Custom Mix Feed Milling in Nebraska: Economies of Size and Plant Utilization

Authors

Alan R. Moeller, University of Nebraska-Lincoln

Document Type

Thesis

Date of this Version

4-1971

Citation

Thesis (M.S.)—University of Nebraska—Lincoln, 1971. Department of Agricultural Economics.

Comments

Copyright 1971, the author. Used by permission.

Abstract

The general purpose of this study is to determine if more efficient methods of custom mix feed production and distribution are available. The specific objectives are:

1. To identify and describe the important characteristics and general trends of custom mix feed operations in Nebraska.

2. To synthesize three model feed mills and corresponding production costs to be used in measuring possible economies of size and utilization of plant.

3. To synthesize distribution cost relationships for various custom mix plant volumes and delivery distances.

4. To identify the major factors affecting custom mix feed production and distribution costs and possible methods for cost reduction.

The more important findings and their implications are summarized below.

1. Custom mix operations have been, and likely will continue to be, an important part of the Nebraska feed industry.

2. Mills should be operated as near effective capacity as possible. A mill operating at or near full capacity utilization of existing capacity has substantially lower average costs than when operating at reduced levels of utilization.

3. Custom mix mill site is an important determinant of the level of per unit costs. A plant of 150 tons per day capacity has costs of only $1.71 per ton or 66 cents less per ton than the smallest mill size.

4. Distribution costs bear a different relationship to plant volume than do the internal mill costs. As the utilization of each model mill increases, the average variable truck costs and average labor costs increase.

5. Due to the discontinuous nature of the delivery equipment, economies of distribution associated with increases in mill size (number of tons hauled) are less dependable. Truck utilization is very low for the 100-ton mill, even at capacity output. Average delivery costs for the latter mill are therefore higher than for either the 60- or the 150-ton plant.

Advisor: Dale G. Anderson