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Economies of Size in Processing Manufactured Dairy Products and Implications for the Southern Dairy Industry*

Published online by Cambridge University Press:  28 April 2015

M. C. Conner ,
W. T. Boehm  and
T. A. Pardue
M. C. Conner
Affiliation:
Department of Agricultural Economics, Virginia Polytechnic Institute and State University
W. T. Boehm
Affiliation:
Department of Agricultural Economics, Virginia Polytechnic Institute and State University
T. A. Pardue
Affiliation:
Manufacturing Operations, Dairymen, Inc.
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Extract

Fluid milk marketing is characterized by daily and seasonally fluctuating raw milk production, variable fluid processing schedules and seasonally fluctuating consumption patterns. These conditions, plus the perishable nature of the product and a relatively low short-run elasticity of demand for fluid milk, are generally considered to be factors requiring volume of Grade A milk available to an area at any given time to exceed the amount actually consumed in the fluid form—if the market is to be characterized by a reasonable degree of price stability. This excess is often referred to as the minimum or “necessary” reserve. The volume of excess milk available may be greater than this minimum, however, as a result of other factors such as classified pricing or producer prices above equilibrium levels.

Type
Research Article
Information
Journal of Agricultural and Applied Economics , Volume 8 , Issue 2 , December 1976 , pp. 103 - 107
Copyright
Copyright © Southern Agricultural Economics Association 1976

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Footnotes

*

The authors acknowledge the assistance of Dr. A. J. Ortego and W. E. Wright in development of the study.

References

[1] Babb, Emerson M. “Effect of Assembly, Processing and Distribution Costs on Marketing Fluid Milk,” Agricultural Experiment Station Bulletin No. 828, Purdue University, February 1967.Google Scholar
[2] Cobia, D.W. and Babb, Emerson M.. “Determining Optimum Size Fluid Milk Processing Plant and Sales Area,” Agricultural Experiment Station Bulletin No. 778, Purdue University, May 1964.Google Scholar
[3] Davino, Gary, Bradfield, Alec, Mengel, John and Webster, Fred. “Economies of Size in Large Fluid Milk Processing Plants,” Vermont Agricultural Experiment Station Research Report, MP 62, May 1970.Google Scholar
[4] Nolte, G. M. and Roller, E. Fred. “Milk Assembly and Processing Costs in the Butter/Dry-Milk Industry,” Minnesota Agricultural Experiment Station Bulletin 507, 1972.Google Scholar
[5] Pardue, T.A. and Wright, William E.. “Manufacturing Plant Cost Simulation Study,” Dairymen, Inc. In-House Report, October 1975.Google Scholar
[6] Webster, Fred, Bradfield, Alex, Bowering, J. R., Moore, H.C. and Taylor., K.A. “Economies of Size in Fluid Milk Processing Plants,” Vermont Agricultural Experiment Station Bulletin No. 636, June 1963.Google Scholar