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Fluid milk processing costs: current state and comparisons.

T J Dalton1, G K Criner, J Halloran

  • 1Department of Resource Economics and Policy, University of Maine, Orono 04473-5782, USA. timothy.dalton@umit.maine.edu

Journal of Dairy Science
|May 23, 2002
PubMed
Summary
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This study models milk processing costs in Maine, finding that larger plants reduce per-container costs but distribution challenges limit centralization. Processing costs have risen significantly due to labor and technology shifts.

Area of Science:

  • Agricultural Economics
  • Operations Research

Background:

  • Milk processing and distribution are critical components of the dairy supply chain.
  • Understanding cost structures is essential for industry competitiveness.

Purpose of the Study:

  • To determine the minimum cost of processing and distributing fluid white milk in Maine.
  • To analyze the impact of plant size on processing costs.
  • To evaluate the economic viability of in-plant blow-molding technology.

Main Methods:

  • An economic-engineering model was developed to represent a state-of-the-art milk processing facility.
  • The model assessed processing costs, economies of scale, and the minimum volume for specific technologies.
  • Comparative analysis with 1993 data evaluated cost trends over a seven-year period.

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Main Results:

  • Increasing plant size offers significant per-container processing cost savings.
  • Distribution costs, influenced by consumer demand geography and plant location, do not favor large, centralized facilities in Maine.
  • Processing costs have increased by 2.9% annually above inflation, driven by advanced equipment and higher labor costs.

Conclusions:

  • Dairies must adopt capital investment and expansion to manage rising labor costs and remain competitive.
  • The optimal balance between plant size and distribution logistics is crucial for cost-effective milk processing.
  • Technological advancements in processing equipment have become a significant cost factor.