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A Comparative Assessment of the Milk Hauling Sector in the US and Argentina

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Abstract

Milk is a highly perishable, voluminous commodity which is often produced by farms scattered around large areas. As such, assembly and transportation become a critical stage for quality preservation and cost-related efficiency. In the U.S., milk assembly has developed to become almost an independent, albeit coordinated, step along the value-added chain. Processors are not usually involved in milk hauling logistics. Milk prices are quoted at processors' plants, leaving the producers responsible for paying transportation and other functions needed to deliver the raw product. In Argentina, milk prices are quoted at the farm gate, and processors are responsible for the logistics and direct payment for milk assembly. A search for more efficiency in milk assembly has recently started because of increases in pressures on dairy processors to sell additional production in international markets. Reductions in costs and increases in efficiency are basic to any competitive strategy in a non-subsidized environment, but serious constraints to both objectives are posed by inadequate infrastructure. Despite environmental differences, the present situation of the Argentine milk hauling sector resembles that of the U.S. in past decades. Without losing sight of the specific characteristics of each system, the following comparison between the U.S. and Argentine hauling sector's attempts to highlight present levels of development achieved by each of them. Based on the maturity of the U.S. system, the direction and dimension of changes ahead for the Argentina system will be projected.

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E.B. 96-15

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1996-08

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Charles H. Dyson School of Applied Economics and Management, Cornell University

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Milk Hauling; Procurement; Structure; Efficiency; Competitiveness

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