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The Honolulu Advertiser
Posted on: Sunday, March 20, 2005

State's largest dairy may close

 •  Hawai'i milk production

By Sean Hao
Advertiser Staff Writer

Within two years, the 1,200 or so milk cows at Wai'anae's Pacific Dairy, the state's largest, may be just a memory as high transportation, feed and other costs continue to take their toll on Hawai'i's milk industry.

Moises Malasique milks cows on a mechanized system at the 42-acre Pacific Dairy in Wai'anae, where a manager has described survival in today's milk business as being "tough, very tough."

Deborah Booker • The Honolulu Advertiser

The nearly 10-year-old Pacific Dairy is the latest to consider closing, which could reduce local milk supplies by more than 20 percent on top of years of steady decline. Already the dairy, which employs 22 people, is thinning its herd by sending newborn calves to the Mainland.

"We'd like to stay (but) we're looking at options," said Robie Ann Dorwelo, administrative manager of the 42-acre dairy. "It's tough, very tough," to stay in the milk business.

The decline of the state's dairy industry comes amid rising shipping and land costs, urban encroachment, environmental regulations and stagnant sales, which have cut local milk production to less than one-third of annual demand statewide.

Last year, local milk production dropped 13 percent to about 9.4 million gallons, or about half the production level reached in 1988. If the state were to face a shortage of imported milk because of a strike or natural disaster, some wonder what consumers would do.

"I don't know. I guess you'd have to look for alternatives, but I don't know what that would be," said Beatta Teixiera of Waimanalo after buying a quart of Viva for $2.09 at Shima's Market recently.

Any disruption of milk imports also could push up prices, which are as high $8 a gallon in some parts of Hawai'i, according to state price surveys.

"What happens when we have a dock strike?" asked Chin Lee, a dairy extension specialist at the University of Hawai'i College of Tropical Agriculture and Human Resources.

"It would be quite a challenge. Then we'll know how much milk costs when we have to fly it in."

The state requires that schools receive priority for local milk, which could help ensure that children have continued access to milk in any shortage.

"We'd be 70 percent to 80 percent short if you didn't get the Mainland milk in," said Randy Kamiya, a milk specialist with the state Department of Agriculture.

"Right now, because our local production is so small, we've been more concerned that local milk reaches our kids through the school lunch program."

Pacific Dairy farm manager Monique Vanderstroom, left, animal feeder Virgilio Quimoyog and administrative manager Robie Ann Dorwelo examine the quality of feed. According to Dorwelo, the weekly cost of shipping feed to Hawai'i has risen by $12,000.

Deborah Booker • The Honolulu Advertiser

Part of the reason for a decline in local milk production is public indifference over the source of milk, Kamiya said. Milk from local farms sold in stores features an "Island Fresh" logo, which carries the image of a smiling daisy, and typically is comparably priced with imported milk, he said.

Very little packaged milk is imported directly for sale. Instead, Meadow Gold Dairies, the state's sole milk processor, imports milk in bulk by ship, re-pasteurizes and packages it for final sale under a variety of brand names. The Mainland milk is usually about one week older than locally produced milk.

Even though the locally produced milk is identified with the "Island Fresh" logo, consumers may have trouble differentiating between local and Mainland milk because the cartons are otherwise identical by brand, and often sit side by side on the same shelf in the grocery store.

State officials said they're looking into ways of raising local milk awareness and interest through advertising, and by possibly distinguishing Mainland milk with a "re-pasteurized" label. Imported milk now carries a "pasteurized" label.

Informal surveys of UH students show that consumers often think they're buying local milk when they buy local brands such as Meadow Gold and Foremost, which may not necessarily be the case, Lee said.

"Just because you're buying a local brand doesn't mean you're buying a local milk," he said.

Because of high prices, many consumers just shop for the cheapest milk regardless of origin.

"It's not healthy, but I like it," said Gabrielle Wellford of Kailua, after purchasing a gallon of Viva 2 percent milk for $6.49 at Shima's.

"It's so expensive. I'd prefer local milk, but I usually just buy the cheapest."

On the surface, Hawai'i's high milk prices would appear to bode well for producers. However, farmers usually get paid only about one-third of the retail price of milk.

Because the price paid to local dairies is regulated, Hawai'i farmers are guaranteed a premium on drinking milk, or "Class 1 milk," over the price paid to their counterparts in California, Hawai'i's largest out-of-state provider. That added money is meant to compensate for the cost of imported milk, thereby making local milk prices competitive with California milk.

However, processors such as Meadow Gold can work around the price controls to minimize their costs by buying more local milk in the cheaper "Class 2 category." Class 2 milk is used in products such as cottage cheese and yogurt.

Even though the quality of Class 1 and Class 2 milk are similar, they command a different price from farmers.

"In a way, Meadow Gold should support the local dairies, and the only way they can really help is if they buy all the milk as Class 1," said Kees Kea, manager for Island Dairy in 'O'okala on the Big Island.

Meadow Gold has said its priority is to buy milk at the lowest price, whether that's locally or on the Mainland.

"We definitely do support the dairy farmers here in Hawai'i," said Meadow Gold spokeswoman Jackie Smythe.

Purchases by Meadow Gold of local milk as Class 2 milk are among several commonly cited reasons for the dairy industry's decline, experts said. On O'ahu, the closure of Wai'anae's Evergreen Hillside Dairy last year reduced the number of dairies on the island to two. As recently as 1999, there were five dairies on O'ahu. There are an additional five dairies on the Big Island.

With $21.4 million in farm sales in 2003, milk was the sixth-ranked agricultural commodity in the state, with employment estimated at fewer than 400 people.

Other factors behind the decline include a lack of locally produced cattle feed. Because of a lack of grazing land, the problem for O'ahu dairies is more acute. For example, at Pacific Dairy, the cost of shipping feed to Hawai'i has risen $600 a container in the last year, Dorwelo said. The dairy brings in 20 containers each week — a $12,000 cost increase.

One potential solution is to grow feed locally. However, current land-use policies don't provide enough incentive to take on such an endeavor, UH's Lee said. According to a provision in the state Constitution, the state should identify and designate agricultural lands of importance and create an extra level of protection against development. However the state has never come up with that designation, despite continued development of prime agricultural land.

The solution is to "grow your own feed, but you can't grow your own feed when you don't have an agricultural land-use policy," Lee said. "You can't grow feed if everybody wants to build houses.

"Every piece of agricultural land still can be rezoned unless environmentalists or communities fight it."

Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.

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