A 6,000-acre swath of Ka‘u land has a likely buyer, but the farmers who have coaxed world-class coffee from the soil are still haggling for licenses to continue their work.
Colorado-based Resource Land Holdings could close by next month on a contract to buy the Lehman Bros. land— which includes the Moaula coffee lands — for an undisclosed sum. The company has been in negotiations for several months with a group of coffee farmers to draft 15-year licenses to cultivate the land. So far no agreement has been reached.
Licenses forged in the 1990s have expired, and nervous coffee farmers are now operating under year-long extensions. They worry that their yearly license rates could be hiked from $150 per acre to $600. Some are concerned the new owners may lay claim to the orchards and subdivide the land for high-end homes.
But the prospective buyer says that’s not what it has in mind.
In all, 36 growers produce the increasingly prominent Ka‘u brand on about 300 acres. Lehman Bros. acquired the property from the previous owner WWK Hawaii Holdings through foreclosure in 2013. The collection of parcels — which includes miles of shoreline, pasture, agricultural land and commercial and industrial zoned land — has been under contract for purchase by RLH since June.
Coffee growers have looked at so many drafts containing tweaks to proposed licenses from RLH that it almost seems pointless, said John Ah San, president of the Palehua Coffee Cooperative.
“I think if they are not willing to bend and meet the farmers, if they are going to try to break the land up and sell it off to gentlemen farmers, I don’t think it’s going to fly,” he said.
The local partner of the prospective buyer paints a very different picture of what is happening. Jim McCully of Hilo says RLH is trying to be sensitive to the needs of farmers while opening up more land and opportunities for added coffee land licenses. RLH is also proposing licenses — fixed for 10 years and negotiable for another five — that will allow farmers to gain financing in a way they could not under old arrangements, he said.
“There’s some good business up there. We want to promote it; we want it to expand,” said McCully. “We’re not going to be foolish; we’re not going to kill the goose.”
Ka‘u coffee is a bit of a Cinderella story. For decades, the south flank of Mauna Loa was sugar country. When that industry collapsed in the mid 1990s, plantation workers and their sons and daughters decided to try to farm coffee, with little first-hand knowledge or outside assistance. Through effort and trial-and-error, growers built a brand that has rivaled and in some years ranked higher in cupping competitions than the signature java grown in the Kona coffee belt.
All the while, the original licenses issued by C. Brewer & Co. could have been revoked with 120 days notice.
“They developed a whole crop with that hanging over their heads,” McCully acknowledged.
It’s not hard to get behind a success story like Ka‘u coffee, but growers and others in the community are skeptical of RLH’s intentions. To take possession of the trees is against Hawaii law, and to make the farmers responsible for crop insurance at the same time is unprecedented, said Malian Lahey, who owns the brand Ka‘u Specialty Coffee and buys from the growers, but does not farm.
“I would say that tripling the rent is beyond the point of abusive, and definitely the idea of taking possession of the trees is far-fetched,” she said.
Ah San and others say the higher license rate added to the expense of equipment and spray to combat the coffee berry borer would put a hardship on farmers.
“We’re telling them that’s going to be too hard to eat right from the start,” Ah San said.
But the higher license rate makes sense, said McCully, who currently grows orchids in East Hawaii and has been involved in other agricultural ventures.
The original licenses for $150 per acre per year also included 2 percent of the farms’ gross income on parchment, payable to the landholder. Historically, that 2 percent of the value of the coffee in its unroasted stage was not paid. A consultant recently found that, if the percentage were paid by the Ka‘u growers today, it would amount to around $450 to $500 an acre, McCully said.
But RLH has no interest in auditing the earnings of individual growers, he said.
“You’re starting to talk about herding squirrels,” McCully said. “We said no, we want a flat rate.”
“That farm land is worth a lot more than $150 an acre per year,” he said. “There’s a number out there. We’re going to come to an agreement with them on the number.”
McCully stressed that RLH isn’t trying to oust farmers from the land or take possession of the coffee trees, although he said the company would have legal right to ownership of the orchards the same as any other plant with perennial roots that have been growing for more than a year. Instead, should the sale finalize, RLH would like to divide the land into lots large enough that they can be farmed and ranched, he said.
“My goal is to get the coffee lands subdivided out so the farmers can own their own coffee farms,” McCully said. “We’re not trying to take the licenses away; we’re trying to write licenses so they can stay and farm the land. And if they don’t want to, we want others of their brethren to come do it.”
At least 600 acres of pasture land adjacent to existing orchards are suitable for cultivation as additional coffee fields, he said. Makai portions of the tract at Waikapuna contain sensitive archaeological areas that should be protected under Nature Conservancy easements, he said.
Pasture lands should be divided into 50- to 200-acre lots suitable for ranching, and a feed lot could be constructed in the area to finish and add value to beef, McCully said.
As for as the existing coffee lands, a set of best practices should be developed as part of the new licenses to ensure that fields are not allowed to go derelict and become breeding grounds for the berry borer, McCully said. That would protect the farmers who work hard to keep the pest down and promote their crop.
RLH continues to draft long-term license agreements the company hopes will be acceptable to farmers, McCully said.
Ah San is optimistic an agreement can be reached, but said the new buyer and the growers have yet to get on the same page.
Ah San said: “We’re all waiting.”