CoffeeBiz AI Assistant
Introduction
How to make a small fortune growing coffee in Hawaii? Start with a large one! Unfortunately, this joke has too much relevance to all agriculture in Hawaii. So why do people want to farm coffee in Hawaii? It depends on the farmer’s situation and desires. As with all Hawaiian agriculture, small-scale farms only provide supplemental income to the family and/or help defray costs of ownership. On the 97% of small coffee farms (i.e, less than 5 acres), the maximum projected gross revenue (typically) is only about $19,200 per acre (800 trees per acre x 10 lbs of cherry x $2.40 per lb). But this is gross revenue – the costs of land, labor, production inputs and taxes must still be deducted. And the cost of living in Kona is very high. For example, a cursory perusal showed rents in August 2023 commonly exceeding $3,000/mo. So, the farmer or other members of the extended family must either already have substantial wealth or have other employment in order to be financially secure in S. Kona. That being said, every bit of income helps.
Monthly Housing Rental Cost in South Kona – August 2023
A key determinant of the cost of coffee land depends on location. In Ka’u, a very rural area on the southeast side of Hawaii Island, sellers were asking about $18,000 per acre for fee simple raw land suitable for coffee in August 2023. In S. Kona, the prices range between $50,000 and $70,000 and acre depending on total acreage, proximity to Kailua-Kona town and whether or not a home was on the property. Alternatively, coffee lands can be leased. Current lease rates for existing coffee lands range from $1,200 per acre per year.
Owning one’s own land can enormous non-financial benefits. Privacy and ambiance are particularly valued. Given the high cost of land in S. Kona, anything that reduces the cost of ownership is desirable. Leasing one’s lands to others to farm is simple and will usually provide at least $600 per acre with the leasee paying their share of the property taxes. Farms provide many opportunities to legally reduce income taxes. Further, in Hawaii, lands used for agriculture are preferentially assessed at greatly reduced rates ($1,500 to $3,000 per acre versus market price). This can reduce property taxes by as much as 90%. Lastly, net operating profit will also reduce the cost of ownership.
The interactive tool at the end of this section can be used to examine cost and returns in much more detail. Key questions which must be answered before the analysis are:
- Is the analysis for a prospectus to a source of financing. If yes, costs of land and labor, whether actually paid or deferred, must be included. For example, if the farmer has alternate possibilities for employment but decides to work on the farm (at no cost), the value of the deferred oncome must be included. Similarly, if the farmer could lease his lands to others but does not, the deferred income from such a lease must be included.
- If the farmer is only wanting to determine what farming coffee will mean to their net income and/or evaluate the impact of of a change in farming methods, only include cash expenses and income.
Interactive Feasibility Analysis
Our website will take user inputs to create a customized feasibility report. This information will be saved in the user’s confidential personal profile. We will not use or release the information without specific approval. The user can go back anytime and update/change preferences and create an updated report. Some sample inputs are given below. Some data field will be optional and some fields are required.
Step 1:
User Information
- Name
- Address
- Phone
- User name
- Password
In this step, the user is required to provide personal details for their account. This includes their name, address, phone number, email address, username, and password. The purpose of collecting this information is to create a unique user profile that can be used to save, update, and access the report in the future. This personal user information helps in maintaining the privacy and security of the user’s data and also facilitates communication between the user and the website administrators if needed.
This stage involves gathering data about the user’s coffee farm. Specifics such as the total farm area, the cultivated area (both general and specifically for coffee), the altitude of the farm, the type of coffee being grown, and the type of crop are all required. Additionally, information about the last and previous coffee productions, any cultivation certificates, the type of cultivation, and the usage of fertilizers and insecticides are also collected. These details help in creating an accurate and personalized report about the economic feasibility of the farm, taking into account the unique characteristics and practices of each individual farm.
This stage involves gathering data about the user’s coffee farm. Specifics such as the total farm area, the cultivated area (both general and specifically for coffee), the altitude of the farm, the type of coffee being grown, and the type of crop are all required. Additionally, information about the last and previous coffee productions, any cultivation certificates, the type of cultivation, and the usage of fertilizers and insecticides are also collected. These details help in creating an accurate and personalized report about the economic feasibility of the farm, taking into account the unique characteristics and practices of each individual farm.
Step 2:
Farm Information
- Farm area (total acre)
- Cultivated area (acre)
- Cultivated area without coffee (acre)
- Farm altitude (feet)
- Coffee type
- Coffee Crop Type
- Coffee Production (Last production)
- Coffee Production (Previous production)
- Cultivation Certificate
- Cultivation Type
- Fertilizer uses
- Insecticide uses
Step 3:
Risk Analysis Info
- Loan Detail
- Contact details
- Other Risks
- Climate Change
- Insurance Type
- Insurance Details
- Land Type
- Farm Location Specialty
- Flood Frequency
- Disease
- Pests
- Logistic Risk
At this stage, the website collects data about various risks associated with the user’s coffee farming operation. This includes loan details, contact details, climate change impact, insurance type and details, type of land, unique features of the farm location, frequency of floods, disease prevalence, pest issues, and logistic risks. By evaluating these factors, the report can provide a comprehensive risk analysis that can help the user make informed decisions about their farming practices.
The fourth step involves creating an evaluation report based on the previously collected data. This report includes information about the fixed and variable costs of the farm, the efficiency of coffee processing, and the details about the coffee products produced. The fixed and variable costs help in determining the overall cost structure of the farm, while the efficiency of coffee processing can offer insights into areas where the farm’s operations could be improved. The details about the coffee products could provide valuable information for marketing purposes.
The fourth step involves creating an evaluation report based on the previously collected data. This report includes information about the fixed and variable costs of the farm, the efficiency of coffee processing, and the details about the coffee products produced. The fixed and variable costs help in determining the overall cost structure of the farm, while the efficiency of coffee processing can offer insights into areas where the farm’s operations could be improved. The details about the coffee products could provide valuable information for marketing purposes.
Step 4:
Evaluation Report
- Fixed Cost
- Variable Cost
- Efficiiency of Coffee Processing
- Product Details
Step 5:
Feasibility Report
- Unit to Break Even
- Calculate Fixed cost
- Calculate Variable cost
- Price (Average Price)
The final step involves the generation of the actual feasibility report. This report provides important metrics such as the break-even unit, calculated fixed and variable costs, and the average price of the coffee. The break-even unit can help the user understand how much they need to sell to cover their costs, while the calculated costs and average price can provide a clear picture of the financial health of the farm. The feasibility report serves as a tool that can guide the user in making informed decisions about their coffee farming business.