Consumer willingness to pay and economic viability of speciality milk products
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Industrial change over the past century has driven a decline in UK dairy farming. This study examines potential diversification within the sector through investigating consumer demand and the economic viability of ‘speciality’ milk products. The data for this study was collected from both consumers and producers in order to produce a model integrating both supply and demand economics. Information from consumers was collected via a questionnaire whereby dairy farming knowledge, opinion and willingness to pay (WTP) for speciality milk products was investigated. As economic or production data for speciality products is not readily available, this information was gathered through multiple case studies. A significant proportion of respondents claimed they would be willing to pay more for milk from all three speciality factors, with locally produced milk defined as the most important factor with the highest proportion of ‘yes’ responses and the highest WTP value. A regression analysis was used to predict willingness to pay from survey results and a significant regression equation was found using respondent estimates of both farmer milk sales share and average pint cost. An economic model was produced using both survey results and case study data in order to examine the economic viability of speciality products. The model suggests that the cost of reduced milk yield from rare breeds could be mitigated by consumer WTP, and that micro-dairies could be economically viable and substantially less susceptible to external fluctuations in costs than conventional farms. The results from this study support evidence from past studies on demand from local produce, provide insight into how new entrants into dairy farming could be encouraged through the use of micro-dairies and suggests a potential way of using rare breeds as added value milk producers which could improve their commercial viability.
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