Meadow Gold Dairies has received an $8.2 million contract to supply milk to the Department of Education's school lunch program.

Meadow Gold, which is owned by Dallas-based Dean Foods Co., was the only bidder for the contract, said Glenna Owens, DOE's food services program manager.

Meadow Gold's contract can be extended with up to two additional one-year contracts. Hawai'i's schoolchildren have consumed locally processed milk for decades in an arrangement that provides kids with fresh milk while giving local dairies a guaranteed market. However, that relationship is changing even though Meadow Gold, Hawai'i's sole milk processor, won the contract.

That's because all but one of O'ahu's dairies has closed, and the remaining dairy — Pacific Dairy — has announced plans to close this summer. That means more Mainland milk needs to be imported into Hawai'i to meet local demand.

Still, awarding the contract to Meadow Gold increases the possibility that local milk may be sold to schools, said Jeri Kahana, commodities branch manager for the state Department of Agriculture.

"That's good for us," she said. "At least local milk will still have the potential for expanding."

The pending loss of O'ahu's remaining dairies follows years of declining production amid rising feed, shipping and land costs, urban encroachment, environmental regulations and stagnant sales.

Reach Sean Hao at shao@honoluluadvertiser.com.