There are other things you might be able to do with that. animal feeds, etc? Cooking pellets you will not want any other binders in... Fuel pellets can get away with some, but when running a pellet stove, the lower the ash (lower maintenance) the better. You can get 100% oak pellets (high btu, low ash) for under $4 for a 40lb bag - typically generally available. Blend pellets can be cheaper... The real question is, can you produce/bag in the smaller scale something that will be able to sell, based on market pricing. I understand why you would like to do the cooking pellets, as they bring more of a premium on price.
Have you thought about adding a stronger motor/engine to run you pellet mill? Might be a better route to consider as well.