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COST OF PRODUCTION AND MARKETOPPORTUNITY FOR VETIVER GRASS
Prepared forOahu Resource Conservation & Development
99-193 Aiea Heights DriveAiea, HI 96701
by theAgribusiness Incubator Program
University of Hawaii
June 26, 2009
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
ii
o Thisequatesto$5.52perlinearfoot.
Areductionintheperdayequipmentchargesignificantlyreducedtheperlinearfootcostwhen
comparinga200footinstallationanda1,000footinstallation.
MarketOpportunities
TodeterminethedemandofvetiveronOahuoverthenext5years,3marketswereanalyzed:
Government,LargePrivateLandowners,andFarms. Theaggregatedemandandfinancial
estimatesfromthethreemarketsisestimatedasfollows:
Year Slips
Revenue
(at$1perslip) Profit
1 442,110 $ 442,110 $ 207,792
2 1,198,932 $ 1,198,932 $ 563,498
3 1,961,111 $ 1,961,111 $ 921,722
4 2,567,178 $ 2,567,178 $ 1,206,574
5 2,717,624 $ 2,717,624 $ 1,277,284
Total 8,886,955 $ 8,886,955 $ 4,176,869
Thedemandandrevenue/profitpotentialforinstallationservicesvariesamongthe3analyzed
marketsandthetotalisestimatedasfollows:
Year Feet Revenue Profit
1 49,616 591,268 295,634
2 203,927 2,314,415 1,157,208
3 360,248 4,061,415 2,030,707
4 477,954 5,371,766 2,685,883
5 498,841 5,613,234 2,806,617
Total 1,590,587 $ 17,952,098 $8,976,049
Conclusion
Asvetiverincreasesitsreputationasan
effectivemethodtoreducesoilerosionand
stabilizesteepslopes,thedemandforthe
plantandinstallationserviceswillcontinue
toincrease. Basedontheanalysisofthe
costandmarketopportunity,vetivercanbe
aprofitablecropforgrowers.
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
iv
DefinitionofMarkets .................................................................................................................25
MarketResearch ........................................................................................................................25
MarketSizeandDemand ...........................................................................................................25
Government .......................................................................................................................... 26
LargePrivateLandowners ..................................................................................................... 27
Farms ..................................................................................................................................... 28
TotalMarketPotential ...............................................................................................................29
Competition................................................................................................................................30
PricingAnalysisSaleofVetiverPlants .........................................................................................31
PricingAnalysisInstallationofVetiverPlants..............................................................................32
Appendix.........................................................................................................................................33
CostofProductionEstimateAnalysisforGrowingVetiver .....................................................33
DirectCostsFirstYearofOperation ................................................................................... 33
DirectCostsFullProduction ............................................................................................... 35
IndirectCosts......................................................................................................................... 36
UnitSalesAnalysis ................................................................................................................. 37
CostVolumeProfitAnalysis.................................................................................................. 37
CostofServiceAnalysisforInstallingVetiver..........................................................................38
Installing200LinearFeetofVetiver...................................................................................... 38
Installing1,000LinearFeetofVetiver................................................................................... 39
Installing2,000LinearFeetofVetiver................................................................................... 40
Installing4,000LinearFeetofVetiver................................................................................... 41
SolicitationLetter .......................................................................................................................42
SolicitationLetter .......................................................................................................................42
RevisedUniversalSoilLossEquation(RUSLE)KFactor ..............................................................43
MarketCalculations....................................................................................................................44
GovernmentDemand............................................................................................................ 44
LargePrivateLandownerDemand ........................................................................................ 45
FarmsDemand ...................................................................................................................... 46
InstallationDemandAllMarkets ........................................................................................ 47
ResearchSources............................................................................................................................48
Publications ........................................................................................................................... 48
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
v
SubjectMatterExperts.......................................................................................................... 48
SubjectMatterExperts Unresponsive................................................................................. 50
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
1
Introduction
Background and Objective
Sunshinevetiverisanonfertile,noninvasiveperennial
grasswithadensewebofrootsthatbindssoilandpenetrates
verticallyto15feet. Itthrivesinthetropics,growinginavariety
ofinhospitablesoilswithlowregardforfertility,salinity,pH,and
drought. Whenplantedinstrips,vetiverformsavegetative
barrierthatslowsthevelocityofwaterandtrapssedimentand
debris. Decadesofuseinthetropicsconfirmthatvetiver,when
usedasavegetativebarrier,isaverycosteffectivemethod
toreducesoilerosionandstabilizesteepslopes.
ItsprovensuccesshasledtheUSDANaturalResources
ConservationService(NRCS)toincludetheplantingofvetiveras
abestmanagementpractice(BMP)forHawaiifarms.
SmallamountsofSunshinevetiverhavebeenavailablefromtheUSDAHoolehuaPlant
MaterialsCenter(PMC)onMolokai,fortestingandgrowerincrease,andtheHawaiiAgriculture
ResearchCenter(HARC)KuniaSubstation. ThePMC,however,hascompleteditstaskoftesting
thisspeciesandhasplanstoreduceitsproductionofvetiver. Limitedsuppliesavailablefrom
thePMCandHARCcannolongermeetthegrowingdemandandthereiscurrentlyonlyone
knownestablishedcommercialvetiversupplier.
PreliminaryestimatesfromtheKuniaandWaialuaareas,gatheredbytheNRCS,indicateaneed
forover100,000linealfeetonjustafewofthefarms. Inaddition,theNRCSbelievesthatother
farms,theHawaiiDepartmentofTransportationandDepartmentofLandandNatural
Resources,andtheUSDepartmentofDefenseagencieswouldlikelybeendusersofvetiver
grassifitwereavailableatareasonablecost.
Inlate2008,theOahuResourceConservation&DevelopmentCouncil(ORC&D)wasawardeda
granttoevaluate,promoteandadvancetheadoptionofvetivergrassasaconservation
resource,andencourageitsproductiononacommercialscale. Theprojectseeksto
establish/conductthefollowing:
Agronomicfieldguidesforpropagation.
Economicsofpropagationinformationforpotentialcommercialscaleorcontract
production.
Atleasttwofielddaysforpotentialproducerstosharepropagationguidance.
Marketopportunitiesthatprovidelinksandcontactlistsforthoseneedingplant
materialsandthoseinterestedinprovidingplantmaterials.
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
2
Thegoaloftheprojectisto:
Evaluate,promoteandadvancetheadoptionofvetivergrassasaconservationresource
toreducesedimenttransportinareasneedingcriticalareatreatment. Byestablishinga
fieldsite(orsites)thatdemonstratesprofitablepropagationtechniques,information
canbesharedwithnurseriesandgrassfarmsintheformoffieldguidesfor
establishment,propagationandreplantingasaconservationpractice,and
publications/literatureforfarmers,NRCS,andotheragencies/organizations.
Inventorycurrentandprojected15yeardemandonOahuforvetiverplantmaterial.
Thisinformationwillbesharedwithnurseriesandgrassfarmerssotheycanbetter
evaluatemarketopportunities.
Compilepropagationcostsandmarketpricesforvetiver.
o Measuregrowthperformanceofvetiver.
o Increaseadoption/transferenceofthistechnologytofarmers/publicthrough
appropriateliteratureand/orpublications.
o Identifyanddocumenteffectiveestablishmenttechniquesforthepropagation
ofvetivergrassforresale.
Thisreportfulfillsthegoalsrelatingtovetivercostofproductionandmarketopportunitiesfor
theislandofOahu.
Vetiver Grass
Vetiver(Chrysopogonzizanioides)hasbeenutilizedformedicinalpurposes,energyproduction,
bioremediation,matandbasketproduction,landscaping,hedgerows,firebreaks,insect
repellent,scentedoils,perfumes,andsoaps. ItsprimaryuseinHawaii,however,hasbeenfor
soilandwaterconservation.
Use as a Vegeta t i ve Bar r ie r f o r Eros ion Cont ro l
Vetiverisaquickgrowinggrass,suitableformostsoilconditions,andhasadeeprootsystem
thatprovidesstructuralstrengthinashortperiodoftime. Whenplantedinarow,vetivercan
beaneffective,inexpensive,lowmaintenance
methodtominimizesoilerosion. Afterinitial
planting,asinglevetiverslipquicklymultipliesand
whenproperlyplanted,connectstoadjoiningplants
tocreateathick,sturdygrasshedge. Thedeepand
widehedgeslowsandspreadswaterrunoff,forming
terracelikebenchesatthefaceofthehedges. In
addition,thethickanddeeprootsystemkeepsthe
plantrelativelyfixedduringhighvelocitywater
flows.
