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Optimum Size of Dairy Plants as Determined by Survivor Analysis¹

Department of Agricultural Economics, University of Illinois, Urbana

D. A. Vose

Department of Economics, University of Minnesota, Duluth

ABSTRACT

This analysis sought to approximate the limits to optimum size among dairy processing plants and to determine the relative importance of plants of optimum size. Optimum size, as defined, included plants of those size groups which maintained or increased their share of industry output over time. Typically those groups included small but growing proportions of the plants, with no determinable upper limits to size, which processed substantial and increasing proportions of the total product.

The survivor technique is imprecise, particularly if group intervals are broad, plants operate in widely diverse environments, or there are serious lags in adjusting plant size to changing conditions. However, though findings should be interpreted with caution, they rest upon operating experience and the technique is comparatively quick and inexpensive; in some cases the only feasible means of estimating effective size for competitive survival.

¹ This research was part of North Central cooperative regional research project NCM-26, Changing Market Structure and Organization of Midwest Dairy Industry.

² Federal-state cooperative agent with the North Central Regional Committee on Dairy Marketing Research.