Nation’s Dairy Industry Sinks: Shetlers Rises to the Top

The U.S. dairy industry is in a tailspin. In the first half of 2009, pricing for Class III milk-that is, milk used to manufacture hard products like butter, nonfat dry milk and cheese-reached nearly its lowest level since 1978. Price per hundredweight, or one hundred pounds of milk, dropped from approximately $20 to about $10 within just a few months. At the same time, demand for milk exports has plummeted, and feed costs have soared. The result? Dairy farms around the nation-some in their seventh generation of operation-are closing the gates, selling the herd and calling it quits.

Is the crisis affecting Kalkaska's Shetler Family Dairy, producer and bottler of its own low-temperature pasteurized, non-homogenized milk? Co-owner Sally Shetler says the farm isn't totally immune to the industry's woes, but it has seen-and survived-the industry's struggles before.

"We started bottling our own milk 10 years ago, because it was bad 10 years ago too. We had to decide back then if we wanted to lose the farm or continue farming," she says. "Right now, we're not making a big profit, but we are OK and paying three full-time family members out of our 40-cow herd."

Key to the farm's survival startegy: smart pricing. Sally says Shetler tries to keep its shelf price at about $3.99 per half gallon-always striving to maintain a price between top-shelf organic and conventional milk.

Another strategy: capitalizing on the local-foods movement. "You see, we're marketing our own milk. And once you capture a niche and get into the niche marketing, you're pretty much unaffected by the commodity market," says co-owner George Shetler. "We're serving people who care where their milk comes from, and they're willing to pay the price. What we've found is that people are willing to support the farmer, and they also want to eat healthy."

The Shetlers, whose cows are totally grass or hay fed and never touched by antibiotics, hormones, herbicides, synthetic fertilizers or pesticides, don't miss an opportunity to remind shoppers of their milk's niche. They trumpet slogans like "Healthy soil produces healthy food, which produces healthy animals and people." The farm's logo features its name encircling an image of Michigan. And imprinted on the side of every bottle is another reminder of the farm's commitment to healthy cows, healthy milk and a healthy environment: "Our cows aren't on drugs, but they are on grass!"

Like any manufacturer these days, Shetler Dairy Farm is finding that diversification does a bottom line good. In addition to refrigerator staples like milk and cultured buttermilk, the farm has expanded its product line to flavored milks and seasonal treats like Egg Nog. It's also hit on today's thirst for coffee drinks and healthy smoothies, serving up its own half & half creamer, Moo-cacino (a coffee-flavored milk) and reduced-fat yogurt smoothies in a variety of flavors. This summer, it added ice cream-11 flavors and counting-to its roster of products.

The most popular sellers? Chocolate milk and heavy cream-the latter of which is booming, thanks to local demand. "We can't keep up with the cream because the local restaurants all want it," says Sally. "Trattoria Stella purchases about 36 quarts a week-or more, if we had more-but we're a little short right now."