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
3
Al te rn a t i v es to Ve t i ve r Grass fo r So i l Eros ion
Soilerosioncanalsobemitigatedusingthefollowingtechniques:
Diversionbermsaremoundsofearthusedtodeflectwater. Theycanbeusedtomove
watertoalesserodiblearea. Soillosscanoccurfromthebermsthemselves,andberm
creationtypicallyrequiresheavymachinery.
Constructionmethodsincludeusingreinforcedconcretestructuresorditches. Fixed
structurescanbeexpensivetoinstall,brittle,costlytorepairandmaintain,andare
usuallyunsustainable.
OtherVegetativeMaterialssuchasbanagrass,wildcane,piligrass,andlemongrass
canalsobeusedforvegetativebarriers. However,Sunshinevetiveristheonlyplantto
receiveavariancefromthestandardminimumwidthof36inchesto12inches.Thus,a
singleroworacloselyplanteddoublerowofvetiverwillsufficewheremultiplerowsof
otherspeciesareneeded. Aminimumamountofcroplandisdevotedtothesesingle
rowvegetativebarriers.
Advan tages o f Using Ve t i ve r f o r Eros i on Con t r o l
Themajorbenefitofvetiveroverconventionalengineeringisitslowcostandlongevity. Itis
estimatedthatthecostofinstallationis30%ofthecostoftraditionalconstructionmethods
(Troung,Van,andPinners,2008:30). Inaddition,vetiverhasthefollowingadvantages(Troung,
Van,andPinners,2008:30):
Vetiverprovidesanatural,environmentallyfriendlywaytocontrolerosionandstabilize
landandsoftenstheharshlookofconventionalrigidengineeringmeasuressuchas
concreteandrockstructures. Thisisparticularlyimportantinurbanandsemirural
areaswherelocalcommunitiesmaycriticizetheunattractiveappearanceof
infrastructuredevelopment.
Longtermmaintenancecostsarelow. Incontrasttoconventionalengineering
structures,greentechnologyimprovesasthevegetativecovermatures. Therefore,the
useofvetiverisparticularlywellsuitedtoremoteareaswheremaintenanceiscostly
anddifficult.
Vetiverisveryeffectiveinpoorandhighlyerodibleanddispersiblesoils.
Disadvan t ages o f Us ing Ve t i ve r fo r Eros ion Cont ro l Themaindisadvantageofvetiverisitsintolerancetoshading,particularlywithinthe36month
establishmentphase. However,duetosunavailabilityinHawaiiduringmostoftheyear,
appropriateplanningcanreducethisrisk. Inaddition,vetiverhasthefollowingdisadvantages
(Troung,etal,2008:31):
Vetiveriseffectiveonlywhentheplantsarewellestablished. Effectiveplanning
requiresaninitialestablishmentperiodofabout23months.
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
4
Vetiverhedgesarefullyeffectiveasavegetativebarrieronlywhenplantsformclosed
hedgerows. Afterestablishment,gapsbetweenclumpsmustbeminimizedor
eliminated.
Itisdifficulttoplantandirrigatevegetationonverysteepslopes,althoughthiswould
alsoapplytoalternatives.
Vetiverrequiresprotectionfromlivestockduringitsestablishmentphase.
Project Research Approach
Todeterminethecostofproductionassociatedwithgrowingandinstallingvetiverandthe
marketdemand,thefollowingresearchwasconducted:
1. Interviewedkeycontacts(seeAppendix,ResearchSources,SubjectMatterExperts).2. Reviewedexistingdocumentation(seeAppendix,ResearchSources,Publications).
Detailsontheresearchactivitiesundertakenareincludedintherelevantsectionsofthis
document.
Approach to Findings
Informationoutlinedinthisreportisbasedonacombinationofresearchandexperiencefrom
theaforementionedsourcesandtheauthors. Marketdemandestimatesarelimitedtothe
Oahumarketonly. Obtainingmarketdemandwascomplicatedbythefactthatmanysources
werenotabletoprovidespecificinformationforuse. Inlieu,estimateddemandnumbersbased
onstatedacreagewereutilized.
Thecostandmarketdemandofmaintainingvetiverasaservicewasalsoconsidered. Becausevetiverrequiresminimalmaintenance,therewasalowinterestlevelinthisserviceandfurther
analysiswasnotconducted.
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
5
Cost of P roduction Estimate for Growing Vetiver
Grow ing Vetiver for Commercial Production
ThegrowingmethodcurrentlyusedattheUSDANRCSHoolehuaPlantMaterialsCenter(PMC)
wasusedtodetermineappropriateproductionrequirementsandcostsassociatedwithgrowing
vetiverforcommercialproduction. Notethatadditionalexperiencewithvetivermayleadto
newinformationandimprovedproductiontechniques.
Althoughthisplanting/growingmethodwasusedforconsiderationincommercialproduction,it
shouldnotbeusedforadvicewithplacementofvetiverforsoilmitigationpurposes. Foradvice
inplantingvetiverforsoilerosionmitigation,contactthelocalNRCSoffice.
Usingcurrentgrowingmethods,theHoolehuaPMCstaffprovidedrecommendationsfor
commercialvetiverproductionandtheCostofProductionfiguresassumeadherencetothese
recommendations.
General
o Plantinthreephaseswithnewvetiverplantedevery6months. Harvestat12
monthstoallowthelandtoremainfallowforaperiodof6monthsandbe
adequatelyrotated. Retilllandpriortoreplanting.
o Basicfarmmachinery(seebelow)isneededtoprepareland,controlweeds,and
cutandharvestvetiver.
o Growersshouldplanfora10%mortalityrate. Theplantoutputnumbersnoted
intheanalysishavetakenthisintoaccount.
InitialStartup/Planting
o Useaclear,relativelylevelareawithopensunforplanting.
o Useatractorforlandpreparationandplantremoval. Itisthepreferredmethod
andisthemethodusedintheaccompanyingCostofProductionEstimate.
Manualmethodscanbeused;however,thiswillincreasethelaborhours.
o Groundpreparationincludesplowing,amendmentaddition,andtilling.
o Aspecificsoiltypeisnotessential. Soiltesting,however,shouldbeconducted
todetermineeffectiveamendments.
o Aspecificfertilizerformulaisnotconsistentlyrecommended. Atarecent
planting,thePMCusedTriple16fertilizerwheninitiallyplantedandisusedin
theCostofProductionEstimate.
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
6
o Installadripirrigationsystemforsupplementalwatering.
o Priortoplanting,soaksoilovernight.
o Plantbyhandandplaceeachslip1footapartwithintherow.
o Placerows68feetapart(dependingonthetypeofequipmentthatisneeded
toremoveandmaintainplants).
PostPlanting
o Afterinitialplanting,soakvetiverdailyforthreeweekstoestablishtheroot
system.
o Afterestablishment,irrigateonceperweekforonehourwithdriptape.
o Handweedoncepermonth.
PlantRemoval
o Useatractortocutoutarootballabout1footdeep.
o Plantscanbeharvestedasearlyas6months. Theidealharvestingperiodis
between12and18months. Theplantsshouldnotremainintheground
beyond24monthsasslipsbecometightandrootsbecomedeeplyrooted,
makingtheremovalandhandsplittingdifficulttomanage.
o Manuallysplitandcleanplantsandremovemostoftheroot.
o Plantoutput:
6months:20slipsproducedperinitialplant
12months:50slipsproducedperinitialplant
OtherNotableInformation
o CurrentlyvetivercannotbeimportedintoHawaiiwithoutfulfillinga1year
quarantineperiod.
o
Vetiver
can
be
exported
to
other
states
if
the
grower
has
a
Hawaii
Department
ofAgriculturecertification.
o Growerscanconsiderplacingvetiverinpotsinsteadoftheground. Although
thismayallowforeasierplantremoval,thePMChasnottestedthisgrowing
methodanditseffectsonplantvolume.
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
7
o Growerscanconsidergrowingvetiverhydroponically. Althoughthismayallow
foreasierplantremoval,thePMChasnottestedthisgrowingmethodandits
effectsonplantvolume.
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
8
Crop Plot P lan
IndeterminingtheCostofProductionEstimate,commercialproductiononacreoflandwas
used. Thefollowingisgeneralinformationabouttheland,numberofplants,andslip
productionfortheacre:
SquareFeetPerAcre 43,560squarefeet
SquareFeetperAcre(rounded)20,000squarefeet
Assumeareausedis100feetx200feet
PlantsperRow 100
NumberofRows(planted6feetapart) 33
NumberofPlots 3
NumberofPlantsPerPlot 1,100
SlipsProducedFromEachPlantin12Months 50(includesa10%mortality)
Thefollowingplotplanwasusedinthecalculation:
Plot#
Number
ofPlants Rows Harvest Yield
NextPlanting
Schedule
January-2010 Plot1 100 1 Jan-11 4,000 Jan-2012
July-20101
Plot1 1,000 10 Jul-11 50,000 Jan-2012
2011HarvestTotal 1,100 11 54,000
January-2011 Plot2 1,100 11 Jan-12 55,000 Jul-2012
July-2011 Plot3 1,100 11 Jun-12 55,000 Jan-2013
2012HarvestTotal 2,200 22 110,000
January-2012 Plot1 1,100 11 Jan-13 55,000 Jul-2013
July-2012 Plot2 1,100 11 Jul-13 55,000 Jan-2014
2013HarvestTotal 2,200 22 110,000
January-2013 Plot3 1,100 11 Jan-14 55,000 Jul-2014
July-2013 Plot1 1,100 11 Jul-14 55,000 Jan-2015
2014HarvestTotal 2,200 22 110,000
1Theinitialplantingincludes100freeplantsfromtheHoolehuaPMC. Sixmonthsafterthe
planting,1,000slipsareremovedfromthesidesofthestarterplantsandreplanted.
