Over the last two decades, the number of U.S. cottonseed processing plants has declined drastically. The realization of scale economies by expanding plant size is shown to be a basic reason for this decline. The analysis is performed by estimation of a nonhomothetic translog cost function to represent the industry structure. Statistical tests indicate that the translog function is appropriate. Other results indicate that derived demands for inputs in cottonseed processing are inelastic and that economies of scale are greater for smaller plants in the industry.