Integrated Byproduct Streams for Enhanced Viability of Combined Dairy Farm and Milk Processing Operations

2015 Annual Report for SW14-015

Project Type: Research and Education
Funds awarded in 2014: $295,688.00
Projected End Date: 03/31/2018
Grant Recipient: Utah State University
Region: Western
State: Utah
Principal Investigator:
Dr. Donald McMahon
Western Dairy Center, Utah State University

Integrated Byproduct Streams for Enhanced Viability of Combined Dairy Farm and Milk Processing Operations


Small and mid-sized family farmstead or artisan dairy manufacturing operations have the challenge of how to dispose whey produced from cheese making as it carries a high biological oxygen demand. This project takes a multi-disciplinary systems approach to solving the waste problem while at the same time ameliorating the nutrient balance issues on dairy farms, lowering the carbon footprint and greenhouse gas emissions, providing an opportunity for additional revenue needed for a sustainable dairy farm—dairy manufacturing business for rural families, and building more visible linkages between farms and consumers.

The ultimate goal of this project is to demonstrate how all the whey (and any waste product from equipment rinsing) generated in an artisan dairy manufacturing operation can be combined with manure from the dairy farm in an aerobic digester to generate a deodorized biofertilizer and combustible gases. And to provide tools that will enable farmers to make an informed judgment on the costs and economic viability of starting an artisan dairy manufacturing operation in conjunction with their dairy farm.

Although encouraged for use on farms, digester systems do not function efficiently when the input is just manure because they lack easily fermentable carbohydrate. The sugar in whey greatly increases digester efficiency and we aim to determine the optimum combinations of whey and manure, and the best digester system that will provide an economic return for use by the ag-in-the-middle dairy farmer.

Objectives/Performance Targets

  1. Collect data and determine on three dairy farms (Logan, UT; Midway, UT, Colorado City, AZ): (a) their current nitrogen and phosphate balance, including nutrient imports and exports and manure production and usage, and (b) their current economic balance of costs versus expenditures.
  2. Collect data and determine for three dairy processing operations (two associated with farms [Heber Valley Dairy/Artisan Cheese in Midway and Meadowayne Dairy in Colorado City] and one independent operation [Aggie Creamery in Logan]) over a year of operation: (a) their balance regarding milk and other ingredient inputs versus food products generated for sale, (b) composition and quantity of liquid waste such as whey and equipment rinsings, and (c) an economic evaluation of products made and sold and associated waste disposal costs.
  3. Use the dairy processing data to model anaerobic digestion for each operation and determine the extent of manure that can be blended with the total waste processing stream to optimize (a) production of biomass suitable for sale as deodorized soil condition, (b) production of energy as combustible gases (with or without conversion into electricity), and (c) conversion of manure into biomass suitable for land application on the farm. In conjunction with this modeling, construct a lab scale digester that can be operated under the various specified conditions to confirm and refine the computer model.
  4. Determine the economic viability of each situation based upon Objective 3 that includes (a) sale of biomass and carbon credits, (b) impact on energy, (c) savings on waste disposal, (d) costs of transport of whey (when the processing operation is separate from the farm), and (e) nutrient management on the farm.
  5. Determine the improvements in nutrient balance on the farm based upon the various scenarios, and the benefits accrued by adding a processing system to milk production on a dairy farm.
  6. Determine the appropriate digester system needed for each scenario to achieve the best return on investment and most efficient long-term operation that would suitable for various size operations.
  7. Determine the benefits related to farm sustainability and solid and liquid processing waste disposal for farm and processing operations that range include small farmers, ag-in-the-middle farmers, and large farms
  8. Evaluate social and economic benefits related to (a) maintaining farming operations along with dairy product manufacture in rural and near rural locations, (b) reducing odor nuisance issues, and (c) developing stronger connections between consumers (who purchase products from the processing operation) and the dairy farms where the milk originates.
  9. Include in a previously developed model of profitability of artisan cheese making the costs and options of whey disposal and the economics of having an integrated farm/factory waste and nutrient management system.
  10. Provide through face-to-face meetings, online resources, webinairs, how-to-videos, outreach to (a) established dairy farmers who are faced with the situation of staying in or leaving the dairy industry, (b) established dairy processors who must resolve low-value high BOD/COD waste streams, and (c) people looking to enter the artisan farmstead arena.