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
9
Financial Analysis
TheCostofProductionEstimaterevealedthefollowing(seeAppendixforthedetailedCostof
ProductionEstimate):
Duringthefirstyearofoperation:
o Totaldirectcostincurredduringthefirstyearofoperationis$16,985.
o Totallaborhoursincurredduringthefirstyearis1,184($15,948,or94%ofthe
totaldirectcost).
Atfullproduction:
o 2,200plantswillbeplantedannually.
o 110,000slipswillbeharvestedannually.
o Annualdirectcostswilltotal$36,214.
o Laborrepresents93%ofdirectcosts.
o Directcostperslipwilltotal$0.33.
o Totalcost(withestimatedindirectcostsadded)perslipwillequateto$0.53.
o Ifcharging$1.00perslip,expectedprofitperslipis$0.47. Annualoperating
profitwilltotal$51,426.
Assumptions
Thefollowingassumptions,basedonplantingmethodsattheHoolehuaPMC,wereusedwhen
developingtheCostofProductionEstimateforgrowingvetiver:
Initialareaisclearedforplanting.
Plantingareaisacre(100ft.x200ft.area). Thereare100plantsineachof33rows.
Plantsareplaced1footapartwithineachrow. Rowsareplaced6feetapart(centerto
center).
Groundpreparationisonlydoneintheareatargetedforplanting(exceptfortheinitial
plantingwherethe1/6acreisprepared).
TheHoolehuaPMCprovides100startedplantsfreeofcharge. NotethatHoolehuaPMC
hascompleteditstaskoftestingthisspeciesandhasplanstoreduceproductionof
vetiverinthenearfuture.
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
10
Theinitialplantingincludesthe100freeplantsfromtheHoolehuaPMC. Sixmonths
aftertheplanting,1,000slipsisremovedfromthesidesofthestarterplantsand
replanted.
Elevenrowsareplantedevery6monthsforadequaterotation. Landlaysfallowfor6
monthsaftereachharvest.
ThePacificBusinessNews(dated:2/23/09),notedaveragewageforfieldworkersin
smallfarmsas$10.36. Thisdollaramountisusedforlaborcosts.
Thirtypercentisaddedtolaborcostsforemployeebenefitsandinsurancecosts.
Soiltestisestimatedat$21forthereportplus$10forshippingordelivertoCTAHR.
Informationonsoiltestingcanbefoundatwww2.ctahr.hawaii.edu/adsc/
Groundpreparationassumesuseof2bladeplowandincludesthefollowingperacre
timeestimates:
o Plow(16hours)
o Breakingclodsofdirtwithdisk(3hours)
o Addingamendments(lime/phosphorous/nitrogen)(3hours)
o Rototill(8hours)
Dripirrigationsetupincludespullinglines,stretching,hookingfittings,andpegginglines.
Watercostisestimatedat$2.66/1000gallons(.00266pergallon).
Atractorisusedforplantremoval. (Note:handremovalisanoptionbutitwillincrease
laborhours.)
Costperslipisbasedonfullproduction.
Thenurseryhada5acreproductionandvetiveraccountedfor10%ofoverallfarm
production. IndirectCostsareallocatedatthislevel.
Disposalcostsarenotfactoredintotheestimate.
Allplantsaresoldatoneyearofage. However,costsformaintainingplantsforan
additional6monthsarefactoredintotheestimate.
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
11
Cost of Production for Installation
Installing Vetiver for Soil Erosion Mitigation
Inadditiontodeterminingthecostofproductionforgrowingvetiver,thecostandmarket
opportunityofinstallingvetiverasaservicewasexplored.
Financial Analysis
TheCostofServiceEstimaterevealedthefollowing(seeAppendixforthedetailedCostof
ServiceEstimate):
Thecosttoinstall200linearfeetofvetiveris$1,840.
o Thisequatesto$9.20perlinearfoot.
o Laborcoststotal$577(31%oftotaldirectcosts).
Thecosttoinstall1,000linearfeetofvetiveris$6,432.
o Thisequatesto$6.43perlinearfoot.
o Laborcoststotal$2,560(40%oftotaldirectcosts).
o Areductionintheperdayequipmentchargesignificantlyreducedtheperlinear
footcostwhencomparinga200footinstallationanda1,000footinstallation.
Thecosttoinstall2,000linearfeetofvetiveris$11,235.
o Thisequatesto$5.62perlinearfoot.
o Laborcoststotal$5,038(45%oftotaldirectcosts).
Thecosttoinstall4,000linearfeetofvetiveris$22,072.
o Thisequatesto$5.52perlinearfoot.
o Laborcoststotal$22,073(46%oftotaldirectcosts).
Assumptions
ThefollowingassumptionswereusedwhendevelopingtheCostofServiceEstimate:
Threeemployeesareavailabletoworkontheproject.
Initialareaisclearedforplanting.
Landgradeisnotprohibitivelysloped.
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
12
Purchaserprovidesatleast3weeksbetweenorderandinstallation. Thisallowsthe
nurserytoroottheplantspriortoinstallation.
Atroughisdugwithaplowattachedtoasmalltractor.
Equipmentisrented(vs.purchased). Deliverychargesarequotedforalocationin
Kunia.
Estimatedrentalcostis$400perdayor$1,150perweekwitha$250deliverycharge.
Plantingisdonebyhand.
Fourvetiverslipsareplantedineach6x12area(forpurposesofthisreport,thisarea
willbereferredtoasalinearfootsincetheplantswillconnecttoformonerow).
Vetiverisplantedin2rows(6"apart)withvetiver6"apartoffsetineachrow(see
followingdiagram,wherexindicatesvetiverslipplanting).
12 12
x x x x x x
6
x x x x x
Toensureestablishment,sitevisitsareconducted3timesperweekforthefirst3
weeks.
Landownerisresponsibleforirrigationinstallationandplantwatering.
Indirectcostsarenotincludedintheperlinearfootestimate.
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
13
Market Analysis Sale of Vetiver P lants
Definition of Markets
TodeterminethedemandofvetiveronOahuoverthenext5years,thefollowingmarketswere
definedforthepurposeofmarketsegmentation. Eachofthesemarketswereassumedtohave
asignificantaggregateneedtomitigatesoilerosioncausedbysurfacewaterflow,andthusbe
candidatesforvetiverpurchase/implementation.
Government:includingfederal,state,andcitygovernmentlandsthatmayusevetiver
forsoilerosioncontrolalongroads,parks,watershedreserves,andotherpublic
propertiesontheislandofOahu.
LargePrivateLandowners:suchasKamehamehaSchools,CampbellEstate,andCastle
andCookewhohavelandholdingsover10,000acresonOahu.
Farms:privatelyoperatedfarmsonOahu(doesnotincludelandintheLargePrivate
Landownermarket).
Market Research
Significanteffortwasmadeingatheringmarketdemandinformationfromawide
representation(seeAppendix,ResearchSources,SubjectMatterExperts)ineachofthedefinedMarkets. EachofthecontactedSubjectMatterExpertswasaskedtoprovideinformationona
numberofquestions(seebelowandAppendix,SolicitationLetter).Duetothelowgeneralfamiliaritywithvetiver,thequestionsweredesignedtoprovide
quantitative
information
on
the
scope
of
need
that
vetiver
might
address,
in
addition
to
other
informationusefulforsellingvetiver. Datawassolicitedfrom31organizations/individualswith
16providingfeedback. Respondents,however,wereoftennotableorwillingtoprovide
answerstosomeofthequantitativevolumequestions,inpartduetothelackofsummary/total
informationfortheirrespectiveorganizations.
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
14
Marke t i ng Su rvey Ques t i ons
Howisyourorganizationcurrentlymanagingsoilerosionandstabilizingsteepslopes
(structural:berm/concreteorvegetativemethod)?
HowmanyTotallinearfeetaremanagedbyyourorganization(orboundaryfeetortotal
sqftofproperties/numberofproperties)onOahu?
WhatpercentageofTotalareslopedlands?
