This work was carried out with the objective of both evaluating costs and identifying the shut-down point in milk production in Minas Gerais State. According to theories on both production and costs, the shut-down point is defined as the lowest price dairy farmers could afford supplying milk to market and still be able to cover their variable expenses. Data involving 574 commercial dairy farmers from all mesoregions in the state were analysed during the agricultural years 1995/6 - 2001/2. The economical profile analysis of the sector show that the cost of the product per unit was high. Economical results show both scale gain and an existing production level where the average variable cost is minimized. Therefore the shut-down point of milk production in Minas Gerais was estimated to be R$ 0,42. At this estimated price 1.299,45 liters of milk per day can be supplied. In the case of lower prices production will not be able to continue.
milk; production costs; shut-down point
