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Projected Profit Maximization for Value Added Dairy

Ty Wolaver

Summary

Many dairies in the Southeast want to add a processing facility to their farm to diversify their cash flow and ensure profitability. However, it can be tough to know how much milk needs to be processed into what product mix for their value-added facility to have the highest chance of profitability. The tool presented would take certain facts and assumptions about a dairy (i.e. value of milk if sold to a traditional market, milkfat percentage, cost of materials to make products like ice cream) and use them along with the price each product will be sold for to determine the optimal product mix for a particular dairy. It can also be used to get a general understanding of profitability if a farmer were to start production in a value-added dairy.

Details

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