WhatpercentageofTotalmayneedsoilerosioncontrolorslopestabilization?
ArethereOahuprojectsplannedinthenext5yearstomanagesoilerosionand
stabilizeslopes(obtaindetailsonsizeofprojectandmethod,ifpossible,aswellas
approximatetiming)?
ArethereanycurrentOahuinitiativestomanagesoilerosionandstabilizeslopes?
Aresoilerosion/slopestabilizationresponsibilitiesmanagedbyyourorganizationor
lessee?
Wouldyourorganizationconsiderevaluatingvetivertomanagesoilerosion/stabilizing
slopesandwhatwouldbetheprimarydecisionpoints?
Wouldyourorganizationmakevetiverpurchasedecisiondirectlyoristhisdetermined
byathirdparty(contractor)?
WouldyourorganizationinstallorcontractoutinstallationforOahuimplementations?
Whataretherequirementstoawardproject(license/insurance/etc)?
Whatisthecontactinformationforindividual/departmentthatwouldmakepurchasing
decisionsforOahuprojects?
Market Size and Demand
Vetiverhasnotyetgainedstatuswithmostmarketsasadefactooptionforwaterdiversionor
soilerosionmitigation. Assuch,directdemandestimatesarenotavailable. Inordertoprovide
aproxyfordirectdemand,thefollowingapproachwasdeveloped:
Formarketswhereonlyacreagedataisavailable:
Squarerootof43,560(oneacreinsquarefeet)=209(horizontallengthinfeetof
acreageintheshapeofasquare)
Numberofacresundermanagementx209=A(linearfeetofacreageassumingonerow
peracre).
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
15
AxB(modifierpermarketsubsegmenttoreflectrelativevetiverapplicabilitydetailed
persubsegment)=C(estimatedcandidateforvetiverinlinearfeet). Notethatdefault
valueofBhasbeenvaluedat25%basedonKFactorfindingsbelow.
Cx4(prescribednumberofvetiverplantsperlinealfoot)=Numberofvetiverplantsfor
thatmarketsubsegment.
Theauthorsattempttobeconservativeinthisapproachinthatitassumesonlyasinglelineof
vetiverplantedhorizontallyacrossanacreofsquareland(avarietyofparcelsizewouldtendto
havegreaterhorizontallengthonaveragethanthesquarerootofanacre). Also,just25%of
theacreageisdeemedthebasemodifierforvetivercandidacyasdeterminedbytheKFactor
analysis. Furthermore,marketunfamiliarity,resistancetochange,nonopenareas,andother
factorsaretakenintoaccountandthemodifieristhustypicallyreducedfromthebase. Finally,
thetotalacreageusedfortheestimatesisunderstatedduetolimitationsoftheresearch
(incompleteaccountingoftotalacreageforanygivenmarket).
Inordertoserveasaformofvalidation,theauthorsusedtheHawaiiNaturalResources
InformationSystem(HNRIS)softwarefromtheCollegeofTropicalAgricultureandHuman
Resources,UniversityofHawaii,toanalyzethenumberofacresonOahuwithsoilwith
ModerateorgreaterKfactor(seeAppendix,KFactor)asagrossindicatorofcandidacyforvetiver.
Bytheaboveanalysis,99,328acresonOahuhaveaKFactorof0.25orgreater(thethreshold
forModerateerodibility)asshownintheshadedareasofthemapbelow. Thisrepresents
roughly25%ofthetotalOahuacreageof384,043acres.
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
16
Effortwasmadetoidentifyacreageexceedingcertaingrades/slopesasthiswouldbeanother
formofgrossvalidation(NRCSestimates3%12%asaworkingfigure),buttheHNRISandNRCS
GISsystemscouldnotprovidethisinformation. Asapointofreference,astudybyKinoshita
andTurnfortheDepartmentofBusiness,EconomicDevelopmentandTourism,providesavisual
representationofcertaingrades/slopesforagriculturallandonOahu(below).
Thefollowingtablecontainsacreagepersloperangeinformationbutappliesonlytoacreage
withsoilsdeemedsuitabletosugarcanegrowth.
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
17
Gove rnmen t
Thismarket,consistingofFederal/military,State,andCityandCountyofHonoluluagenciesand
organizations,representsthelargestopportunityforvetiverplantsales. Somereasonsstated
bymarketintervieweesthatsubstantiatethestrengthofthismarketinclude:
Customersinthismarketmanagerelativelylargelandareas.
Customersinthismarketareespeciallysensitivetoenvironmentalconcernsbypolicy
and/orpublicinterestandarethusmorelikelytoaddresserosionissues.
Theuseofnaturalmethodsforsurfacewaterdiversionanderosioncontrolispreferable
forpublicperceptionconsiderations.
Currentlytherearetwoidentifiedvetiverusingprojectsintheplanningstages. TheState
DepartmentofTransportationServiceshasaplanforusingvetiveronaroadsideslopeon
KahekiliHighwayandisestimatingtheuseof13,000vetiverslips(ChrisDacus). TheCity
DepartmentofParksandRecreation(JamesWoll)hasrecentlyapprovedavetiverpilotproject
onunspecifiedparkland. Inaddition,interestinvetiverwasexpressedbytheUSArmyCorpof
Engineers(RussellLeong).
Themarketpotentialforvetiverslipsinthegovernmentmarketisestimatedtobe(see
Appendix,MarketCalculations,GovernmentDemand):
Year Slips
Revenue
(at$1perslip) Profit
1 205,672 $ 205,672 $ 96,666
2 720,623 $ 720,623 $ 338,693
3
1,206,056
$
1,206,056
$
566,846
4 1,753,013 $ 1,753,013 $ 823,916
5 1,844,351 $ 1,844,351 $ 866,845
Total 5,729,715 $ 5,729,715 $ 2,692,966
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
18
0
500000
1000000
1500000
2000000
Year1 Year2 Year3 Year4 Year5
Vetiverslips
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
19
Large P r i va te Landow ne rs
ThelargeprivatelandownersonOahuareidentifiedasCampbellEstate,KamehamehaSchools,
Castle&CookeHawaii,andJamesCampbellCompanyHawaii. Thesehavelandholdingson
Oahuofover10,000acres. Althoughthesefourlandownersaccountforover131,000acreson
Oahuathirdofthetotalacreagethedemandforvetiverisestimatedtobesignificantly
lowerthanthegovernmentmarketduetoarelativelylowermotivationtoutilizevetiver:
Emphasisoncomplianceversusproactiveerosioncontrol.
Lesssensitive/subjecttoenvironmentalconcernsbypolicyand/orpublicinterestthan
governmentmarket.
Highrateoftenantresponsibilityforerosioncontrol.
Themarketpotentialforvetiverslipsinthelargeprivatelandownermarketisestimatedtobe
(seeAppendix,MarketCalculations,LargePrivateLandownerDemand):
Year Slips
Revenue
(at1$perslip) Profit
1 0 $ $
2 182,762 $ 182,762 $ 85,898
3 400,399 $ 400,399 $ 188,187
4 400,399 $ 400,399 $ 188,187
5 400,399 $ 400,399 $ 188,187
Total 1,383,959 $ 1,383,959 $ 650,459
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
Year1 Year2 Year3 Year4 Year5
Vetiverslips
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
20
F arms
TheFarmsmarketincludesprivatelyoperatedfarmsonOahu(doesnotincludethatwhichfall
undertheLargePrivateLandownermarket). Forthismarket,pastdatafromNRCSonvetiver
recommendationsandimplementationsprovidedastrongbasisforestimatingthemodifierC
usedinthedemandcalculations.
Thismarketrepresentsanactivemarketforvetiversalesdueforthefollowingreasons:
Farmershaveincentivetominimizesoillossduetotheiroperationalrelianceonsoil.
FarmershaveincentivestoobtainandimplementconservationplansfromNRCS,
includingpermitobviationandcostshareprograms.
TheNRCSConservationReserveProgram(CRP)andtheEnvironmentalQuality
IncentivesProgram(EQIP)providetechnicalandfinancialassistancetoeligiblefarmers
andrancherstoaddresssoil,water,andrelatednaturalresourceconcernsontheir
landsinanenvironmentallybeneficialandcosteffectivemanner.ThePrograms
encouragesfarmerstoconverthighlyerodiblecroplandorotherenvironmentally
sensitiveacreagetovegetativecover,suchastameornativegrasses,wildlifeplantings,
trees,filterstrips,orriparianbuffers.VetiverasavegetativebarrierisaNRCS
recommendedbestmanagementpracticethataddressessomeoftheprogram
objectives. Farmersreceiveanannualrentalpaymentforthetermofthemultiyear
contract.Costsharingisprovidedtoestablishthepractices.
VetiveruseisarecommendedBestManagementPracticebyNRCS,whoprovide
conservationplanningservicestofarmers.
