Milk Assembly Costs in the Greater Ohio Area: A Multiproduct Analysis

Edward W. Gallagher, Cameron S. Thraen and Gary Schnitkey ()

Review of Agricultural Economics, 1993, vol. 15, issue 1, 75-88

Abstract: The economics of raw milk assembly is examined. The hauling technology is described as a multiple output process with road miles and volume by weight hauled as the outputs produced by the hauling firms. A translogarithmic total cost function is estimated using survey data from the greater Ohio milk production region. The relative share of total cost is substantially lower for the volume hauled output relative to the distance driven outputs. Current hauling rate schedules strictly based on volume, or on volume per mile driven, substantially overcharge large volume dairy producers and under-charge small volume producers.

Date: 1993
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