Food Processing
Last updated: April 2008

Industry Codes:
  • NAICS – 311511 Fluid Milk Manufacturing
  • SIC – 2026 Fluid Milk

Overview

Over the past 20 years, per capita milk consumption in the U.S. has decreased. Only about 30% of the milk processed is consumed as fluid milk or cream. About half of the milk is converted into some form of cheese. In March, milk production was up 2.4% over one year earlier and projected to increase 2.7% overall in 2008. However, there is concern about the future profitability of the fluid milk processed as dairy farmers compete against ethanol producers for corn and other basic feed stocks. When the milk-feed price ratio is out of sync the profits of processing plants get squeezed as they try to pass along higher costs to retailers who will, in turn, raise prices charged to the consumer. One "bright spot" should be the export market. In 2005, 8.3% of total U.S. production for products such as powered milk, cheese, whey, lactose protein, ice cream, infant formula, fluid milk and cream, and milk powders were exported. This is expected to increase due to the devaluation of the dollar.

Industry Condition – Fair


Key Industry Indicators

  • U.S. Fluid Milk Sales
    In February 2008, fluid milk sales in the U.S. were down 7% compared to the prior month, but increased 2.6% or 118 million pounds over one year earlier.
  • Fluid Grade Milk Price
    In April 2008, fluid grade milk prices were $18.00/cwt, 8% higher than one year earlier. Prices began to spike in July 2007, began falling in November and continued a steady decline through March, but held steady in April.
  • Milk Cow Prices
    In April 2008, the price per milk cow decreased slightly from $1,960/head in January to $1,940/head. The price is up 12% compared to one year earlier.
  • Estimated Milk Production
    In March 2008, milk production in the U.S. increased 2.4% over one year earlier.
  • Milk-Feed Price Ratio (with MILC payments)
    In April 2008, the milk-feed price ratio (with MILC payments) was 1.90 which fell from 2.51 one year earlier. The ratio has now fallen to its lowest level since 2001.

Commodity Tracker

Secondary Market

Overview

There are about 380 fluid milk processing plants in the U.S. and over 1,000 dairy product manufacturing plants. The equipment in these facilities is installation intensive and should be valued in-place as part of a business enterprise valuation. It is not uncommon for entire plants or groups of plants to be sold intact to competing processors. Intangible assets, like shelf space and recognized brands, have considerable value.

Although milk processing facilities are sold piecemeal, removal of much of the equipment is difficult and, as a result, the value realized is negatively affected. The equipment generating the most value is blow molding equipment, filling lines, and processing equipment like separators, homogenizers, heat exchangers, and valve clusters. Smaller processing tanks and silos that are easily accessible and transportable over the road are also salable. Stainless steel piping is salable by length and also has considerable scrap value in today's market.

Used Equipment Values – Average

  • Supply of used equipment – Stable
  • Demand for used equipment – Stable

Liquidation Monitor

  • Recent bankruptcy filings
    • Bravo! Brands filed on September 21, 2007

Factors Influencing Value & Marketability

In-Place
  • Age, condition, productivity, efficiency, flexibility, and location of the processing plant
  • Business factors, including availability of competitively priced raw materials, cost of operations, trade name and trademarks, distribution & shelf space, pricing, competition, etc.
Piecemeal
  • Age, condition, productivity, efficiency, flexibility
  • Location and accessibility in the building
  • Limited number of prospective purgeantaresrs
  • Limited dealer network
  • Scrap prices

Industry Experience

Valuation Monitor

AccuVal routinely provides appraisal, consulting, and asset management services to the Food Processing industry, including all sectors of dairy processing. View industries serviced >>

Representative Clients Our Associates Have Served

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Success Stories

  • AccuVal's Appraisal of Fortune 500 Milk Processing Operation Supports Successful $125 Million Transaction
  • Feasibility Analysis Supporting Major Merger Between Two Industry Giants Proves Spot On
  • AccuVal Provides the Strategy to Maximize Recovery in Bankruptcy by Bundling the Sale of Certain Operating Plants, Customer Relationships, and Trademarks
  • View all Success Stories