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A Cost and Returns Evaluation of Alternative Dairy Products to Determine Capital Investment and Operational Feasibility of a Small-Scale Dairy Processing Facility¹

K. M. Becker^*,2, R. L. Parsons^*, J. Kolodinsky^* and G. N. Matiru

^* Department of Community Development and Applied Economics, University of Vermont, Burlington 05405
Independent Research Consultant, Williston, VT 05495

² Corresponding author: Kenneth.Becker{at}uvm.edu

This study examines the economic feasibility of 50-and 500-cow dairy processing facilities for fluid milk, yogurt, and cheese. Net present value and internal rate of return calculations for projected costs and returns over a 10-yr period indicate that larger yogurt and cheese processing plants offer the most profitable prospects, whereas a smaller yogurt plant would break even. A smaller cheese plant would have insufficient returns to cover the cost of capital, and fluid milk processing at either scale is economically infeasible. Economic success in processing is greatly contingent upon individual business, financial management, and marketing skills.

Key Words: small-scale dairy processing • yogurt • cheese • fluid milk