Value-added dairy production is all about finding ways to increase your dairy business profitability.
How you achieve that will vary depending on your in-terests, abilities, resources, and the market you can tap into. To succeed, an entrepreneurial spirit is required.
You will be faced with many tough decisions that will impact current and future operations and all aspects of the business, from processing to human resources to financial management and so forth. The thought you put into the choices you make and the research, prepa-ration, and analysis you do are integral to the start-up and management of a value-added dairy enterprise.
This publication has introduced many value-added dairy products you might consider producing. One of the primary decisions you will face is whether you will pasteurize your milk. Pasteurization allows you to produce and sell soft dairy items (butter, yogurt, and soft cheeses such as ricotta and mozzarella). The equipment needed to produce each dairy item was also covered. However, it is always a good idea to check with your state’s regulatory agencies—in most cases, the state Department of Agriculture—to ensure that you satisfy all regulations and guidelines before invest-ing in equipment. Failure to produce dairy items with approved equipment could result in having a stock of product that you are unable to sell, causing significant money loss and putting your business at risk. Make no mistake though, the process of choosing a value-added dairy item to produce allows you to look at your skills and talents and can be an exciting process.
Marketing is an integral component of all value-added enterprises. Not only do you need to research and assess your market options before beginning pro-duction, you must also effectively market your product to your target market population to create and main-tain sales. How well you are able to market your value-added dairy product will, to a large extent, determine your enterprise’s success (or failure) and profitability.
Marketing is a wide and complex topic. We have at-tempted to touch on many of its aspects, from research to distribution to pricing. However, you would be well served to educate yourself further on this topic.
Numerous resources are available, including publica-tions, extension workshops, conferences, and so forth.
Performing a resource inventory is a perfect place to begin your adventure into value-added dairy. As-sessing the resources you have at hand and others to which you have access can assist you in your decision making and planning. The inventory you develop can help you decide which product(s) you may want to consider processing as well as knowing where you will need to make investments. You should cover all aspects—including physical/natural, human, finan-cial, and marketing resources—when performing your inventory. You may be surprised to find what you have available to you.
The proper use of financial tools is essential for determining whether the choices you are considering are profitable. Financial analysis becomes even more critical to your business when starting a value-added enterprise since you are not guaranteed a sale of your product as you are when shipping fluid milk to a cooperative. Use the financial tools described here not only when starting your value-added enterprise but also when making changes to your marketing strat-egy, pricing, or to help decide whether to purchase a piece of equipment or change from black and white to colored product labels—all decisions that financially impact your business. You need to know how changes in strategy or unexpected expenditures will impact profitability. It could well be the difference between continuing with this new enterprise for years to come or having to close up shop.
The production of value-added dairy products allows for a vast array of business opportunities, and careful planning can make the difference between success and failure. We hope that this publication will help you tackle the opportunities that exist. Most importantly, we hope you develop a profitable and sustainable value-added dairy enterprise, should you choose to follow that path.
Resources
Publications and articles
Boehlje, M., and C. Ehmke. Capital Investment Analysis and Project Assessment. West Lafayette, Ind.: Purdue University, 2005.
Gegner, L. “Value-Added Dairy Options.” Appropriate Technology Transfer for Rural Areas (ATTRA). August 2001. www.attra.ncat.org
Gloy, A., and M. Stephenson. A Value-Added Opportu-nity: Market Potential for Specialty Cheeses in Select New York Markets. Ithaca: Cornell University, 2006.
Greaser, G., and J. Harper. Agricultural Alternatives: En-terprise Budget Analysis. University Park: The Pennsyl-vania State University, 1994. agalternatives.aers.psu.
edu/farmmanagement/enterprise/enterprise_bud-get_analysis.pdf
Johnson, K. Big Rewards in Small-Scale Dairy Processing.