During 2015, information was gathered to evaluate the economics of using an anaerobic digester for the combined treatment of whey and manure. Two approaches to this were made: (1) a survey was conducted of current operational costs being encountered by operators of artisan creameries related to whey disposal, (2) laboratory-based trials were conducted on the efficiency of anaerobic digestion based on combinations of manure and cheese whey, and (3) a business enterprise analysis was developed based on the farm and cheese operations owned and operated by Mr. Grant Koeller of Heber Valley Dairy in Utah.

Whey Operational Costs

There are four main modes of whey management currently being almost equally used by artisan cheese operations (based upon 18 responses):

  1. The cheese maker has an agreement with farmer(s) to pick up the whey.
  2. The cheese maker feeds the whey back to their own animals when they have a farmstead operation.
  3. The whey is composted or processed on the farm and used for fertilizer and/or irrigation.
  4. The cheese maker pays someone to haul the whey away or they pay a municipality to process it and put it down their drains.

The decision on which mode to use is dependent on size of the artisan cheese operation. There are significant operational costs associated with having the whey removed from the farm or relying on a municipality to process in grey water system. Doing so mainly occurs in the larger operations which had out grown their local farmers needs to feed their animals or were dealing with primarily acid whey which is less nutrient dense for animal feed.

Typically, a small scale operation does not consider having any operational costs for whey disposal because their individual operational costs are only vaguely tracked. Usually, except when there is a reason to have an explicit cost center associated with whey removal, such as payment per load for removal, costs are more likely to be intermingled with overall creamery operational costs.

The point at which impactful costs for whey handling becomes significant for a creamery occurs when the creamery is converting about 2,500 gallons or more of milk into cheese each week. That is, about 1 million lbs of whey is being generated each year. The costs associated with this ranged from paying high start-up costs to install a biodigester on site to operationally paying to have whey removed to an alternative location.

Anaerobic Digestion Efficiency

Manure was obtained from the Buchanan dairy from adult Holstein cows and then blended until its components (manure, undigested plant material) were homogenous. Cheese whey was obtained from the Aggie Creamery at Utah State University and filtered to remove any cheese fines. Some of the whey was adjusted to pH 4, 6, and 8. Activated sludge was obtained from the Central Weber Sewer District (Ogden, UT). Chemical oxygen demand (COD) for these starting materials was 42,100, 80,200 and 10,980 mg/L respectively.

Initially, bio-methane potential was determined for manure:whey mixtures of 100:0, 75:25, 50:50, 25:75, and 0:100 using 140-ml reagent bottles along with an additional 10% of the activated sludge and 1% of a chemical nutrient supplement solution. After flushing with nitrogen the sealed bottles were incubated at 35°C for 30 days. Gas volumes from the bottles were collected by syringe and then analyzed for composition by gas chromatography for methane and hydrogen content. At the end of incubation the amount of suspended solids remaining in the bottles was determined.

This was followed by incubation in a 60-liter capacity induced bed reactor with a hydraulic retention time of 10 days, using 15% whey with manure so as to maximize biomass production rather than biogas. The effluent was then collected and then air dried. The biomass will then be tested for bulk density, total porosity, air capacity, and water-holding capacity.

Business Analysis

The enterprise business analysis was completed as a Master of Science in International Food and Agriculture thesis by Steven Chans Lund an entitled “An analysis of the feasibility of anaerobic digestion on small-scale dairies in Utah.”

The purpose of this study was to analyze the feasibility of implementing anaerobic digester systems on small-scale dairy farms (i.e., 210 cows) in the state of Utah with an annual cheese production of about 100,000 pounds. The specific objectives of the study were the following:

  1. Examine the potential economic benefits of different products produced from anaerobic digestion.
  2. Examine the benefits of codigestion on a dairy farm and artisan cheese plant operation.
  3. Examine the potential social and environmental benefits received from anaerobic digestion.
  4. Analyze the strengths and weaknesses of using anaerobic digestion as a means to managing dairy waste.

