The state has spent about $3.8 million since November 2007 on a program aimed at revitalizing Hawai'i's struggling livestock industry and improving the state's self-sufficiency.

Despite the cash infusion, Hawai'i's livestock industry has continued to shrink.

Now those subsidies, which were scheduled to run through 2010, have been canceled because of the state's budget shortfall.

That doesn't bode well for livestock producers.

The subsidies "stopped some of the decline," said David "Buddy" Nobriga, president of Nobriga's Ranch, which is a cattle feedlot in Waikapu Town on Maui.

Nobriga's Ranch received $83,616 in feed subsidies, according to state records. Without the subsidies, "We've got to tighten up our belts and see if we can survive," Nobriga said.

Although Hawai'i's farm sector remains relatively small compared with the $12 billion tourism industry, agriculture plays an important role in diversifying the state economy, preserving greenbelt lands and reducing the Islands' dependence on imported food. The loss of food-producing livestock businesses makes Hawai'i more dependent on the Mainland and other sources to meet basic needs.

That could be problematic if weather, labor or issues prevent shipments of food into the state, said Chin Lee, a dairy extension specialist at the University of Hawai'i.

"Everything is pointing to the need ... to address the issue of food security," he said. "We are just not sustainable the way we are going if we do not address agriculture."

The state subsidized up to 50 percent of feed costs for commercial beef, milk, egg and pork farmers in an effort to offset the rising cost of importing food for animals.

State and industry leaders said the decline in livestock production would have been worse without the subsidies. The subsidies helped stabilize livestock operations when feed prices spiked due in part to rising demand for ethanol, said state Department of Agriculture Director Sandra Lee Kunimoto.

"That set the stage for this real high spike in feed prices," she said. "The fallout then comes to all the livestock industries, so the fact that we were able to offer that subsidy for that amount of time helped to buffer the effect."

TOO LATE FOR DAIRIES

The feed subsidy program was too late to save O'ahu dairies. In 2008, O'ahu's last milk producer, Pacific Dairy, shut its spigots.

Feed subsidies "were supposed to help revitalize and help (farmers) survive," said Monique Van der Stroom, a former manager at Pacific Dairy. "I don't know how you revitalize if you're already in that much debt or you're already struggling."

The subsidies did help Big Island dairies, said Van der Stroom, owner of cheese maker Naked Cow Dairy in Wai'anae. However, the program didn't address a host of issues affecting farmers including urban encroachment, environmental issues, a lack of land available for long-term agricultural leases and high land, labor and shipping costs.

"What do you do now? I don't know if anybody worked on what do you do when the feed subsidy is over," she said.

State agriculture officials said the subsidies were never meant to be permanent.

"This was to help give the little cushion to do something with it," said Jeri Kahana, commodities branch manager for the state Department of Agriculture. "Whether or not they did anything with it, we don't know. A lot of them didn't do anything with it (because) it was more a matter of survival."

Some operations benefiting from subsidies launched initiatives to target customers for direct sales and expand marketing and production.

For example, Island Dairy on the Big Island began growing corn and alfalfa to reduce demand for Mainland feed. M&H Kaneshiro Farms bought equipment to process eggs to sell directly to customers, Kahana said.

"These are the things these guys are trying to do and the feed subsidy helps," Kahana said. "The farmers are trying to stay alive instead of just giving up."

Even with the subsidies, which were capped at $250,000 a year per farm, the industry contracted.

Between July 2007 and July 2009, statewide cattle sales fell 10 percent, egg production fell 15 percent and hog sales dropped 24 percent, according to the U.S. Department of Agriculture. Milk production fell 48 percent following the shutdown of Pacific Dairy. The broiler chicken portion of the livestock sector shut down entirely in 2004.

SIGNS OF GROWTH

There are some signs of growth in the livestock sector. A string of local dairy shutdowns in recent years left residents of O'ahu, Maui and Kaua'i with all their milk imported from the Mainland or the Big Island. However, Island Dairy and one other surviving Big Island dairy business still supply fresh local milk.

Island Dairy has doubled its number of cows and boosted milk production this year. As of July 27, Island Dairy received $500,002 from the state's feed subsidy program.

Through July, statewide milk production rose 18 percent to 12.7 million pounds. That's still well below production figures of just a few years ago. As recently as 2004, Hawai'i dairies produced more than 80 million pounds of milk in a year.

Livestock producers were expected to get another $2.2 million through 2010. However, in July, agriculture director Kunimoto announced that the program was suspended as of April because of the state's budget shortfall.

Livestock farmers said the state could do more to help curb urban encroachment, provide state lands for long-term agricultural use and to spur private landowners to sign long-term leases with farmers.

The state is supporting local livestock by helping to spread awareness of the advantages of buying locally produced food, Kunimoto said. The state also is taking steps to protect agriculture lands via a 2005 law that established a process for private landowners and county governments to designate prime agriculture land. That law fulfilled a mandate issued nearly 30 years earlier at the 1978 Constitutional Convention requiring the state to identify such land so it could be protected from development.

In June, Alexander & Baldwin Inc. became the first owner of farmland in the state under the new law. The move allows A&B to seek financial benefits from the state that could help shore up what have been money-losing agricultural operations for the company.

The law should help remove development pressure from agriculture lands, making it possible for farmers to secure land at reasonable rates for the long term.

"We certainly hope that" there's a future for Hawai'i's livestock industry, Kunimoto said. "That's what we work for."