Small Dairy Farmer Finds Niche Market

Five year ago, dairy farmer Robert Shatto found himself at a crossroads. He had been operating at a loss for two decades and the situation was only getting worse. He didn’t want to give up the business so he came up with another plan. He returned to his roots -- playing up his milk's fresh, hormone-free advantage, and used retro glass bottles that no other store was using. The newly popular Shatto brand milk also had residual effects – farm tours that draw as many as 1,000 visitors a week and an expanded product line including orange and root-beer flavored milk.

Even though 5 dairy farms close a day, there are the few who are taking control of the marketplace. They’re producing a wholesome product and marketing a lifestyle. It’s a huge opportunity to reverse the trend of the disappearing family farm.

The high-end branding moves have afforded small dairies a way to insulate themselves -- with built-in margins -- from the fickle market forces that have wreaked havoc on milk prices. Farmers who sell their milk to the cooperatives at a set price, which for years has typically meant lower than the cost of production, can now demand their own price, anywhere from $35 to $45 per 100 pounds of milk to retailers directly, in contrast to $10 to $16 to the cooperatives.

These small farmers can barely keep up with the demand they have created, but by them coming up with niche markets that needed to be filled, they have been able to stay in business and preserve the small family farms.

1 comment:

Dr. Tufte said...

Ummm ... does anyone else see a problem with a business that can lose money for 20 years and stay open?

First off, there may be nothing wrong with that. It may be a labor of love in which the non-monetary profits far exceed the monetary losses. The only problem with that explanation is that this isn't mentioned in the story.

It's possible that the owner has very deep pockets - but again, this isn't mentioned.

It's also possible that the owner has been making lots of unrealized capital gains on his property, which make losing money worthwhile. This isn't mentioned either, but it begs the question of why he bothers to produce milk at all.

Then there is the possibility that the claim that he is losing money does not include subsidy checks from the federal government. Again, this isn't mentioned, but we can be sure that he is getting them (almost all dairy farmers do).

I think it's a shame that all of this is left unclear, because it is a pretty nice story.