Milking robots — do they pay?
December 21, 2013
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: http://www.extension.iastate.edu/dairyteam/milking-systems. 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.
There are many other factors that should be considered when thinking about the best milking system for your dairy. Some of these include:
- "Management makes milk — robots only harvest it." This quote is from Doug Kastenschmidt, a Wisconsin dairy farmer whose cows average over 100 pounds per day with robots. Robots require a high level of management to be successful.
- Desire of farm managers to observe cow behavior and make adjustments to improve performance.
- Skill and interest of the managers. Robots take more technical skill that other milking systems. The manager should enjoy using software for the greatest benefit. A higher level of repair skill is required. Maintenance cost will be lower if someone on the farm develops the skill to perform some of the simple repairs.
- Feed management skill. Excellent feed management is important to keep cow flow to the robots consistent and for good performance.
- Future expansion. Currently the box type robots on the market are able to milk about 50 to 70 cows per box. If future expansion is planned, expansion must be in 60-cow increments and increased investment in robots will be required. In parlor systems, increasing milking hours is often all that is required.
- Willingness to be on call around the clock. Someone on the farm must be willing to take calls from the robot around the clock. If you are not prepared for this, it can be frustrating.
Robots are effective at milking and have the ability to harvest high quality milk consistently. Most dairy farmers who install robots with the correct expectations and realistic cash flows are happy with their decision and enjoy an improved lifestyle.
Figure 1. Cost comparison of different milking systems. Adapted from Larry Tranel, Iowa State University.
Tie stall (TS) - $35,400 labor/yr
Low cost parlor (LCP) - $25,000 capital ($4,250 annual), $14,600 labor
Medium cost parlor (MCP) - $50,000 capital ($8,500 annual), $14,600 labor
High cost parlor (HCP) - $100,000 capital ($17,000 annual), $14,600 labor
New parlor (NP) - $250,000 capital ($42,500 annual), $14,600 labor
Robot - (10% increase in milk) $59,600 annual