Anhydrous butter oil or cream was encapsulated in all-purpose flour, modified cornstarch, or sucrose and then spray-dried. We estimated the processing cost for a plant designed to produce 57,000 kg/d (125,000 lbs/ d) of encapsulated milk fat powder. Powder with a 50% milk fat content could be produced for about $0.23/kg plus the cost of the butter oil or cream, the encapsulant selected, and the other ingredients. Spray-drying of milk fat improved ease of handling and reduced storage costs.