A 53-year-old dairy on the Big Island -- the last locally owned large dairy in the state -- may have to close because it's being forced to accept a steep cut in price for its milk paid by Hawaii's only milk processor -- Meadow Gold.
Meadow Gold said it's no longer financially viable for the company to pay Hawaii dairies higher prices than it pays for milk in California.
Cloverleaf Dairy in Hawi along the Kohala coast of the Big Island has been owned and operated by the Boteilho family since 1962.
"I am being asked to come in here and submit to this threat and kill myself," said Ed Boteilho, as he reluctantly asked the state Board of Agriculture Tuesday for permission to charge Meadow Gold less than the minimum price of milk set by the state.
Boteilho said that means his dairy will lose more than $70,000 a month, because the price he receives from Meadow Gold will go down by about 23 percent. Meadow Gold has threatened to stop buying local milk if it doesn't match much lower California prices.
"What is taking place is actually a destruction of a long-time family business, by the powers to be," Boteilho told reporters after the agriculture board meeting.
Meadow Gold, which calls itself "Hawaii's Dairy," actually owns no dairies in the islands and imports the vast majority of its milk from the mainland.
In a statement, Jamaison Schuler, a spokesman for Dean Foods, the parent company of Meadow Gold, said, "… 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."
“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," Schuler said.
Boteilho said he will likely have to close down in about six months because he can't afford to operate with those lower prices from Meadow Gold. He will have to lay off at least half of his staff of 13 people, which includes 11 full-timers, he said.
"Some of whom have been with me 30 years, 20 years, you know, many years," Boteilho said, his voice choked with emotion.
Big Island rancher Michelle Galimba, who's a member of the state agriculture board, was also emotional during the meeting Tuesday.
"I'm very sad. For me, this is a tragedy. And I'm very sorry it had to come to this," she told Boteilho.
The board unanimously approved the request to grant a waiver to Cloverleaf Dairy, allowing it to sell raw milk at less than the roughly $35 for each 11 to 12 gallons that's the current state minimum price set by law.
Board of Agriculture Chair Scott Enright told Boteilho, "The Hawaii Department of Agriculture can't force Dean Foods/Meadow Gold to buy local milk."
"It's unfortunate that you find yourself in a marketplace that's extremely competitive, but that's where we find ourselves," Enright said. "This board and this Department of Agriculture would like to do absolutely everything we could to support you as it has in the past. But we find ourselves constrained by the realities of the marketplace."
Boteilho said he offered his dairy operation and cows for sale “as is” at a price of $4 million and the Ulupono Initiative funded by billionaire Pierre Omidyar began due diligence as it planned to purchase the operation last fall.
Boteilho said Ulupono offered him $1 million less than his asking price and wanted him to complete expensive repairs and cleanup so he says the deal fell through earlier this year.
Ulupono Initiative Director of Communications Amy Hennessey confirmed the organization will not be purchasing Cloverleaf Dairy.
“Unfortunately we were unable to come to mutually agreeable terms, but we wish Ed Boteilho and his family the very best. We will continue to seek opportunities to support and expand our local dairy industry to help improve the supply of fresh local milk for Hawaii's families,” Hennessey said.
On Dec. 30, 2014, the board approved a similar request by Boteilho's competitor, Big Island Dairy, to sell its milk to Meadow Gold at lower prices than those officially allowed by the state. That dairy is owned by an Idaho-based dairy that purchased the operation in 2012.
Schuler, the spokesman for Meadow Gold's parent company, said, “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.”
“In order for Meadow Gold to remain a viable business that employs more than 320 residents of Hawaii, contributes generously to local charities and contributes to the local tax base, we must act to reduce our costs through the recent pricing waivers put in place by the Hawaii Department of Agriculture,” Schuler added.
“We're pleased one of the state's milk producers received a waiver today so that our plants in Hilo and Honolulu can continue to buy nearly 100 percent of the raw milk produced by Hawaii's dairy farms,” he said.
Schuler said Meadow Gold has held a keen focus toward supporting diversified agriculture in Hawaii with the intent that local dairy producers would develop the means to be able to compete with their mainland competition.
“We have been patient and supportive in light of declining milk consumption and declining market share. 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,” Schuler said. “The company discussed pricing pressures for raw milk with our dairy suppliers in the past, but has quietly accepted the pricing minimums in an effort to be patient. But 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.”
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