Haystack Mountain is not getting subsidised milk; they're paying market rates. The dairy is a profit centre for the prison (which in this case is government operated), used to defray operational costs. The prisoner's get paid a pittance, but that helps out the prison; not Haystack (or the grocery stores or eventual consumers). Nobody in the production chain is going to give their output away below market rate just because they got cheap inputs.
Similarly, people suggesting that the competition is putting other dairies out of business are off the mark, because again, the prison dairy is selling their product at market rates. And in this particular case, the prison dairy was set up after Haystack Mountain's supplier closed, threatening to force them out of business; they didn't close in response to the prison dairy closing.
The deeply troubling issue described in the article is forced labour, where the government can throw you in prison and then force you to work for (basically) free. Cheap cheese (or goat milk) is 1) not an ethical issue and 2) not actually happening.