The methods used included creating enterprise budgets for (a) the small-scale dairy (milking) activity, (b) the artisan cheese production activity and (c) the anaerobic digester system. It involved analyzing future cash flows, estimating the net present value, estimating the internal rate of return and performing sensitivity analyses. Each of the three enterprises was first analyzed separately to determine its individual profitability as well as its potential to improve farm profitability when combined and integrated with the other activities or operations. The feasibility is improved when coproducts from anaerobic digestion are marketed correctly.

It was shown that adopting anaerobic digestion on small-scale dairy farms can be feasible when subsidies are provided for the initial investment cost. The higher the percentage of initial investment covered by the subsidy is a signal that the social and environmental benefit provided by the enterprise is a high priority for the community. An estimated 35 percent of the investment cost of an anaerobic digester must be subsidized before an acceptable net present value and internal rate of return is realized for an artisan dairy.

Impacts and Contributions/Outcomes

Including an anaerobic digestion system for handling whey generated by an artisan farmstead cheese making operation needs to be considered in terms of social impact on the business operation. Anaerobic digester systems improve the social and environmental sustainability of the farm by reducing the negative externalities caused by agriculture, primarily when a dairy farm is located in close proximity to an urban area. It does this by improving the social acceptability of farms through reducing odors and also reducing the quantity of waste stored on the farm. It provides a socially acceptable method of waste management, decreases air pollution (e.g., decreases greenhouse gas emissions) and decreases the probability of water pollution.

The cost of making the farm more socially and environmentally sustainability through use of anaerobic digestion needs to be shared with the community. The negative impact of not doing so is that the farm may suffer from urban encroachment and the probability of the farm’s failure is increased. If the community wishes to maintain small-scale dairy farming as part of the landscape, it will need to consider subsidizing the adoption of an anaerobic digester for such farms.

However, the level of subsidies should be determined on a case-by-case basis. The subsidy should be adjusted to a level that does not entirely remove all financial responsibilities from the farmer but at the same time also makes the investment feasible for small-scale farmers. The level of subsidy should be determined by the level of financial risk a particular operation can accept and the level of pressure from urban encroachment. The subsidy level is influenced by the size of the farm, especially small-scale production, due to the economies of scale these operation lack but which are essential to the financial viability of unsubsidized anaerobic digesters.

Farmers and community officials must work together to determine the amount of compensation needed to ease the pressures of urban encroachment on dairy farms and to prevent the loss of the culture and tradition that farming provides to communities in Utah. By subsidizing the investment of anaerobic digester system by at least 35 percent of their initial investment cost, the sustainability of small-scale dairy farms in close proximity to urban areas in Utah will be improved.


Dr. Lisbeth Goddik
Professor and Ext. Specialist in Dairy Processing
Food Science and Technology Dept, Oregon State University
100 Wiegand Hall
Corvallis , OR 97331
Office Phone: 5417378322
Winfred Barlow
Owner Farmer
Meadowayne Dairy Inc
385 N Juniper
Colorado City, AZ 86021
Office Phone: 4356569506
Dr. Donald McMahon
Western Dairy Center, Utah State University
8700 Old Main Hill
Logan, UT 84322-8700
Office Phone: 4357973644
Bryce Buchanan
Owner Farmer
601 West 200 South
Smithfield, UT 84335
Office Phone: 4355635752
Dr. DeeVon Bailey
Applied Economics Dept, Utah State University
4835 Old Main Hill
Logan, UT 84322-4835
Office Phone: 4357972300
Dr. Conly Hansen
Nutrition, Dietetics and Food Sciences Dept,Utah State University
8700 Old Main Hill
Logan, UT 84322-8700
Office Phone: 4357972188
Dr. Grant Cardon
Associate Professor
Plants, Soils and Climate Dept, Utah State University
4820 Old Main Hill
Logan, UT 84322-4820
Office Phone: 4357972278
Dr. Ruby Ward
Associate Professor
Applied Economics Dept, Utah State University
4835 Old Main Hill
Logan, UT 84322-4835
Office Phone: 4357972323
Grant Kohler
Owner Farmer
Heber Valley Artisan Cheese
PO Box 182
Heber City , UT 84032
Office Phone: 8013585602
Dr. Allen Young
Professor and Extension Specialist
Animal, Dairy and Veterinary Sciences Department, Utah State University
4815 Old Main Hill
Logan, UT 84322-4815