ThismarketincludessomelargefarmerssuchasDelMonteandhybridseedcompanies,someof
whicharealreadyimplementingvetiverforerosioncontrol.
Themarketpotentialforvetiverslipsinthefarmsmarketisestimatedtobe(seeAppendix,MarketCalculations,FarmsDemand):
Year Slips
Revenue
(at$1perslip) Profit
1 236,438 $ 236,438 $ 111,126
2 295,547 $ 295,547 $ 138,907
3 354,656 $ 354,656 $ 166,688
4 413,766
$
413,766
$
194,470
5 472,875 $ 472,875 $ 222,251
Total 1,773,282 $ 1,773,282 $ 833,442
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
21
0
100000
200000
300000
400000
500000
Year1 Year2 Year3 Year4 Year5
Vetiverslips
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
22
Total Market Potential
Theaggregatedemandfromthethreemarketsisshownbelow. Thegeneralyearoveryear
increasesandsharpriseintheestimatebetweenyearsoneandtworeflectassumptionsthat:
ThroughthedisseminationofinformationandfielddemonstrationsbyORC&Dand
NRCSaspartofthisproject,anincreasedawarenessonthepartofpotentialvetiver
suppliersandcustomerswilloccur. Theresultingincreaseinsupplyavailabilitywill
enableanaccelerationofvetiverimplementation/purchases.
Aspilotprojectsandearlyimplementationsdemonstratesuccess,confidenceinvetiver
andthusadoptionwillsteadilyincrease.
Year Slips
Revenue
(at$1perslip) Profit AcresofVetiver
1 442,110 $ 442,110 $ 207,792 2.01
2 1,198,932 $ 1,198,932 $ 563,498 5.45
3 1,961,111 $ 1,961,111 $ 921,722 8.91
4 2,567,178 $ 2,567,178 $ 1,206,574 11.67
5 2,717,624 $ 2,717,624 $ 1,277,284 12.35
Total 8,886,955 $ 8,886,955 $ 4,176,869
Asapointofreference,notethataKfactorof0.25+yields83,038,208vetiverplantsusingthe
basedemandformula. Thefiveyearaggregateislessthan10%ofthatnumber.
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
Year1 Year2 Year3 Year4 Year5
Revenue
TheupwardtrendmaybefurthersupportedbyaSenateConcurrentResolution(SCR No.176)
beingreviewedbyvariousSenatecommittees(asof4/16/09)requestingthattheDepartment
ofLandandNaturalResourcesandtheDepartmentofTransportationresearchtheuseof
vegetativeerosionbarriers,particularlyvetivergrass,tominimizesoilerosionandpreventthe
resultingrunofffromdamagingroads,streams,coastalwaters,andreefsandtostabilizestream
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
23
banks,hillsides,andotherthreatenedsites. TheSCRrequeststhattheDepartmentofLandand
NaturalResourcessubmitafinalreporttotheLegislaturepriortothe2010RegularSession.
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
24
Competition
Currentlythereisoneknownlargecommercialgrowerandtwoadditionalsourcesofvetiver
plantsinHawaiiaslistedinthetablebelow. Thegeneralassessmentofthesupply/demand
balanceisthatthereisinsufficientsupplyofvetivertomeettheneedsofprojected
conservationplanrecommendations.
Potentialcompetitionforsupplyingvetiverwouldcomemostnaturallyfromexistingnurseries
withingroundgrowingmethods.
Source Location VetiverPricing Capacity Notes
VetiverSystemsof
Hawaii Oahu
Proprietary Proprietary Onlyknowncommercialgrowerin
Hawaii.
HoolehuaPlant
MaterialCenter
Molokai
None Limited Distributionquantitylimitedto
100slipspergrower.
HawaiiAgriculture
ResearchCenter
Oahu
.40.65/slip Limited Researchcenterwithlimited
supply. Notestablishedfor
commercialdistributionbut
currentlysharinginconsideration
ofthelownumberofalternate
sources.
Plantremovalisnotincludedin
thecost. Purchasermustremove
plants
on
their
own.
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
25
Market Analysis Installation of Vetiver Plants
Definition of Markets
SeeMarketAnalysisSaleofVetiverPlants,DefinitionofMarketsabove.Market Research
InadditiontofeedbackfromtheresearchdescribedinMarketAnalysisSaleofVetiverPlants,MarketResearchabove,thefollowingactivitiesprovidedusefulinformationfortheanalysisofthevetiverinstallationmarket:
Publiclyavailablerequestsforproposalsandbidsonsoilerosionmitigationprojects
demonstratedthatthegovernmentmarketgenerallyseekstohire
construction/implementationservices,whichisanalogoustoinstallation. This
informationalsoservedasacomparisonforpricinganalysis.
AnalysisofaStateDepartmentofTransportation,HighwaysDivisionplanforroadside
erosionmitigationinvolvingvetiversupportedtheabovefinding,specificallyforvetiver
installation. Inaddition,thescopeofspecifiedvetiverinstallationinformeddemand
estimates.
InterviewswithSubjectMatterExpertswithknowledgeofvetiverinstallationsprovided
insightofdemandestimatesfortheLargePrivateLandownerandFarmsmarkets.
Market Size and Demand
Thelinearfeetdemandestimatesforthedefinedmarkets(seeAppendix,MarketCalculations)formedthebasisforestimatedvetiverinstallationdemand. Appliedtothisfigureisaper
marketmodifiertoadjustforvariabilityamongstmarketsfordemandofcontractedinstallation
servicesversuscustomerinstallation(seeAppendix,MarketCalculations,InstallationDemand).Formarketpotentialcalculations,thevariousmarketsarecharacterizedbydifferent
assumptionsofaveragevetiverinstallationprojectsizeandthusdifferingcostofservicefigures
areutilized(seeAppendix,MarketCalculations,InstallationDemand). Notealsothatthesecostsassumepurchasingvetiveratthecosttoproduce,i.e.,growingtheplantmaterial.
Thepricingoftheserviceforallmarkets,however,issetatthemediananalyzedmarkupof
100%duetotherelativecostsavingsofvetiverversustraditionalmethodsoferosionmitigation,
andincludesthevetiverplantmaterialitself.
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
26
Gove rnmen t
Forthismarket,projectswilltendtobelargeandthereforecostsfromthe4,000linearfoot
analysis(seeAppendix,CostofService)wereused.EstimatedMarketPotential,Government
Year Feet
Revenue
(at100%markup) Profit
1 43,705 $ 482,507 $ 241,254
2 153,132 $ 1,690,580 $ 845,290
3 256,287 $ 2,829,408 $1,414,704
4 372,515 $ 4,112,569 $2,056,285
5 391,924 $ 4,326,846 $2,163,423
Total 1,217,564 $ 13,441,911 $6,720,956
Costperlinearfoot(4,000ftCoSanalysis) $ 5.52
Sellingpriceperlinearfoot(100%markup) $ 11.04
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
4500000
Year1 Year2 Year3 Year4 Year5
Revenue
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
27
Large P r i va te Landow ne rs
Forthismarket,projectswilltendtobelargebutmoreconservativeandthereforecostsfrom
the2,000linearfootanalysis(seeAppendix,CostofService)wereused.EstimatedMarketPotential,PrivateLargeLandowner
Year Feet
Revenue
(at100%markup) Profit
1 $ $
2 43,406 $ 487,884 $ 243,942
3 95,095 $ 1,068,865 $ 534,432
4 95,095 $ 1,068,865 $ 534,432
5 95,095 $ 1,068,865 $ 534,432
Total 328,691 $ 3,694,479 $1,847,238
Costperlinearfoot(2,000ftCoSanalysis) $ 5.62
Sellingpriceperlinearfoot(100%markup) $ 11.24
0
200000
400000
600000
800000
1000000
1200000
Year1 Year2 Year3 Year4 Year5
Revenue
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28
F arms
Forthismarket,projectswilltendtobesmallerandthereforecostsfromthe200linearfoot
analysis(seeAppendix,CostofService)wereused.EstimatedMarketPotential,Farms
Year Feet
Revenue
(at100%markup) Profit
1 5,911 $ 108,761 $ 54,381
2 7,389 $ 135,952 $ 67,976
3 8,866 $ 163,142 $ 81,571
4 10,344 $ 190,332 $ 95,166
5 11,822 $ 217,523 $ 108,761
Total 44,332 $ 815,710 $ 407,855
Costperlinearfoot(200ftCoSanalysis) $ 9.20
Sellingpriceperlinearfoot(100%markup) $ 18.40
0
50000
100000
150000
200000
250000
Year1 Year2 Year3 Year4 Year5
Revenue
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29
Total Market Potential
Theaggregatemarketpotentialfromthethreemarketsisshownbelow. SeealsoMarketAnalysisSaleofVetiverPlants,TotalMarketPotential).
