The impact of air transportation on ranching decisions in Hawaii

Abstract

Hawaiian cattle producers have been forced to operate in relative isolation because of the distance to the Mainland. There is only one feedlot in Hawaii that does custom feeding and only one Federally inspected slaughterhouse in the Islands. Thus, the Hawaiian rancher can only improve his economic position by ranch management decisions that will lower costs since the off-ranch price of feeding and slaughter are relatively fixed. By taking advantage of new technology in containerization and air transportation, ranchers in Hawaii may soon be able to finish and market feeders (calves) on the Mainland. In an effort to see what effect lower air freight rates and consequent air transportation of calves to the U. S. Mainland will have on net ranch income in Hawaii, a hypothetical ranch containing 18,500 acres of pasture was budgeted, based on previous survey results, Mainland feedlot costs, and knowledge of the industry by University personnel in conjunction with three ranching experts. Four marketing alternatives were analyzed: (1) finishing and marketing of yearlings in Hawaii, (2) finishing and marketing of yearlings in Ventura, California, (3) finishing and marketing of weaned calves in Ventura, California, and (4) finishing and marketing of those yearlings expected to grade choice after finishing in Hawaii, and those calves expected to grade only good in Ventura, California. With the air freight rate to Los Angeles of $.10 per pound or above, finishing and marketing of yearlings in Hawaii is the most profitable operation. At $.09 per pound, two alternative systems will increase net ranch income, given the conditions of the hypothetical ranch. One is converting all resources of the ranch to a cow-calf operation and flying feeder calves to Los Angeles to be drylot finished in Ventura. The second is finishing those yearlings expected to grade choice in Hawaii, and those calves expected to grade good in California. When the air freight rate is $.08 per pound, all operating systems that fully utilize the ranch resources will increase net ranch income. At $.07 per pound, and allowing some of the resources of the ranch to remain idle (those used to grow yearlings), net ranch income can be increased by flying calves to Ventura, California for drylot finishing and marketing.