MooMilk, 2000. www.moomilk.com/archive/tech_44.
htm
Roth, S. Product Pricing: What Do I Charge? University Park: The Pennsylvania State University, 2007. farm-management.aers.psu.edu/FMDocs/pubs/What%20 Do%20I%20Charge2.pdf
Roth, S. Understanding Pricing Objectives and Strategies:
For the Value-Added Ag Producer. University Park: The Pennsylvania State University, 2007. pubs.cas.psu.
edu/FreePubs/pdfs/ua441.pdf
Roth, S., and J. Hyde. Partial Budgeting for Agricultural Businesses. University Park: The Pennsylvania State University, 2002. pubs.cas.psu.edu/freepubs/pdfs/
ua366.pdf
Seeboth, A., and J. Harket. Value-Added Opportunities for Maine Dairy Farms. Maine Department of Agricul-ture, Food, and Rural Resources, 2005.
uniVersities
The Pennsylvania State University Food Science Department
Short Courses and Workshops 814-865-8301
www.foodscience.psu.edu/Outreach/shcs.html
University of Vermont
Vermont’s Institute for Artisan Cheese Burlington, VT
802-656-8300
nutrition.uvm.edu/viac/index.
cfm?pg=welcome§ion=about University of Wisconsin
Center for Dairy Research Babcock Hall
1605 Linden Drive Madison, WI 53706-1565 608-262-5970
www.cdr.wisc.edu/courses/cheese_technology.html Washington State University Creamery
PO Box 641122
Pullman, WA 99164-1122 800-457-5442
www.wsu.edu/creamery/upcoming.htm state dePartments oF aGriculture Connecticut
800-861-9939
www.ct.gov/doag/site/default.asp Maine
207-287-3871
maine.gov/agriculture/index.shtml Maryland
410-841-5700
www.mda.state.md.us Massachusetts 617-626-1700 www.mass.gov/agr New Hampshire 603-271-3551 agriculture.nh.gov New Jersey 609-292-6931
www.newjersey.gov/agriculture New York
800-554-4501
www.agmkt.state.ny.us/TheDepartment.html
Pennsylvania 717-787-4737
www.agriculture.state.pa.us Rhode Island
401-222-2781
www.dem.ri.gov/programs/bnatres/agricult Vermont
802-828-2416
www.vermontagriculture.com equiPment suPPliers Cheese Production equipment C. van’t Riet Dairy Technology-USA 70 Treasure Lake
DuBois, PA 15801 814-591-6979
www.schuller.us/index.html Milk Processing equipment Heritage Equipment Company 900 Heritage Drive
Plain City, OH 43064 614-873-3941
www.heritage-equipment.com Rowlands Sales Company, Inc.
Butler Industrial Park PO Box 552
Hazleton, PA 18201-0552 570-455-5813
www.rowlands.com Pladot Mini Dairy www.iec-il.com
www.pladotminidairy.com
other Cheese Supply PO Box 31125
Bellingham, WA 98228 866-205-6376
www.cheesesupply.com Dairy Foods Consulting Peter Dixon
Putney, VT 802-38704941
www.dairyfoodsconsulting.com/index.shtml The Dairy Practices Council
51 E. Front St., Suite 2 Keyport, NJ 07735 732-203-1947 www.dairypc.org
Glengarry Cheesemaking and Dairy Supply, Ltd.
RR #2 21048 Con 10
Alexandria, Ontario, Canada K0C 1A0 or
PO Box 92
Massena, NY 13662 888-816-0903
www.glengarrycheesemaking.on.ca
New England Cheesemaking Supply Company PO Box 85
Ashfield, MA 01330 413-628-3808
www.cheesemaking.com
Northeast Center for Food Entrepreneurship at the New York Food Venture Center
Cornell University/NYSAES Food Research Lab
630 W. North Street Geneva, NY 14456 315-787-2273
www.nysaes.cornell.edu/necfe/index.html USDA Dairy Product Standards
www.ams.usda.gov/standards/standair.htm
Prepared by Sarah Roth, senior extension associate, Penn State; Angela Gloy, extension associate, Cornell University; Jeffrey Hyde, associate pro-fessor of agricultural economics, Penn State; and Brian Kelly, Penn State Cooperative Extension educator in Blair County.
Visit Penn State’s College of Agricultural Sciences on the Web: www.cas.psu.edu
Penn State College of Agricultural Sciences research, extension, and resident education programs are funded in part by Pennsylva-nia counties, the Commonwealth of PennsylvaPennsylva-nia, and the U.S. Department of Agriculture.
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