OSBORN, Mo. - Leroy Shatto poured the Missouri Director of Agriculture a sample of an experimental flavor of milk: Cotton candy.

Director Dr. Jon Hagler exclaimed it was excellent.

Mr. Shatto held up the glass bottle of blue milk. "You ought to see the cow that comes from," he joked.

The Shatto Milk Co. is one of the department's greatest success stories, Dr. Hagler said. Friday afternoon, he visited the dairy near Osborn, Mo., to recognize awarding of an $88,000 grant.

Mr. Shatto is using the money to develop cheese products. He said producing cheeses will use excess milk when demand for bottled milk decreases. Next week, an artisan cheese maker from New England will visit the dairy to train the staff in making different varieties. "I think this cheese will be bigger than I ever dreamed," Mr. Shatto said.

Already the dairy has exceeded his expectations. He begun selling farm fresh milk in glass bottles in June 2003. Milk drinkers instantly took to the product and Shatto Milk added flavored milks, butter, eggnog, ice cream and, most recently, cheese curds.

Shatto Milk was named the runner up as the nation's best small business.

The little dairy, located on Missouri Highway 33 south of U.S. Highway 36, also has become a tourist draw. Today, about 5,000 people are expected to attend Family Day at the Farm. The event from 11 a.m. to 3 p.m. will include hay rides, petting baby calves and milk samples.

"People want to see where their milk comes from and what a cow looks like," Mr. Shatto said.

Dr. Hagler praised Shatto for giving consumers a connection with the earth. He hopes more family farms will use the value added grants to extend their operations.

"We believe the future of agriculture rests in a lot of ways with these small operations," he said.

Susan Mires can be reached at susanm@npgco.com.