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. marketing and innovation investment. distribution.In this evolving environment. competition and substitution (as defined and exhibited by consumers). the U. dairy industry has significantly different opportunities to better meet these varying needs across categories.S. The evolution and future health of specific dairy categories are dependent on the current levels of “commoditization” of the category — price-driven private/store label.

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and a range of diseconomies of scale (rises in average cost as production increases).Scale Economies and Structure in Dairy Farming Strong structural changes—specifically. A longrun average cost curve is depicted in figure 2. The figure also displays a range of constant average costs. At low levels of output.4 The figure consists of three regions. in which average costs do not vary with increases in output. average costs decline with increases in output. the ongoing shift of production to larger operations—suggest that there may be significant economies of scale in dairy production. . in the form of cost advantages accruing to increased herd sizes.

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