Editor’s Note:Civil Beat is examining why life in the islands is so expensive in an ongoing series, Living Hawaii. Over the next year we will look at what’s behind high prices here and discuss ways to bring them down.
No need to cry over spilled milk. In Hawaii, just pouring the stuff can make us wince. Milk is expensive here.
We all know the cost of life in Hawaii can be exorbitant but it’s not always clear how and why local prices shake out the way they do. When it comes to groceries, you’ll almost always pay more — and often far more — on Oahu than you will in Manhattan, another pricey island where the cost of living is about twice the national average, according to the Council for Community and Economic Research.
But there are staples that cost nearly twice as much in Hawaii as they do in New York City. Take a gallon of regular non-organic milk. It costs $3.29 for the generic brand at Whole Foods in New York City, but you shell out $6.29 for a gallon of Meadow Gold at Foodland on Oahu.
Step up a level, to the gallon of organic milk at Whole Foods in Hawaii, and it can cost as much as a bottle of wine.
Many things, it turns out. Three decades ago, Hawaii had dozens of milk dairies. Today much of Hawaii’s milk comes from the mainland — just two milk-producing dairies remain in the state, both on the Big Island.
“But we don’t have a feed mill here, and cows don’t just eat grass,” said Jeri Kahana, a quality assurance specialist at the Hawaii Agriculture Department. “So you have to import feed as well. The cost of doing business in Hawaii? Everything we touch is linked to transportation.”
Most of the milk you’ll find in Hawaii stores comes from California, where it’s purchased by a processor that ships it to Hawaii. The California Milk Control Program sets the price that processors pay. But fuel prices that remain near their peak and tanker rental costs drive up the price that consumers ultimately pay. Federal requirements related to interstate shipments — such as that milk must be pasteurized before it’s packaged — add more to the cost, too.
So, would an increase in local production drive down the cost of milk?
It might. But, locally produced milk often sells for close to $9 per gallon (although it is sometimes “on sale” for a little more than $7).
As Kahana points out, even Hawaii dairy farmers rely on mainland feed, which pushes prices up. Local milk is also subject to state pricing requirements that are meant to ensure farmers can stay in business.
“So ultimately, yes, we would like to lower the cost of milk, but at the same time … if we’re talking local, we need to make sure the producers make money to stay in business,” Kahana said.
Similar to the California milk board, the state of Hawaii sets a price for milk in order to ensure that farmers can earn enough money to survive. To do that, the state uses an administrative-rules process to determine the amount of money that milk processors like Meadow Gold must pay farmers. The last time the price went up was a decade ago. Hawaii producers have gotten $35.53 per 100 pounds of milk since 2003. Local farmers went more than a decade without a rate increase prior to hikes in 2001 and 2003, and it was during that period of time that Hawaii saw the demise of so many of its milk dairies, Kahana said.
“It became more and more obvious that there was this diverging price between Hawaii and the mainland,” said Andrew Novakovic, a professor of agricultural economics at Cornell University. “And California is more than happy to sell milk to Hawaii. It just became more economically sensible to rely on California milk supplies.”
Some 90 percent of milk produced in the United States is price-regulated, Novakovic says. But the rate of $35.53 per 100 pounds of milk in Hawaii represents about double the national average. Farmers in California were earning $17.20 per 100 pounds of milk as of May, according to the Modesto Bee. The higher pricing system in Hawaii gets passed onto consumers because milk processors — Meadow Gold, in this case — are required to pay farmers a set amount.
“When it comes right down to it, the issue isn’t the transportation cost,” Novakovic said. “The issue is the pricing structure.”
And though Novakovic says it makes more economic sense for Hawaii to purchase the bulk of its milk from the mainland, there is still a special incentive for the state to maintain at least some local supply of milk.
“Historically, we think of milk as a highly nutritious product that we feed to children,” Novakovic said. “And we do exceptional things to make sure our children have access to this highly nutritious product.”
Novakovic also points out that it would make the most sense to compare Hawaii milk prices with California’s, since California milk is sold in both states. A quick call to a San Francisco Safeway confirms milk costs $4.39 there. At Jon’s International Marketplace in Los Angeles, you can pick up a gallon for $3.59.
If that doesn’t make you want to cry, this might: Milk is unregulated in Idaho, and that means residents there can get a gallon for $2.59.
Just keep reminding yourself that they have to drive 500 miles to get to the beach.
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