The Effects of Seasonality of Manufactured Milk Production on Dairy Manufacturing Firms\u27 Efficiency

Seasonal variations in milk production have been a major problem of the South Dakota dairy manufacturing industry for a number of years. Processors faced throughout the year with wide fluctuations in the volume of milk received are prevented from obtaining optimum utilization of equipment, labor, and other plant facilities. Manufacturers cannot decrease operating costs materially as volume declines from peak levels since a major portion of the plant’s costs are fixed. The above generally indicates the nature of this study. How then, is South Dakota affected by this problem? Seasonality of milk production in South Dakota is decreasing, but the rate of decrease has not been sufficient to eliminate the existing problem nor has it been consistent over the last several years. The objective of this study were: to determine the degree of increased efficiency of the firm which might be expected to result from reducing the seasonal variations of milk production and increasing receipts to a level now attained only three months of the year, to estimate the effect of increased efficiency of the firm on producer milk prices