A North Kohala dairyman testified Tuesday the Big Island’s — and the state’s — largest and only other dairy is requesting state permission to sell milk below the legal minimum price because of a deal already in place with the state’s only milk processor.
At a public hearing hosted by the state Department of Agriculture in Waimea, Ed Boteilho Jr., president of Cloverleaf Dairy in Hawi, said he was told by Big Island Dairy owners Steve Whitesides and Derek Whitesides that Meadow Gold was behind the Ookala dairy’s request to sell milk below the minimum set under the Milk Control Act of 1967.
“They were assuring me that they were forced to sign a contract, which is what we’re trying to address here. An already signed contract,” Boteilho testified. “This was said to me by both owners and I swear to God about it. I swear to anyone that was the situation. So, what we’re doing here is trying to correct something that is already done. But in the process of doing that, nobody consulted me.”
The state took testimony about the requested waiver in the minimum milk price, $3.06 a gallon for milk processed on the Big Island, and between $2.36 and $2.71 per gallon on Oahu-processed milk — the latter fluctuates depending on the price of California milk.
Grant Tomita, state Milk Control Program specialist and acting Commodities Branch director for the Department of Agriculture, said the proposed amendments to Hawaii Administrative Rules to allow Big Island Dairy’s request will be considered at the next state Board of Agriculture meeting next month in Honolulu. Board members will receive testimony taken at Tuesday’s hearing and one Monday in Honolulu.
Tomita said no date has been set for the next board meeting.
Thirteen people attended Tuesday’s hearing, including state Rep. Richard Onishi of Hilo, the House agriculture vice chairman, and county Councilwoman Margaret Wille of Kohala, who chairs the county Committee on Agriculture, Water and Energy Sustainability. Six, including Wille, testified. Only Brad Duff, the new general manager of Big Island Dairy, testified in favor of the proposal.
Big Island Dairy is in the process of expanding, which would include doubling its herd of milking cows from 900 to 1,100 to 1,800 to 2,200. Duff noted only about 20 percent of milk consumed in Hawaii is produced in the state.
“In order for us to supply more milk, we need to secure contracts with processors so that we may plan for the future,” he said. “We have to have a guarantee that our milk will be purchased. Current quota rules secure us a price on our milk but they do not guarantee that a processor has to purchase our product. With the amount of risk that the Big Island Dairy is undertaking in this (expansion), we need to know that our product has a buyer and at what price.”
Concerns were ex-pressed about a possible monopoly of the milk market, which has seen the closure of eight Hawaii dairy farms since 1999.
“What is going to happen if Cloverleaf Dairy opts to sell out? What is going to happen with the dairies coming in, if there is no minimum milk price in place?” Kees Kea, who’s in the process of starting a dairy in Ookala, asked rhetorically.
Wille testified the state should “not be allowing one entity that has enough power to come in and undermine not just existing dairies, but all those potential start-ups that would question whether this would be a good option to pursue.”
Reached Tuesday at his Idaho home, Steve Whitesides said his company needs to be competitive with mainland-produced milk, which comprises about 80 percent of the milk consumed in Hawaii.
“The way the state law was written is that they don’t have any ability to force a processor to take the milk supply,” he said. “So, there lies the whole problem. If they can bring milk in cheaper from the mainland, how do they buy from me at a higher price?”
Whitesides acknowledged he has “an agreement with Meadow Gold to take our supply of milk,” but declined to talk specifics.
“I don’t call it a contract,” he said. “The price is based on an agreement we have. Sometimes it’s higher and sometimes it’s lower and it’s been higher (than the minimum) recently. It’s an agreement between Meadow Gold and myself and it’s a fair agreement. We have to be competitive with the mainland or else Meadow Gold won’t be there in the future.”
Boteilho said he could support a change in Hawaii Administrative Rules to allow for a waiver of the minimum milk price if the wording in the proposed amendments was changed from “to allow the producer or producer-distributor” to request the price waiver to “to allow the producer and producer-distributor” to make the request. He said the process would then be more inclusive of other dairy farmers.
“It’s very critical to me because anyone knows if you start creating a monopoly — which is what this will do, it will allow them to have a monopoly in the pricing, then the other small dairies will either have to follow or get out,” he said. “This corrects the amendments to allow myself to negotiate, along with the other parties, rather than only a single entity proposing price changes as the current amendment reads.”
Whitesides called Boteilho “a great dairyman” and said he doesn’t intend to disrupt Cloverleaf’s operations.
“He’s been there a lot longer than anybody else and he’s earned his right to be there. And the last thing I want to do is affect his quota position. And he still has that right,” he said. “What I’m doing is, I want the right to contract on the outside the quota. … If they wanted an agreement with Meadow Gold, or whoever else is the supplier, the way the (law) reads, they can still maintain the quota that they have. … Their quota is still the same. If Meadow Gold buys their milk, I’m happy for them. I’m more willing to be on the open market of supply and demand from the mainland.”
Jamaison Schuler, spokesman for Dean Foods, Meadow Gold’s corporate parent, said Tuesday the company has no comment.
Email John Burnett at jburnett@hawaiitribune-herald.com.