SIMULATION OF THE EFFECTS OF PRODUCTION SCALE ON COSTS AND ECONOMIC OUTCOMES IN DAIRY FARMING

Abstract

This study aimed to simulate the effects of production scale variation on the economic outcomes of dairy farming, analyzing scenarios of productive expansion and contraction. It was evidenced that production scale constitutes a structural determinant of profitability, with progressive gains arising from the dilution of fixed costs over larger production volumes. The research demonstrated that systems with higher milk prices exhibit significantly lower breakeven points and greater operational resilience under productive contraction scenarios, whereas systems with lower unit margins display greater profit elasticity in relation to scale, implying both higher risk and greater marginal gain potential with expansion. The analysis revealed that the interaction between price and scale generates multiplicative effects on economic performance, suggesting that the viability of the activity does not arise from either factor in isolation, but from the structural combination of both. The findings indicate that cost structure optimization, associated with value aggregation strategies and adequate productive scale sizing, constitutes a critical factor for the economic sustainability of dairy farming. It is concluded that the sector's profitability depends on the integrated management between price and scale, with the producer being responsible for evaluating, based on their specific context, the trade-off between investments in expansion and in quality, with the sensitivity analysis herein employed being a useful tool for the identification of breakeven points, risks, and opportunities for marginal gains in the long term.