TotalEstimatedMarketPotential
Year
Feet
Revenue
Profit
1 49,616 591,268 295,634
2 203,927 2,314,415 1,157,208
3 360,248 4,061,415 2,030,707
4 477,954 5,371,766 2,685,883
5 498,841 5,613,234 2,806,617
Total 1,590,587 $ 17,952,098 $8,976,049
0
1000000
2000000
3000000
4000000
5000000
6000000
Year1 Year2 Year3 Year4 Year5
Revenue
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
30
Competition
CurrentlythereisoneknowncommercialinstallerofvetiverinHawaii,locatedonOahu.
PotentialcompetitionforinstallingvetiverwouldincludelandscapersonOahu,particularly
thosewiththeabilitytogrowtheplantmaterial. Otherrequirementsofaninstallerwould
include:
Needforexpertiseontheimplementationofvetivertobeeffectivefortheintended
purpose(erosionmitigation,surfacewaterdiversion,soilstabilization,etc.)
Potentiallyalandscapecontractororotherlicense,bonding,and/orparticipationonthe
GSAscheduletobidongovernmentjobs.
Otherskillsrelatedtoinstallation,includingirrigationinstallation.
Asourceforvetiverplantmaterial.
Giventhatconventional(nonvetiver)alternativesareashighas$91persquarefoot,competitionwithinstallersofthesealternativesisnotexpectedtocomefrompricecompetition
butrathercustomeracceptanceofvetiverasasolution.
Source Location Installation
Pricing
Capacity Notes
VetiverSystemsof
Hawaii Oahu
Proprietary Proprietary Onlyknowncommercialinstallerin
Hawaii.
InterviewswithSubjectMatterExpertsindicatedlowinterestinpostestablishmentplant
maintenanceservices(e.g.,mowing/hedgingvetiver). Therefore,themarketwasnotanalyzed.
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31
Pricing Analysis Sale of Vetiver P lantsAbusinessshouldconsideritscompetitors,suppliers,theavailabilityofsubstituteproducts,and
theircustomerswhendevelopingapricingstrategy. Inthecaseofsellingvetiverslips:
Competitors: asindicatedintheCompetitionsectionabove,thereisonlyone
knowncommercialgrowerinHawaii. Therefore,thecurrentlevelofcompetitionis
low.
Suppliers:thevastmajorityofdirectcostsassociatedwiththesaleofvetiverplants
relatetolabor. Therelianceonsuppliershasrelativelynoeffectonthegrowingof
theplant.
AvailabilityofSubstituteProducts:asindicatedintheAlternativestoVetiverGrass
forSoilErosionsectionabove,alternativesincludediversionberms,construction
methods,andothervegetativemethods. Bermandconstructionmethodsare
readilyavailableatahighercost. Thefollowingexamplesprovideinformationon
recentHawaiiprojects:
In2004,theStatereducedthedegreeofslopeonamountainatCastleJunction
onKalanianaoleHighwayfrom70degreesto30degrees. Theprojectcostthe
state$7.8million. Thisprojectincludedroadmodifications.
In2008,theStateDepartmentofTransportationpublishedanoticetobidders
forslopestabilizationnearthePaliHighway. Theprojectincludedproviding
slopestabilizationusingAnchorMatSystemorequivalent,andproviding
erosioncontrolmatandgroundcover. Theareaisestimatedatapproximately
150feetby50feet. Theestimatedconstructioncostwasbetween$500,000
and$1,000,000. Bidsamountsubmittedrangedbetween$622,000and
$745,000. Thisrepresentsanaverageof$91persquarefoot.
SinceothervegetativemethodsarenotcurrentlyrecommendedbytheNRCSinthe
VegetativeBarrierConservationPractice,acompetitivepriceanalysisforvegetative
alternativeswasnotconducted.
Customers:theclientbaserangesfromsmallfarmerstogovernmentagencies. In
thecurrenteconomy,allclientsareconcernedwithcost. Governmentclients,
especiallyFederal,showparticularinterestinusingavegetativebarrierinsteadof
traditionalconstructionmaterials.
Consideringthatthereisminimalcompetitionandlimitedinformationregardingcompetitor
pricing,abusinessmightconsiderusingacostplusmarkupstrategyfordeterminingpricing. The
businesscandeterminethedesiredprofitlevelandaddittototalcoststodetermineselling
price.
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32
Pricing Analysis Installation of Vetiver PlantsSimilartothepricinganalysisforsellingvetiver,abusinessshouldconsiderthefollowingfactors
whendetermininginstallationprices,whichincludethevetiverplantmaterialitself. Inthecase
ofinstallingvetiverslips:
Competitors: therearemanyexperienced,licensedcontractlandscaperswhocould
installvetiver. Asof4/1/09,therewere70licensedlandscapearchitectsonOahu.
ThemostrecentLandscapeIndustryCouncilofHawaiimembershiplistreflects105
membersonOahu. Superpages.comlists127landscapecontractorsonOahu.
Suppliers: otherthanlabor,thecostofthevetiverslipsaccountformostofthecost
associatedwithinstallation. Iftheinstallerisalsoagrower(supplier)ofvetiver,it
willhaveanadvantageovernongrower/installerssincetheycanfactorinaprofit
fromtheplantsaleinadditiontoaprofitfromtheinstallationservice.
Availability
of
Substitute
Products:
Farmers
and
landowners/government
departmentswithadequateexpertiseandlabormayopttoselfinstallthevetiver.
Inaddition,otherlandscapersmayhaveanautomatedmethodwhichcouldreduce
thelaborcostsassociatedwiththeinstallation.
Customers:theclientbaserangesfromsmallfarmerstogovernmentagencies. In
thecurrenteconomy,allclientsareconcernedwithcost.
Consideringthatthereisafairamountofcompetitioninadditiontotheopportunityforthe
customertoinstallthevetiverontheirown,abusinessmightconsiderusingcompetitor
pricingasabenchmarkfortheirownprices. Theymayconsiderpricingslightlybelow,above
orthesameastheircompetitors. AqueryoflandscapersonOahuconcludedthatjobsare
pricedbasedonacostplusstrategy,rangingbetween50and100%. Consideringthatthere
isnomarkupreflectedforthecostoftheplantsintheCostofServiceestimates,itis
recommendedthatthebusinessconsidermarkupsonhigherendoftherange.
Toensurethatpricesremaincompetitive,thebusinessshouldcontinuallyobserve
competitorpricingandstrategyandadjustpricesasnecessary.
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33
Appendix
Cost of Production Estimate Analysis for Growing Vetiver
Di rec t Costs Fi rs t Year o f Opera t ion
Notes:1,100slipsareplantedduringtheyear,yielding54,000atharvest.
(1) Only1/6ofanacreispreppedateachcycle. Soilsamplewillbecompletedforeach1/6
acrepriortoplanting.CostofsoiltestfromCTAHRis$21withanadditional$10for
shipping/deliverofsoil.
(2) BasedonHARCestimate:161616fertilizer:$168/acre;lime:$60/acre;gypsum:
$90/acre.
(3) HoolehuaPMCestimated2hourstoplant100slipsbyhand.
(4) HoolehuaPMCestimated810hours/1100plantspermonth. Frequency:weeding1x
permonthpercrop. Additionalcyclesincludedincasenurseryneedstomaintain3rd
plotfor6months.
(5) HoolehuaPMCestimated4gallons/plant/watering. Costestimate:$2.66/1000gallons
(BOWSpublishedrate). Frequency:2timesperweekforthe1stmonththenweekly.
Additionalcyclesincludedincasenurseryneedstomaintain3rdplotfor6months.
(6) HoolehuaPMCestimated5mintoremoveeachball;1100balls=92hours.
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34
(7) HoolehuaPMCestimated75/hour;54,000slips=720hours.
(8) Estimated1hourper500slips.
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
35
Di rec t Costs Fu l l P rodu ct ion
Notes:2,200slipsareplantedduringtheyear,yielding110,000atharvest.
(1) Only1/6ofanacreispreppedateachcycle. Soilsamplewillbecompletedforeach1/6
acrepriortoplanting. CostofsoiltestfromCTAHRis$21withanadditional$10for
shipping/deliverofsoil.
(2) BasedonHARCestimate:161616fertilizer:$168/acre;lime:$60/acre;gypsum:
$90/acre.
(3) HoolehuaPMCestimated2hourstoplant100slipsbyhand.
(4) HoolehuaPMCestimated810hours/1100plantspermonth.
Frequency:weeding1xpermonthpercrop. Additionalcyclesincludedincasenursery
needstomaintain3rdplotfor6months.
(5) HoolehuaPMCestimated4gallons/plant/watering.
Costestimate:$2.66/1000gallons(BOWSpublishedrate).
Frequency:2timesperweekforthe1stmonththenweekly. Additionalcyclesincluded
incasenurseryneedstomaintain3rdplotfor6months.
