ECONOMIC VIABILITY AND COST MANAGEMENT IN DAIRY FARMING FROM THE PERSPECTIVE OF ECONOMIES OF SCOPE

Abstract

The objective was to analyze the economic viability and cost structure of dairy farming in the Mogiana Paulista region from the perspective of the economy of scope, using a simulation for a production system with 100 lactating cows. The study, based on secondary data from 2024, reveals that dairy farming in the simulated scenario is economically viable and profitable. The cost breakdown shows that the Effective Operating Cost (EOC) is heavily concentrated in a few items, with expenditures on concentrates (55.55%), silage (13.64%), energy/fuel (11.99%), and labor (5.86%) accounting for 87.04% of total expenditures. This pattern reflects the need for high nutritional supplementation in high-productivity herds (25 L/cow/day), consistent with the specialized literature. One of the most significant findings is the robust profitability of the operation, even from a broader accounting perspective. The projected profit of R$ 251,411.21 represents 17.92% of gross income. The analysis of return on capital is particularly revealing: the rate of return on working capital (20.48% per annum) and on total capital excluding land (9.98% per annum) are attractive. However, including the opportunity cost of land reduces profitability to 6.99% per annum, yet it still exceeds the benchmark of 6% per annum, indicating resilience and long-term viability. The study breaks new ground by disaggregating costs and revenues across different income sources, revealing the importance of economies of scope. Although milk is the core product (73.49% of revenue), the sale of livestock (4.44%) and, especially, by-products such as manure (22.07%) contribute significantly to overall profitability. This finding is crucial, as it demonstrates that revenue diversification within the production system is a key component of the farm’s financial health. Finally, the analysis of unit costs per liter of milk corroborates the system’s efficiency, with a total cost of 1.1095 relative to the selling price of R$ 2.36/L. The study’s conclusion reinforces that economic viability is consistent and that cost management—with a focus on nutrition and energy—combined with the exploitation of economies of scope, are critical to the venture’s success, especially in a context of scalability.