State drops wholesale milk price 23 percent

The state Department of Agriculture, bowing to pressure from Meadow Gold Dairies, unanimously approved a 23 percent drop in the state-set wholesale milk price paid to the last locally owned dairy.

Hawaii island’s Cloverleaf Dairy owner Ed Boteilho Jr. said he may be forced to close his dairy.

"I may close down the milking part," he said. "What you’re seeing and what has taken place is actually a destruction of a longtime family business by the powers that be, including Meadow Gold, who has so much manipulating power that it’s take it or leave it."

Boteilho said he is hoping to run the dairy business until the end of the year and might look to repurpose his farm.

Cloverleaf has 13 employees and produces milk with nearly 700 cows on 892 acres.

"A price like this means — and they all know it — there’s no chance I can survive, not in the long run," Boteilho tearfully said. "It’s been a good run but this is the end result."

Representatives of Meadow Gold, owned by Texas-based Dean Foods, didn’t attend the board meeting Tuesday, but earlier threatened to quit buying milk from local dairies if it had to keep paying the minimum price.

"Under the old minimum milk price regulations, we were growing increasingly concerned that purchasing raw milk from Hawaii’s milk producers was no longer financially viable for our company or the consumers of Hawaii," said Jamaison Schuler, a Dean Foods spokes­man, in an email. "Because of the state of Hawaii’s previous minimum milk price regulations, we estimate that over the past six years alone, Meadow Gold of Hawaii has paid more than $4 million in higher raw milk prices from Hawaii’s dairy farms compared to mainland raw milk prices."

It’s unclear what, if any, impact the change will have on prices consumers see on store shelves.

"The marketplace dictates the price for a commodity like milk, so as supportive as the board of agriculture … would like to be, we can’t force Meadow Gold to buy milk that they don’t want to buy, and they’ve stated that they’ll no longer purchase milk at the milk-controlled price," said Scott Enright, agriculture board chairman. "So if a dairy, in this case Cloverleaf, wants to move forward doing business with Dean Foods Meadow Gold, they need to come to a mutually agreed-upon price. We had 40 dairies 30 years ago. We’re down to two. That’s capitalism."

The minimum price was established under a 50-year-old rule that sets what processors must pay but doesn’t compel them to purchase local milk.

Meadow Gold’s complaint is that the local milk it processes and sells in stores isn’t competitive with milk from the mainland because of what it regards as an imposed subsidy paid to local farmers. Meadow Gold imports mainland milk, but so do about two dozen other distributors that have been eroding Meadow Gold’s market share. Mainland milk accounts for 80 percent of the milk consumed in Hawaii.

"Recently, our mainland milk processing competitors have won competitive bids against us to supply local retailers with mainland milk based on raw milk prices that are much less than we were paying for raw milk from Hawaii," Schuler said. "With the spread between mainland raw milk prices and Hawaii raw milk prices becoming increasingly wider, and with local milk producers eager to grow their operations, we found ourselves at a crossroads where we could not agree to buy increased volume of local milk at the regulated minimum prices."

Meadow Gold employs more than 320 residents, Schuler said.

He added that the company has discussed pricing pressures for raw milk with local dairy suppliers in the past but has "quietly accepted the pricing minimums in an effort to be patient."

"We have been patient and supportive in light of declining milk consumption and declining market share," Schuler said. "We had hoped that dairy producers would institute on-farm efficiencies that would effectively lead to lower raw milk prices, but such lower prices never materialized."

The Board of Agriculture previously voted to relax price regulations for wholesale milk after the only other major local milk producer, Big Island Dairy LLC, petitioned to charge less than the state minimum.

Until 1985, 100 percent of Hawaii’s milk supply came from local farms. Increasing costs for feed and pressure from real estate development along with other issues have forced most Hawaii dairies out of business. Eight Hawaii dairy farms have closed since 1999.

Boteilho had been in talks to sell the Cloverleaf Dairy for $4 million to Ulu­pono Initiative, a local investment firm funded by eBay founder Pierre Omid­yar, but that deal did not come to fruition, he said.