Fluid Milk Processing Cost Analysis

¹ Department of Resource Economics and Policy, University of Maine Orono 04469

An economic engineering model of a milk processing facility was used to estimate processing costs for white milk in Maine. A microcomputer spreadsheet was used to determine per unit processing costs and to perform sensitivity analyses and comparisons of processing costs for 1989 and 1993. Sensitivity analysis addressed the effect on processing costs of a 50% increase in milk volume processed and on-site blow molding for plastic gallon (3.784 L) and half-gallon (1.892 L) containers.

Overall, estimated costs for the processing facility have increased 10% between 1989 and 1993. Electricity and labor costs have increased, but the annual costs for equipment, land, and building have decreased. Analysis showed that the distribution of processing costs varied among container types. Increasing the plant capacity from 400,000 to 600,000 gal/d reduced processing costs for plastic gallons by 11% and for plastic half-gallons by 13%. The operation of the smaller plant without on-site blow molding increased processing costs by $.028 for gallon containers and by $.008 for half-gallons.

Key Words: engineering • milk processing • economy of size • costs

Submitted on July 26, 1994
Accepted on December 28, 1994