Fluid Milk Processing Costs : Current State and

An economic-engineering model is used to derive the theoretically m in imu m cost of processing and distributing fluid white milk for the s ta te of Maine. This model represents a s tate-of-the-art mi lk processing facility and is used to evaluate three questions: 1) the components of total processing costs; 2) whe the r the cost of milk processing declines wi th increasing p lant size; and 3) the min imum processing volume to financially just i fy inp lant blow-molding technology. The model indicates tha t significant savings in per-container processing costs can be achieved by increasing plant size. However, distribution costs, related to the geographical distribution of consumer demand and p lan t location in the s ta te of Maine not favor large central ized plants . In addition, this model is compared with resul ts pubzhed in 1993 to eva lua te cost t rends over a 7-yr period. . ' i~e model indicates impor t shifts to more technologically advanced processing equ ipment and a dramat ic increase in labor costs. Overall, processing costs have risen 2.9% annua l ly above the ra te of inflation. Dairies tha t are unable to respond to increased labor costs through capital inves tment and expansion will likely find it more difficult to remain competit ive in the milk processing industry. (