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Processing Costs, Labor Efficiency, and Economies of Size in Cooperatively Owned Fluid Milk Plants

Author

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  • Thraen, Cameron S.
  • Hahn, David E.
  • Roof, James B.

Abstract

This article examines the operating cost structure of 15 cooperatively owned fluid milk processing plants. The selected plants range from small, low-volume facilities to large, high-volume plants with varying levels of capital and labor inputs. Operating costs are presented for the plants by converting monthly fiscal data to averages and grouping the plants by relative processing volume. The functional relationship between total and unit costs and average plant volume is estimated. Processing cost per gallon declines by 1.6 percent for a 10 percent increase in plant volume. Approximately 85 percent of the reduction in unit cost is attributable to lower labor, packaging, energy, repair, maintenance, and depreciation costs.

Suggested Citation

  • Thraen, Cameron S. & Hahn, David E. & Roof, James B., 1987. "Processing Costs, Labor Efficiency, and Economies of Size in Cooperatively Owned Fluid Milk Plants," Journal of Agricultural Cooperation, National Council of Farmer Cooperatives, vol. 2, pages 1-17.
    • Handle: RePEc:ags:joagco:46202
    DOI: 10.22004/ag.econ.46202
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    Cited by:

    1. Ariyaratne, Chatura B. & Featherstone, Allen M. & Langemeier, Michael R. & Barton, David G., 2000. "Measuring X-Efficiency And Scale Efficiency For A Sample Of Agricultural Cooperatives," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 29(2), pages 1-10, October.
    2. Kozo Harimaya & Koichi Kagitani, 2022. "Efficiency, and economies of scale and scope in Japanese agricultural cooperatives," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 11(1), pages 1-19, December.
    3. Hailu, Getu & Goddard, Ellen W. & Jeffrey, Scott R., 2005. "Measuring Efficiency in Fruit and Vegetable Marketing Co-operatives with Heterogeneous Technologies in Canada," 2005 Annual meeting, July 24-27, Providence, RI 19507, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Stephenson, Mark W. & Novakovic, Andrew M. & Pratt, James E., 1991. "An Evaluation of the Cost of Seasonality in the U.S. Dairy Industry," 1991 Annual Meeting, August 4-7, Manhattan, Kansas 271158, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Pokharel, Krishna P & Featherstone, Allen M, 2016. "A Nonparametric Approach to Estimate Multiproduct and Product-specific Scale and Scope Economies for Agricultural Cooperatives," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236182, Agricultural and Applied Economics Association.
    6. Erba, Eric M. & Aplin, Richard D. & Stephenson, Mark W., 1997. "An Analysis of Processing and Distribution Productivity and Costs in 35 Fluid Milk Plants," Research Bulletins 122717, Cornell University, Department of Applied Economics and Management.
    7. Stephenson, Mark W. & Novakovic, Andrew M. & Pratt, James E., 1990. "The Potential for Structural Change in the Northeast Dairy Manufacturing Sector," Staff Papers 121539, Cornell University, Department of Applied Economics and Management.

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    Keywords

    Agribusiness;

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