I often get questions from lenders and dairy producers wondering if installing milking robots is a good investment. This is a difficult question to answer. Typically my first response is, "Compared to what?" Figure 1 shows a comparison of different milking systems. For a 120-cow dairy, the total cost per cwt of milk of a robotic milking system was similar to a new modern parlor. Of course the cost was about double the cost per cwt of a lower cost remodeled parlor.
Producers do not install robots because it is the lowest cost option for harvesting milk. Nearly all dairy producer surveys show that the main reasons for installing robots are improved lifestyle and decreased labor or the desire to milk more cows with only family labor. This is similar to many other decisions we make. Farmers choose to drive tractors with cabs to improve their lifestyle. Most of us decide not to live in the cheapest house or drive the cheapest car because we want a nicer lifestyle.
Because milking robots are a large investment, it is important to develop a realistic cash flow and carefully think about how much capital you want to tie up in your milking system. Extension Economist Bill Lazarus and I developed a partial budget spreadsheet based on an earlier model that Larry Tranel, Iowa State University field specialist had developed. The spreadsheet is available online at: z.umn.edu/robotmilker. This spreadsheet will perform an economic analysis based on user inputs. There are tabs that create sensitivity graphs, compare multiple scenarios, and show a yearly cash flow graph based on loans. This can allow you to do a quick assessment on how robots may affect profitability. If you have any questions while using the spreadsheet or have suggestions for improvement, feel free to contact me.
A couple of items to remember when using the spreadsheet:
- It is designed only as a partial budget to compare similar size herds. It will not take into account the additional herd profit that might result from herd expansion.
- All of the decreased expenses come from decreased labor. If this is currently family labor, these decreased expenses cannot be applied to loan payments. This labor must be used for something more productive than milking to improve total farm income. The most common option is to expand the herd size without hiring additional labor. Other options might include improving reproduction, improving crop management to increase yield and forage quality, or improving youngstock quality through better management. If not, this money must come out of family living.
- Be realistic about the decrease in labor and the increase in milk production. Most research shows that installing robots and increasing milking frequency from 2 times per day to 2.5 to 3.0 times per day will result in 3 to 5 pounds of milk per cow per day. Any increase beyond that must come from improved cow comfort and/or improved management. Most farms also do not have a dramatic reduction in total labor. It is a very different type of labor and the labor time is much more flexible.