Got (local) milk?

Hawaii hasn’t had much of it since feed costs decimated the local dairy industry in recent years. But a company from New Zealand, where dairy farming helps drive the national economy, aims to rebuild Hawaii’s local milk supply.

An affiliate of Dairy Solutionz (NZ) Ltd. has teamed with partners and investors to establish an initial 1,000-cow farm by 2013 and assist others in starting similar-size farms.

The thrust of the endeavor is forming a consortium of Hawaii dairy farms feeding herds almost exclusively on pasture grasses.

Such a model is well developed in New Zealand, which is the world’s largest dairy exporter with about $11 billion in sales representing 95 percent of the country’s milk production.

"We see no reason at all why we can’t create a fully sustainable dairy industry (in Hawaii)," said Derek Fairweather, CEO of a company that owns Dairy Solutionz, a consortium of New Zealand agricultural producers and suppliers. "We’ve done enough technical work that we know we can re-energize this industry."

If successful, the plan stands to expand production and reduce retail prices of local milk. The project also promises to create jobs and reuse thousands of acres of fallow farmland.

Hawaii’s dairy industry once satisfied 100 percent of statewide milk consumption and was once part of a thriving agriculture sector along with sugar cane and pineapple.

But dairy farmers suffered blows over the decades that included real estate development pressure forcing operations onto marginal lands, and a debacle in 1982 when tests found milk contaminated by heptachlor passed through cows eating tops of pineapple treated with the pesticide.

Imported milk began flowing in 1985, and since then has poured into Hawaii as local dairies dwindled.

Since 1999 eight Hawaii dairy farms closed under pressure from rising prices to buy and ship feed from the mainland.

Two major dairies on Hawaii island, Cloverleaf Dairy and Island Dairy, each with about 650 to 850 cows, are all that’s left of the local industry in terms of large-scale operations.

The two dairies produce just under 10 percent of the milk sold in the state under Hawaii’s Fresh and Mountain Apple brands, according to the state Department of Agriculture.

Island Dairy survived and expanded in recent years largely by growing its own crops such as corn and alfalfa, which now represent 30 percent of food for its 850 cows. Island Dairy cows also graze on pastures for another 20 percent to make the farm 50 percent self-sufficient for food.

Dairy Solutionz said its methods of intense pasture management can increase pasture feeding to 85 percent and decrease production costs.

Grant Tomita, milk control program specialist with the Agriculture Department, said 85 percent is doable. He also said the consortium setup can further reduce farm costs. "The bottom line is the cost of production," he said. "If you can get a handle on that, you’re in good shape."

Tomita said the proposal has good potential to dramatically expand the supply of local milk.

Bahman Sadeghi, who owns Island Dairy and also imports milk, said Hawaii’s dairy industry and consumers will benefit if Dairy Solutionz succeeds with a consortium and 85 percent pasture feeding. "It will be good for everyone," he said.

Fairweather of Dairy Solutionz said the company knows enough about grass nutrients, intensive pasture management and animal genetics to replicate New Zealand’s model in Hawaii.

Similar replications have been established in Brazil, Chile, Uruguay and the U.S. Midwest.

One key challenge for success, however, will be achieving a big-enough scale, Fairweather said.

"The enemy is the cost of production," he said. "We can collaborate and drive out the high cost of production."

Dairy Solutionz wants to work with existing Hawaii dairy farmers and new farmers along with landowners and investment partners.

An initial consortium called Tropical Dairy Solutions LLC is made up of Dairy Solutionz, Hawaii-based investment organization Ulupono Initiative, San Diego-based venture capital firm Finistere Ventures and Maryland-based Atlantic Dairy Consulting.

The venture is drawing on research Ulupono conducted over the past two years testing which kinds of grasses grow best in several spots around the state.

"The long-term vision is to develop a sustainable, profitable dairy industry statewide based on farming the grass rather than relying on imported feed in an industrial agriculture model," said Kyle Datta, Ulupono’s general partner.

Large Hawaii landowners Kamehameha Schools, Maui Land & Pineapple Co. and Grove Farm helped with the tests, and commitments are in the works to provide land for dairy farms. A 1,000-cow pasture farm needs about 1,000 acres, Fairweather said.

Cows for new farms could be the Kiwi Cross breed shipped from New Zealand, or perhaps cows bred on the mainland crossing a U.S. breed with the Kiwi Cross.

If industry growth takes off, it could lead to expansion of milk processing facilities, which shrank as local dairy farms went out of business.

Fairweather estimated that it will take $30 million for the cooperative to get started. "This is not a short-term play," he said. "This is a long-term view. This is the next step in reinvigorating what some people saw as a small and declining industry, and reducing Hawaii’s dependence on suppliers that are thousands of miles away."

To replace all imported milk, it would take about 10 farms each with 1,000 cows on 10,000 acres, Fairweather estimated.