State has priciest milk in the U.S.

With prices increasing worldwide, locally produced milk is becoming competitive

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The only dairy left on Oahu, Pacific Dairy, planned to shut down this summer but has decided to keep going in hopes that new state subsidies for feed costs will help it make ends meet.

Honolulu's milk is the costliest in the nation, with San Francisco's close behind. Globally, milk prices are reaching record highs, propelled by feed costs and growing demand.

Honolulu resident Sue Watt used to buy local milk because she preferred its fresh taste. "I get whatever's on sale now because that's all I can afford," she said last week, clutching a gallon of mainland milk she had bought on special for $5 at Safeway.

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Julio and Rose Mateo paid $5.59 for a half-gallon of Meadow Gold milk last week at the Pali Safeway and didn't flinch at the price.

"For me, I like the local milk," Julio Mateo said. "If it's more expensive, no can help."

Added his wife: "If it comes from the mainland it is easy to spoil."

But Hawaiian milk is a rare commodity these days. Today, the state imports roughly 80 percent of its fresh milk, according to Jeri Kahana, commodities branch manager for the state Department of Agriculture. Three years ago, that figure was 55 percent. In the 1980s, Hawaii produced all of its own milk.

While the Mateos were doing their shopping Thursday afternoon, Ben Sadeghi was driving his tractor through a pasture in Waimea on the Big Island, chopping up guinea grass to help feed a dairy herd.

Sadeghi used to be a dairyman himself, but his Ahualoa Dairy went out of business two years ago because the price he got for his milk didn't cover the soaring cost of alfalfa hay. Now he's trying to help his brother's dairy stay in business by providing supplemental feed known as "green chop."

"I can't just stand back and watch another ship sink," said Sadeghi. "I was in the business for 15 years. In that time, I witnessed maybe a dozen dairies go out of business."

Production of milk in Hawaii has fallen steadily for years, dropping to 57 million pounds last year, half of what was produced in 2000. It is expected to be lower this year, with the closure of Oahu's Mountain View Dairy, which milked its last cow at the end of May.

There are just four dairies left in the state, one on Oahu and three on the Big Island. But a new shot in the arm -- in the form of state subsidies for feed costs -- may help keep them going. And the soaring international price of milk is actually making Hawaii milk more competitive.

Pacific Dairy, the last dairy on Oahu, had planned to shut down this summer but recently changed plans. It produced close to 700,000 pounds of milk last month.

"Based on the new feed subsidies from the state, they decided not to close this summer," said Carissa Tourtelot, spokeswoman for Meadow Gold, the state's only milk processor. Calls to Pacific Dairy went unanswered on Thursday and Friday.

Legislation that took effect July 1 sets aside $3 million for each of the next two years to subsidize feed costs for dairy and poultry farms. In passing the bill, lawmakers noted that feed costs account for a larger fraction of production costs in Hawaii than elsewhere, and stressed the need for the state to have its own fresh milk and eggs.

Big Island farmers also got a bit of a break on Wednesday, when the farm-price paid for their milk rose slightly. Since the 1960s, the state has controlled the price paid to milk producers, but retail prices are left to the market.

"The feed subsidy is a big help," said Bahnam Sadeghi, Ben's brother and an owner of Island Dairy. "What we're hoping to do is to try and shift our feed rations to have less dependence on mainland imports by doing the forage production.

"The other factor is we need to educate the consumer about the difference between local and imported milk," he said. "The consumer has to want fresh, local milk."

It takes at least five days for milk shipped from the mainland to reach Hawaii. The milk comes in bulk containers and has to be pasteurized a second time before it can go to consumers.

"The majority of the population of this state is drinking double-pasteurized, imported milk that is 8 days old," said Ben Sadeghi, with the drone of his tractor in the background. "Wake up before you have no dairies left in Hawaii."

Consumers who want to buy local milk should look for the "Island Fresh" insignia on the cap of gallon jugs or the packaging of the half-gallons. The Big Island still produces 100 percent of its own milk, with surplus shipped to Maui.

Finding "island fresh" milk on Oahu is tougher. The public schools get first crack at locally produced milk.

Whatever the source of the milk, for many Honolulu consumers, the high prices are tough to swallow.

"It's ridiculous," said Sue Watt, carrying a gallon of mainland milk that she bought on special at Safeway for $5, regularly $6.49. "I used to like my Foremost. I get whatever's on sale now because that's all I can afford. I feel really bad for families that have a lot of kids."

Milk prices at Honolulu's grocery stores are the highest in the nation. The most recent national comparison showed a half-gallon of whole milk in Hawaii retailing for an average of $2.74, well above the national average of $1.96, in the first quarter of this year. San Francisco came in second at $2.71.

The figures are compiled by the Council for Community and Economic Research in Arlington, Va., which conducts surveys every quarter in 300 cities nationwide. Twin Falls, Idaho, had the cheapest milk in the latest survey, at $1.39 for half a gallon.

Spot checks on Friday at several Honolulu groceries found half-gallons of house brands of milk on sale for $2.50 to $3.50, with brand names like Foremost and Meadow Gold ranging from $3.50 to $5.59.

"Milk prices are at record highs in the United States and New Zealand and around the world, and it's driven by high feed costs and demand by emerging markets for milk powder," said Bahnam Sadeghi. "The price of milk on the Big Island is cheaper now than the milk that comes in from the mainland."

But Honolulu is a different story.

Shopper Charelle Puig said she moved to Las Vegas because costs were so high here. She was back in town last week for a sister's wedding, loading groceries into a cooler in the back of her car.

"I bought just a half-gallon because it was so expensive," she said. "I have a little one and he goes through 1 gallon in three days. It's a good thing we live in Vegas. Over there you can buy 2 gallons for $5."