(6) HoolehuaPMCestimated5mintoremoveeachball;1100balls=92hours.
(7) HoolehuaPMCestimated75/hour;54,000slips=720hours.
(8) Estimated1hourper500slips.
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
36
I nd i r ec t Cos ts
Notes:(1) Estimatedat$750permonth.
(2) Employeeinsurancesareincludedinlaborcosts.
(3) Estimated$75,000+30%employeerelatedcosts.
Laborwagesareincludedindirectcosts.
(4) Estimated$3,600peracre/peryear. (CostofMililaniAgParkis$200$400peracre/per
monthfor5acresorless).
(5) Estimated4%GETand5%state/fedtaxfor$500,000inrevenues.
(6) Estimatedat$2,000permonth.
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
37
Uni t Sa les Ana lys is
Notes:Unitcontributionmarginreflectstheamountavailabletopayforindirectcosts.
Cos t -Vo lum e-Pro f i t Ana l ys is
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
38
Cost of Service Analysis for Installing Vetiver
I ns ta l l i ng 200 L inea r Fee t o f Ve t i ve r
Plants Per Linear Foot 4
Total Linear Feet for Estimate 200
Total Number of Plants Needed 800
Estimated Days to Install 1
Notes:(1) Costtoremoveplantfromnurseryisbuiltintogrowingcost.
(2) Labortochangebucketsdaily(200slipsperbucket). Fiveminutesperbucketfor21
days.
(3) Driveandunloadtimeestimatedat30minutesineachdirection/perperson. Location
estimated15milesaway. Estimatedpermilerateat55cents.
(4) Timeestimatedat50linearfeetperhour;equipmentcostis$400perday;$250delivery
chargetoKunia.
(5) Timeestimatedat50slipsperhour/perperson. Materialcostreflectstotalgrowing
costofeachvetiverslip.
(6) Timeestimatedat20minutesper100feet. Visitingsite3timesperweekfor3weeks.
(7) Estimated5%plantreplacementrate.
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39
I ns ta l l i ng 1 ,000 L i nea r Fee t o f Ve t i ve r
Plants Per Linear Foot 4
Total Linear Feet for Estimate 1,000
Total Number of Plants Needed 4,000
Estimated Days to Install 5
Notes:(1) Costtoremoveplantfromnurseryisbuiltintogrowingcost.
(2) Labortochangebucketsdaily(200slipsperbucket). Fiveminutesperbucketfor21
days.
(3) Driveandunloadtimeestimatedat30minutesineachdirection/perperson. Location
estimated15milesaway. Estimatedpermilerateat55cents.
(4) Timeestimatedat50linearfeetperhour;equipmentcostis$1150perweek;$250
deliverychargetoKunia.
(5) Timeestimatedat50slipsperhour/perperson. Materialcostreflectstotalgrowing
costofeachvetiverslip.
(6) Timeestimatedat20minutesper100feet. Visitingsite3timesperweekfor3weeks.
(7) Estimated5%plantreplacementrate.
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I ns ta l l i ng 2 ,000 L i nea r Fee t o f Ve t i ve r
Plants Per Linear Foot 4
Total Linear Feet for Estimate 2,000
Total Number of Plants Needed 8,000
Estimated Days to Install 10
Notes:(1) Costtoremoveplantfromnurseryisbuiltintogrowingcost.
(2) Labortochangebucketsdaily(200slipsperbucket). Fiveminutesperbucketfor21
days.
(3) Driveandunloadtimeestimatedat30minutesineachdirection/perperson. Location
estimated15milesaway. Estimatedpermilerateat55cents.
(4) Timeestimatedat50linearfeetperhour;equipmentcostis$1150perweek;$250
deliverychargetoKunia.
(5) Timeestimatedat50slipsperhour/perperson. Materialcostreflectstotalgrowing
costofeachvetiverslip.
(6) Timeestimatedat20minutesper100feet. Visitingsite3timesperweekfor3weeks.
(7) Estimated5%plantreplacementrate.
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41
I ns ta l l i ng 4 ,000 L i nea r Fee t o f Ve t i ve r
Plants Per Linear Foot 4
Total Linear Feet for Estimate 4,000
Total Number of Plants Needed 16,000
Estimated Days to Install 20
Notes:(1) Costtoremoveplantfromnurseryisbuiltintogrowingcost.
(2) Labortochangebucketsdaily(200slipsperbucket). Fiveminutesperbucketfor21
days.
(3) Driveandunloadtimeestimatedat30minutesineachdirection/perperson. Location
estimated15milesaway. Estimatedpermilerateat55cents.
(4) Timeestimatedat50linearfeetperhour;equipmentcostis$1150perweek;$250
deliverychargetoKunia.
(5) Timeestimatedat50slipsperhour/perperson. Materialcostreflectstotalgrowing
costofeachvetiverslip.
(6) Timeestimatedat20minutesper100feet. Visitingsite3timesperweekfor3weeks.
(7) Estimated5%plantreplacementrate.
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42
Solicitation Letter
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43
Revised Universal Soil Loss Equation (RUSLE) K Factor
RUSLEisatooltomeasurerillandinterrill(sometimescalledsheetandrill)erosiononthe
landscape.ItisamultiplicativeformulaofRxKxLSxCxPinwhichRisaRainfallfactor,Kisa
soilfactor,LSisaslopelengthandgradientfactor,Cisamanagementfactor,andPisapractice
factor.
TheKfactorisasoilerodibilityissoilerodibilityfactorwhichrepresentsbothsusceptibilityof
soiltoerosionandtherateofrunoff,asmeasuredunderthestandardunitplotcondition. Soils
highinclayhavelowKvalues,about0.05to0.15,becausetheyareresistanttodetachment.
Coarsetexturedsoils,suchassandysoils,havelowKvalues,about0.05to0.2,becauseoflow
runoffeventhoughthesesoilsareeasilydetached. Mediumtexturedsoils,suchasthesiltloam
soils,havemoderateKvalues,about0.25to0.4,becausetheyaremoderatelysusceptibleto
detachmentandtheyproducemoderaterunoff. Soilshavinghighsiltcontentaremosterodible
ofallsoils.Theyareeasilydetached;tendtocrustandproducehighratesofrunoff. ValuesofK
forthesesoilstendtobegreaterthan0.4.
Organicmatterreduceserodibilitybecauseitreducesthesusceptibilityofthesoilto
detachment,anditincreasesinfiltration,whichreducesrunoffandthuserosion. Additionor
accumulationofincreasedorganicmatterthroughmanagementsuchasincorporationof
manureoradditionsofmulchisrepresentedintheCfactorratherthantheKFactor.
ExtrapolationoftheKfactornomographbeyondanorganicmatterof4%isnotrecommended
orallowedinRUSLE. InRUSLE,factorKconsidersthewholesoilandfactorKfconsidersonlythe
fineearthfraction,thematerialof
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44
Market Calculations
Go v e r n m e n t D em a n d
VetiverDemandonOahu,Government A B C B C B C
Key Customerswithidentifiedacreage AcresFormula
LinearfeetYr1
Mod
Yr1
candidate
plantsYr2
Mod
Yr2
candidate
plantsYr3
Mod
Yr3
candidate
plants
1 StateDepartmentofHealth 85.71 17913 2% 1433 4.0% 2866 5.0% 3583
2 USArmyITAM 53000 11077000 0% 0 0.5% 221540 1.0% 443080
3 USAirForce 28000 5852000 0% 0 0.5% 117040 1.0% 234080
4 USNavy 15000 3135000 0% 0 0.5% 62700 0.5% 62700
5 USMarineCorp 2951 616759 0.5% 12335 1.0% 24670 1.5% 37006
6 HawaiiDepartmentofAgriculture 9450 1975050 2.0% 158004 3.0% 237006 4.0% 316008
7 CityParksandRecreation 5000 1045000 0.5% 20900 1.0% 41800 2.0% 83600
8 StateDepartmentofTransportationServices 13000 100.0% 13000 200.0% 26000
205,672 720,623 1,206,056
Key Notes
1 PubliclandsinthewindwardOahuwatershedareasalreadyidentifiedascandidateforrestoration. Modincreasesreflectincreasingacceptanceofve2 75%>5%grade,Rehab5000acres/yr,vetiveroflimiteduseforrangeastootallandseedingmethodnotideal. Modreflectslowbutincreasingaccep
