractions. According to its website, at one time the ranch encompassed 500,000 acres. Currently, it consists of 130,000 acres and 26,000 head of cattle.
Email Colin M. Stewart at cstewart@hawaiitribune-herald.com.