HONOLULU—Hawai‘i lawmakers hope to strengthen and expand the state’s organic farming sector after passing unprecedented legislation. The legislation would allocate $2 million in state-funded tax credit for certified organic food production (House Bill 1689 CD 1). The state-funded tax credit is the first of its kind in the United States, and is designed to complement existing federal programs that help organic farmers overcome the financial barriers of certification.

State legislators believe the new program will reduce the burden on emerging small farmers seeking costly, but necessary, organic certifications and inspections. It will benefit organic farmers by helping them obtain the price-premium of certified organic products, promote the production of locally-grown food, and stimulate job growth in the agriculture sector.

Organic farmer Una Greenaway of Kuaiwi Farm and President of the Hawai‘i Organic Farming Association says, “Organic farmers do have more costs than conventional farmers. As organic farmers, we welcome any and all support the state government can provide to offset those costs and help Hawai‘i’s organic industry.”

Hawai‘i’s new tax credit will reimburse farmers the remaining 25% of costs not covered by the U.S. Department of Agriculture (USDA) Organic Certification Cost Share Programs (OCCSP), which currently reimburses eligible organic producers and handlers up to 75% of certification costs each year, to a $750 maximum.

The new tax credit also covers a wide array of costs that are ineligible under the USDA Cost Share Programs, including costs for any equipment, materials, or supplies necessary for organic certification or production of agricultural products that are specified in a farm’s organic system plan. Coupled with the existing federal cost-share program, Hawai‘i’s new tax credit will reimburse an organic farmer for virtually all costs of organic food production and certification, up to $50,000.

“Organic agriculture has a huge role to play in addressing some of the most pressing issues of our time – economic revitalization, climate change, public health and environmental protection,” says Ashley Lukens, Director of Hawai‘i Center for Food Safety. “Through policy initiatives such as the new tax credit, we’re seeing the state step up to fulfill its responsibility to support local food self-sufficiency, and recognize organic farming as a means for promoting a healthy, viable future for Hawai‘i.”

Background

The growing demand for locally grown, certified-organic produce and products in Hawai‘i greatly exceeds supply, and Hawai‘i farmers face numerous barriers that deter them from entering the organic sector. These include the financial and paperwork requirements associated with obtaining and maintaining organic certification and higher costs for organic materials, such as fertilizer, which can be double that of conventional farming. In addition to more expensive materials, organic operations are typically more labor intensive per output, which limits economies of scales. Not only are more worker hours costly, but Hawai‘i’s agriculture wages are 35% higher than the US average.

Organic foods and products are a strong emerging market in Hawai‘i, and the sector is valued at over $6 million. The total retail market for organic products is now valued at more than $39 billion in the United States and over $75 billion worldwide. According to data released by the Agricultural Marketing Service's (AMS) National Organic Program (NOP), the number of domestic certified organic operations increased by almost 12 percent between 2014 and 2015, representing the highest growth rate since 2008 and an increase of nearly 300 percent since the count began in 2002. A recent study shows that the organic price premium for several retail-level food products is higher than their conventional counterparts; for example, certified organic coffee garners a 50% higher retail price than coffee that is not certified organic.

The USDA defines organic agriculture as “a production system that is managed…to respond to site-specific conditions by integrating cultural, biological, and mechanical practices that foster cycling of resources, promote ecological balance, and conserve biodiversity. Synthetic fertilizers, sewage sludge, irradiation, and genetic engineering may not be used.” By assisting organic farmers to initiate and grow their businesses, this program will help develop Hawai‘i’s organic agriculture sector and in turn benefit its farmers, the environment, economy, and public health.

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