3 NotcurrentlymanaginglandslikeITAM,butinterested.Modreflectsslowstart,increasingacceptance.
4 Mostlyshipyardthuslowlikelihood.Modreflectslowandslowacceptance.
5 ManagedlikeITAMbutrelativelysmallacreage. Wetterandmoresloped.
6 2700acresnow,butexpect34xthattwoyearssoused3.5xcurrent.Tenantsarerequiredtoimplementconservationplanin1year.Modreflectsgro
7 Plannedvetiverpilotproject. Modreflectsincreasingacceptance.
8 Nofeedbackonacrevolumesbuthavedatafromplannedvetiverproject.Modreflectssuccessfulvetiverpilot.
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46
Farm s Dem and
VetiverDemandonOahu,Farms
Key Customerswithidentifiedacreage Acres
Formula
Linearfeet
Yr1
Mod
Yr1
candidate
plants
Yr2
Mod
Yr2candidate
plants
Yr3
Mod
Yr3candidate
plants
1 AllOahuFarms,USDA2002Census 70,705 14,777,345 0.4% 236,438 0.5% 295,547 0.6% 354,656
236,438 295,547 354,656
Key Notes
1 Modbasedonhistoricalrecommendedlinearfeet,expectedtogrowwithincreasedawarenessandconservationplannercapacity.
Notethattheacreageusedinthedemandcalculationonlyincludesthatwhichwasdeterminedtobefarmland,asopposedtosimplyagricultural
agriculturalzonedacreagewould,ineffect,doublecountasignificantnumberofacresalreadyconsideredfortheLargePrivateLandownermarke
Itisgenerallyassumedthatthismarketwillutilizevetiverbasedonconservationplanfulfillmentandincludethoseplansgenerallyeligibleforcost
vetiverneed:
o SmallCooperator:200400feet
o LargeCooperator:2,000feet
HistoricalvetiverrecommendationsandimplementationfromNRCSOahu
Notethatimplementationtypicallylagsrecommendationandthustheratioofimplementationtorecommendat
calculated. Notealsothelimitednumberofyearsthatvetiverhasbeenrecommendedandthehighrateofgrow
ConservationPlanProjectYear
Linearfeetrecommendedby
conservationplans(Oahu)
ConservationplanLinea
implemented(Oah
2007 1,500 500
2008 5,150 1,150
2009 22,000 TBD
Total 28,650 1,650
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47
I n s t a l la t i o n D em a n d A l l M ar k e t s
OahuInstallationDemandEstimates
Key Market Mod Year1feet Year2feet Year3feet Year4feet Year
1 Government 85% 43,705 153,132 256,287 372,515 391,
2 LargePrivateLandowner 95% 43,406 95,095 95,095 95,
3 Farms 10% 5,911 7,389 8,866 10,344 11,
Totals 49,616 203,927 360,248 477,954 498,8
Key Notes
1 Modimpactedbyproclivitytocontractservicesbutslightlyamelioratedbyexistenceofsomecapacitytodothisthemselves.
2 Modimpactedbyproclivitytocontractservicesandlowcapacitytodothisthemselves.
3 Modimpactedbycapacityforimplementingvegetativematerialandgenerallylowfinancialresources.
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48
Research Sources
Pub l i ca t ions
AllphotoimagesobtainedwithpermissionfromtheVetiverNetworkInternational
(www.vetiver.org).
HawaiiBusinessMagazine,November2007. Top20WealthiestLandowners.HawaiiNaturalResourceInformationSystemv2.0,CollegeofTropicalAgricultureandHuman
Resources,UniversityofHawaii.
Joy,RobertJ. 2009. PlantGuide:SunshineVetiverGrass. UnitedStatesDepartmentofAgriculture,NaturalResourcesConservationService(http://plants.usda.gov/).
Kinoshita,Charles,etal.2006. PotentialforEthanolProductioninHawaii. DepartmentofBusiness,EconomicDevelopmentandTourism,StateofHawaii.
Lavelle,Neoma.2007. ImprovingHawaiisWaterQuality: SelectingSitesforRiparianRestorationinaGIS. NicholasSchooloftheEnvironmentandEarthSciences,DukeUniversity.
OahuSoilandWaterConservationDistricts.June2007.TheOahuOutlookTheVetiverNetworkInternationalwebsite. Articlesandotherreferencematerialsfoundat
www.vetiver.com
TheVetiverSystem:Aprovensolution. BrochurewrittenandpublishedbyTheVetiverNetwork
International.
Truong,Paul,TranTanVan,and,ElisePinners.2008.VetiverSystemApplicationsTechnicalReferenceManual.TheVetiverNetworkInternational.
UrbanGroundwaterDatabase,1999
UnitedStatesDepartmentofAgriculture2007CensusofAgriculture
VetiverGrass: Athingreenlineagainsterosion. WrittenbytheNationalResearchCouncil.
Publishedin1993bytheNationalAcademyPress,Washington,D.C.
Sub jec t Ma t t e r Expe r t s
Brokish,Jean,ProjectManager,OahuResourceConservationandDevelopment
Char,Marvin,CivilEngineeringBranch,SiteDevelopmentDivision,DepartmentofPlanningand
Permitting,CityandCountyofHonolulu
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COST OF PRODUCTION AND MARKET OPPORTUNITY FOR VETIVER GRASS
49
Dacus,Chris,LandscapeArchitect,DepartmentofTransportationServices,CityandCountyof
Honolulu
Howland,Mark,IntegratedTrainingAreasManagement(ITAM)/ImprovedRepairableAsset
Management(IRAM),GeneralDynamicsforUnitedStatesArmy
Inouye,Wayne,PermitIssuanceBranch,DepartmentofPlanningandPermitting,Cityand
CountyofHonolulu
Joy,Robert,PlantMaterialsSpecialist,NaturalResourcesConservationService,UnitedStates
DepartmentofAgriculture
Kacir,Richard,DistrictConservationist,NaturalResourcesConservationService,UnitedStates
DepartmentofAgriculture
Leong,Russell,ArmyCorpofEngineers,UnitedStatesArmy
Matsunami,Garret,EngineeringandSiteConstruction,Castle&Cooke
Miller,Kim,LandOwnershipSpecialist,HawaiiHousingFinanceandDevelopmentCorporation,
StateofHawaii
Morton,Mawae,StrategicResourcesManager,LandAssetsDivision,EndowmentGroup,
KamehamehaSchools
Nakata,Ryan,DepartmentofTransportationServices,CityandCountyofHonolulu
Rice,James,WastewaterProgramManager,UnitedStatesArmyGarrisonHawaii
Sakamoto,Glenn(andstaffDavidDuvauchelle,KeniReyes,AndresJuario),Manager,Hoolehua
PlantMaterialsCenter,NaturalResourcesConservationService,UnitedStatesDepartmentof
Agriculture
Santo,Lance,Agronomist/FieldCoordinator,HawaiiAgriculturalResearchCenter
Slay,Hudson,CleanWaterBranch,DepartmentofHealth,StateofHawaii
Smith,Craig,Agronomist,USDANRCSPacificIslandsWest.
Takayesu,Gerald,DepartmentofEnvironmentalServices,CityandCountyofHonolulu
Teruya,Randall,AgriculturalAssetManager,AgriculturalResourceManagementDivision,
HawaiiDepartmentofAgriculture,StateofHawaii
Turnbull,Steve,EnvironmentalBranch,ArmyCorpofEngineers,UnitedStatesArmy
Woll,Jason,DepartmentofParksandRecreation,CityandCountyofHonolulu
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Sub j ec t Ma t te r Expe r t s - Un respons ive
Thefollowingwerecontactedforinformationbutdidnotprovidefeedbackintimeforthe
publicationofthisreport. Thesecontactsarelistedforthepurposeoffurtherilluminatingthe
scopeoftheresearchaswellasprovidingpotentialsourcesoffurtherresearch.
ArmyFamilyHousing,UnitedStatesArmy
BureauofLandManagement,UnitedStatesDepartmentoftheInterior
Constantinides,Michael,ForestryandWildlifeDivision,DepartmentofLandandNatural
Resources,StateofHawaii
FishandWildlifeService,UnitedStatesDepartmentoftheInterior
ForestService,UnitedStatesDepartmentofAgriculture
Hirano,Eric,ChiefEngineer,EngineeringDivision,DepartmentofLandandNaturalResources,
StateofHawaii
JamesCampbellCompany,Hawaii
LandDivision,DepartmentofPlanningandPermitting,CityandCountyofHonolulu
LandManagementDivision,LandManagementBranch,DepartmentofHawaiianHomelands,
StateofHawaii
Mansker,Michelle,DepartmentofPublicWorks,UnitedStatesArmy
NationalParkService,UnitedStatesDepartmentoftheInterior
Penn,David,TotalMaximumDailyLoad(TMDL)Coordinator,EnvironmentalPlanningOffice,
StateofHawaii
RoadMaintenanceDivision,DepartmentofTransportationServices,CityandCountyof
Honolulu(indicatednotapplicable)
UrbanForestry,DepartmentofParksandRecreation,CityandCountyofHonolulu
Watts,Kimberly,Director,SustainableRangesProgram,UnitedStatesArmyEnvironmental
Command