Like his father and his grandfather before him, Shep Ysselstein's life revolved around milk production.
Gunn's Hill, near Woodstock, Ont., has been a dairy farm since the 1800s, and since the Ysselstein family bought it in the 1960s, the daily routine is to feed and milk the herd of 130 Holsteins morning and evening.
"We produced milk and they just trucked it away and it was hard to know where it was used. It's blended into the pool and some of it goes to bottled milk and some goes to cheese plants," Mr. Ysselstein explains. But he started thinking of an alternative when he took a break from the farm to earn a business administration degree at an agricultural college in Iowa.
He has four other brothers and two had already moved away from the farm to pursue other careers. He'd seen many other family farms get sold because the younger generation didn't want to put in the hours it takes to make a living farming.
"I really like business, and farming is a business. But milking cows every single day wasn't necessarily for me," he says. "The cows never talk to you and it can get pretty lonely being around them all day long."
Rather than sending away the milk, his inspiration was to use it to make artisanal cheeses to add more value to the farm.
Shifting from just selling raw materials to either producing products from them or branding their source is a fast growing trend, says David Sparling, the chairman of agri-food innovation in the University of Western Ontario's Richard Ivey School of Business in London, Ont.
His research has found that a diversification strategy is increasingly necessary as many farmers need to capture more value from their land. One factor is that it's expensive to expand land holdings to increase production, particularly in the dairy business. Also, family members are getting training and skills needed to run farm businesses better, he says.
"Around the country there is a growing recognition that innovation in food products and capturing added value on farms is the best bet for rural communities to expand jobs and build economic growth," Prof. Sparling says. These can include growing vegetables in greenhouses for restaurants or retailers, as well as packaging or processing on the farm to capture more value rather than shipping it away.
At the same time, a number of government programs are encouraging diversification of farming.
An example is the recently launched federal Growing Forward 2 AgriInnovation Program, which has increased funding available for research and doubled the amount of money devoted to helping farmers develop new markets, he says.
There is also a growing market for locally produced food and branded farm products, says Ralph Martin, the Loblaw chair of sustainable food production at the University of Guelph in Guelph, Ont.
"The more local the brand, the more appeal there is," Prof. Martin says. "There is a hierarchy that goes from the county, to the province to the fact that the product is Canadian. Most consumers would still prefer something from Canada to something from outside the country."
"It's not necessarily because people want to buy food within a certain distance, but they do want some sense of relationship to the producer. And knowing that the proceeds go to local farmers is also an appeal because they understand that the economic spinoffs are going back into their own economy," says Prof. Martin, who teaches courses in organic agriculture and agricultural ecology.
"There's also an appeal in the artisanal nature of the product. Cheese made by hand in small batches seems less anonymous than cheese made on an industrial scale," he adds.
The game-changing approach is not restricted to single farms. There is a trend toward farmers who produce organic milk developing co-operatives, where a number of farmers arrange to have their milk processed and marketed under their brand, he says.
Mr. Ysselstein did his homework before starting Gunn's Hill Artisan Cheese.
He found that sales of specialty cheeses were growing rapidly in Canada. "It seemed like the time was right for what I had in mind," he says.
But he had no experience as a cheese maker, and he jumped at the chance to spend a summer on a cheese-producing farm in the Swiss Alps. "It was all very traditional, with wood containers and a copper vat that heated the milk over a wood fire. It was almost the same way things were done 500 years ago," he recalls.
Mr. Ysselstein says the experience taught him the true meaning of artisanal: hands-on. "When I'm making cheese, I'm very physically involved with it. I feel it and touch it and stir it myself. In industry, it's all automated."
"We will use about 250,000 litres of milk a year. [To put that in perspective, it's the milk produced by about 30 cows in a year.] A large cheese factory might use a million litres a day," he explains.
If he had to do it over again, he might have built in more time before he had to get his cheese on the market.
"The thing about cheese is it doesn't just sell right away. There's a long time in production. Some need to be aged eight months to a year." That meant he had to arrange to have enough funding to bridge two years of expenses without much income, he found.
One of the major hurdles was getting financing to build a facility to make the cheese. Fortunately he had help from a local startup business loan program financed by Industry Canada.
Other hurdles were regulatory. He needed a licence to make food and there were local zoning rules about where he could set up a processing plant. And he also had to get a waiver from the dairy farmers' quota system to be able to use the milk the farm produces, rather than having it go into the milk processing system.
There was some trial and error in early batches of cheese as well. But now that he's got the technique right, the business is on track. In his second year of sales, he figures the cheese operation will break even this year and turn a profit in 2014.
A big boost was that Gunn's Hill Five Brothers brand won the firm cheese award at the Canadian Cheese Grand Prix in Montreal this spring. That has led to an upward spike in orders, including a deal to get wider distribution of the cheese, which he started selling through a store on the farm. Even the curds left over from production have become a runaway hit.
Now he's in the process of hiring employees to help with marketing and shipping, run the store and do the paperwork.
"I would like to continue to be the artisan and pass on the other tasks to someone else," he says. "It's a change in the game that's paying off."
Down on the farm
Trends in farming, according to the 2011 Census of Agriculture by Statistics Canada:
The number of farms in Canada has decreased 10 per cent in the past five years to 205,730, but the average farm size has jumped 7 per cent during that time.
22,000 family farms have been lost since 2006.
48 per cent of all farmers are 55 or older, the highest historic percentage.
The percentage of farm operators under 35 has fallen to 8.2 per cent from 9.1 per cent in 2006.