the costs of starting a milk processing business vary widely depending on the choice of products, the scale of operations, and design and materials used for construction. A reasonable budget includes the costs of constructing the facility, purchasing equip-ment and installation, and marketing operations.
the facility is either built into an existing building, added onto the existing milk storage room of the barn, or a new building is constructed. A facility producing 20,000 pounds of cheese, which includes all of the necessary rooms, will be 1,000 to 2,000 square feet. In very general terms, the interior work for a milk processing facility of this size will cost around $50,000. the choice of flooring is the larg-est single factor in the total cost; acid-resistant brick flooring is around $17 per square foot. A specialized cheese aging room, such as a concrete cave, will add another $50,000 to the cost.
Equipment costs have the widest variation.
Sometimes used equipment bargains can be found and it may only take $10,000 to get set up to process milk. On the other hand, the cost of new equipment for making fresh dairy products may be $100,000.
A moderate budget for raw milk cheese making is
$25,000. In budgeting, installation costs are often overlooked. Estimates are needed for boiler hook ups and stainless steel pipe welding jobs. table 10.1 includes some of the common costs for milk pro-cessing equipment for a farm producing 400–600 liter of milk per day. these can be used to develop a budget.
A budget for marketing operations is needed to ensure that there are funds for labels, packaging and shipping materials, sales, service, product samples, promotion, web site development, etc. (See table 10.2) these costs typically are estimated at 15–20%
of anticipated gross sales during the early years of the business; they may decrease to 8–10% once the business has established a solid reputation.
A few additional considerations will help in developing start up budgets. these include: Shrink-age/waste of product, which is made but not of sufficient quality to sell. Count on 20% during first year and 5% is the normal operating amount and is an achievable goal within 5 years of start up.
Set your prices based on what you need to carry the operation. there should be a 40% profit mar-gin above the production cost, which is what it costs you to get the product ready for sale before sales and distribution costs are factored in. Make high-priced products in limited quantities thereby increasing demand.
the previous “cash flow analysis” was for a sheep cheese business. Adjustments in costs and returns must be made if this is applied to goat and cow milk cheese production as follows:
• cheese yield should be set at 10 pounds milk to 1 pound cheese;
• cheese prices should be the same for hard and soft-ripened goat cheeses but $15 per pound retail and $8 per pound wholesale for goat Feta and Chevre;
• prices for cow cheeses should be $16 retail and
$9 wholesale;
• milk costs should be $25 per hundred weight (cwt.) for cow and $40 per cwt. for goat.
the cash flow analysis also assumes that the every 5 pounds of sheep milk and every 10 pounds
66 A GuiDe To STARTinG A CoMMeRCiAl GoAT DAiRy
equipment cost ($)
1 x 1,200 liter cheese vat w/agitator and curd
knives (new) $15,000
1 x 50 gal vat pasteurizer (used) 5,500 Pasteurization controls and steam filter 3,500 1 x 7.5 HP (60,000 BTU/hr) steam boiler (new) 8,000
Boiler condensate return system 3,000
1 x brine tank (10 ft long x 3 ft wide, used) 1,500 2 x work tables (6 ft long, $250 each used) 50022 1 x cheese press and drain table (used) 2,000 1 x centrifugal milk pump and dump station (new) 800 25 x 10 lb cheese hoops ($215 each, new) 5,375 20 x Camembert cheese block-forms
($335 each, new) 6,700
240 x cheese Aging racks (stainless steel wire,
$25 each, new) 6,000
50 x 5 lb cheese hoops ($50 each, new) 2,500 10 x 20 lb cheese hoops ($150 each, new) 1,500 Ice cream freezer (10 gal batch, new) 20,000 Cream separator
(100 gal/hr open bowl, used) 800
Cream separator
(200 gal cold, 400 gal hot/hr, closed bowl, used) 9,500
Homogenizer (400 gal/hr) 12,500
Ice water chiller (3 HP) 6,000
Walk-in cooler (6 ft. x 6 ft., with refrigeration, new) 6,000 Walk-in freezer (6 ft x 6 ft, with refrigeration, new) 6,000 Refrigeration and fresh air recovery
ventilation system
(in a room for aging 20,000 lbs cheese per year) 14,000
Cheese aging boards and posts 4,000
Vacuum sealer and hot water dip tank 9,000 table 10.1
common costs for milk processing equipment for a farm producing 400 – 600 liters of milk per day
table 10.3
actual yield (lbs milk/ lb cheese)
year Sheep cow/Goat
of goat and cow milk will yield 1 pound of cheese, which can be sold. this would be the case in an established cheese making business where 95% of the cheese that is made is sold. However, in the first five years, allowances must be made for “waste,”
which is cheese that is of poor quality and cannot be sold. It is better to adjust the yield figure as shown in table 10.3.
US Department of Health and Human Services US Department of Food and Drug Administration Office of Regulatory Affairs
5600 Fishers Lane Rockville, MD 20857-0001
888-INFO-FDA (888-463-6332), 302-827-6906 richard.barnes@fda.hhs.gov
STARTinG A new MilK PRoCeSSinG FACiliTy: ConSiDeRATionS AnD CoSTS 67 table 10.2
Sample operating cash flow analysis for a sheep cheese business
year 1 year 2 year 3 year 4 year 5
Milk used (lbs) 61,600 100,000 180,600 240,800 301,000
Cheese made (lbs) 12,320 20,000 36,120 48,160 60,200
Yield (lb milk/lb cheese) 5 5 5 5 5
SALES:
Cheese: (20% retail @ $20/lb + 80%
wholesale @ $12/lb) 167,552 272,000 491,232 654,976 818,720
EXPENSES:
Licenses, permits and fees 1,200 1200 1,200 1,200 1,200
Cheese ingredients: ($2.50/cwt for
rennet, salt and cultures) 1,540 2,500 4,515 6,020 7,525
Milk ($100/cwt) 61,600 100,000 180,600 240,800 301,000
Energy: (oil, electric, and wood) 2,500 4,000 6,000 7,980 10,613
Insurance (liability) 2,500 2500 2,500 2,500 2,500
Loan ($60,000 @ 5% x 7 years) 5,300 10600 10,600 10,600 10,600
Outside labor ($12/hr) 12,480 16,598 22,076 29,361 40,000
Marketing (20% of sales):
(sales, packaging, shipping distribution,
and service) 33,510 54,400 98,246 130,995 163,744
Cheese room supplies:
(including cleaning supplies) 500 600 800 1,000 1,200
Office supplies 300 400 600 900 1,200
TOTAL EXPENSES: $121,430 $192,798 $327,137 $431,356 $539,582
Total cost/lb $9.86 $9.64 $9.06 $8.96 $8.96
RETURN TO owner’s labor $46,122 $79,202 $164,095 $223,620 $279,138
PROFIT MARGIN before distribution 38% 39% 43% 44% 44%
Cheese production cost/lb before
distribution 7.14 6.92 6.34 6.24 6.24
69 Section 4
Milk
71