Robotic Milking Economics: Is the Technology Profitable

1
Robotic Milking Economics Is the Technology
Profitable?

• Jeffrey Hyde
• Phoebe Engel

Department of Agricultural Economics and Rural S
ociology
Penn State University
Penn State is committed to affirmative action,
equal opportunity, and the diversity of its
workforce
Revised 2/14/02
2
Coming Attractions

• Brief History
• Market Players
• Economic Considerations
• Other Considerations
• Wrap Up

3
Brief History of the Technology

• Experimentation and innovation 1980s

4
Brief History of the Technology

• Experimentation and innovation 1980s
• First farm installation 1992

5
Brief History of the Technology

• Experimentation and innovation 1980s
• First farm installation 1992
• Over 1000 units installed world-wide
• Most in Europe, half of all new systems are
  robots
  
• Some in Japan
• About 25 in Canada
• 6 in PA, 8 in WI, several others planned

6
Players in the Market

• Lely - Astronaut

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Players in the Market

• Lely - Astronaut

Source Lely Web Site
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Players in the Market

• Bou-Matic

Source Bou-Matic Web Site
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Players in the Market

• DeLaval

Source DeLaval Web Site
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Players in the Market

• AMS Liberty

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Players in the Market

• Lely, Bou-Matic, and Delaval
• Single unit systems
• Each unit serves 60-65 cows

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Players in the Market

• Lely, Bou-Matic, and Delaval
• Single unit systems
• Each unit serves 60-65 cows
• AMS-Liberty
• Multiple units served by one robot
• Four units serves 150 cows

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Milking System
Source Lely Web Site
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Economic Considerations

• Can a producer afford to purchase a robotic
  milking unit relative to a new parlor?

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Economic Considerations

• What are the investments costs?
• Machinery and Equipment
• About 125,000 per unit
• Other costs depend on other construction

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Economic Considerations

• What are the investments costs?
• Maintenance costs
• Higher than parlor!
• Maybe twice that of a parlor
• Depends on contract

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Economic Considerations

• What are the investments costs?
• Increased feed bill
• Cows milked more often eat more
• Increase costs by about 10

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Economic Considerations

• What are the investments costs?
• Potential decrease in component levels
• Butterfat percentage may fall
• Research has used a 1 decline in price

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Economic Considerations

• What are the investments costs?
• Shorter life than parlor
• Not as many years to recoup investment
• Parlor 12 years Robots 7 years

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Economic Considerations

• What are the investments costs?
• Herd health concerns

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Economic Considerations

• What are the investments costs?
• Herd health concerns
• Transition period substantial 2 years

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Economic Considerations

• What are the investments benefits?
• Labor savings
• Not as significant as you might think!
• Increase over time
• Around 31 savings in the long run
• Percentage may be greater for larger herds

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Economic Considerations

• What are the investments benefits?
• Increase milk production
• Increase some cows to 3X or more
• About 7.5 pounds/cow/day

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Economic Considerations

• What are the investments benefits?
• Free time to focus on other things

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Economic Considerations

• What are the investments benefits?
• Free time to focus on other things
• Wealth of information per cow
• Production
• Health
• Milking frequency

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Economic Considerations

• What are the investments benefits?
• Free time to focus on other things
• Wealth of information per cow
• Production
• Health
• Milking frequency
• Increased cow comfort??

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Economic Considerations

• Can Pennsylvania farmers afford it?
• Need to weigh the costs and benefits

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Economic Considerations

• Can Pennsylvania farmers afford it?
• Need to weigh the costs and benefits
• Time aspect is very important!

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Economic Considerations

• Can Pennsylvania farmers afford it?
• Need to weigh the costs and benefits
• Time aspect is very important!
• Much uncertainty
• Milk price
• Feed price
• Production
• Useful life

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Economic Considerations

• Can Pennsylvania farmers afford it?
• Research at Penn State on robot values

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Economic Considerations

• Can Pennsylvania farmers afford it?
• Research at Penn State on robot values
• Simulation Analysis

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Economic Considerations

• Can Pennsylvania farmers afford it?
• Research at Penn State on robot values
• Simulation Analysis
• Estimated breakeven robot values The maximum
  the producer can pay for the robot(s) given other
  parameters in the model (cost of parlor, changes
  in production, etc.)

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Economic Considerations

• A series of scenarios were developed based
  upon
  
• Herd size
• Alternative milking equipment (parlor) cost
• Production level
• Labor cost
• Length of useful life of the systems
• Others

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Economic Considerations

• Research Results
• With 60 cows (1 unit - 125,000)
• Base Case Breakeven Value 188,380
• Parlor cost 100,000
• Production 18,000
• Labor cost 10,000
• Milk Price 14.00

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Economic Considerations

• Research Results
• With 120 cows (2 units - 250,000)
• Base Case Breakeven Value 361,198
• Parlor cost 150,000
• Production 18,000
• Labor cost 20,000
• Milk Price 14.00

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Economic Considerations

• Research Results
• With 180 cows (3 units - 375,000)
• Base Case Breakeven Value 534,016
• Parlor cost 200,000
• Production 18,000
• Labor cost 30,000
• Milk Price 14.00

37
Economic Considerations
38
Economic Considerations

• Sensitivity Analysis Parlor Cost
• 1000 increase 690 increase in breakeven

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Economic Considerations

• Sensitivity Analysis Labor Cost
• 1 increase 3.68 increase in breakeven

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Economic Considerations

• Sensitivity Analysis Production
• 1 lb./cow increase -2.84 per robotic unit
• -5.68 for two units
• -8.52 for three units

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Economic Considerations

• Sensitivity Analysis Milk Price
• 1 increase 8,583 per robotic unit

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Economic Considerations

• Sensitivity Analysis Useful life of robot(s)
• 1 year increase about 18,000 per robotic unit

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Economic Considerations

• Sensitivity Analysis Useful life of parlor
• 1 year increase about -3,750 per robotic unit

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Economic Considerations

• Sensitivity Analysis General
• Can (roughly) add effects of individual
  sensitivity analyses

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Other Considerations

• Milk quality is a concern

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Other Considerations

• Milk quality is a concern
• Transition period is substantial 2 years

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Other Considerations

• Milk quality is a concern
• Transition period is substantial 2 years
• More information on cows

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Other Considerations

• Milk quality is a concern
• Transition period is substantial 2 years
• More information on cows
• Avoid labor management

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Other Considerations

• Milk quality is a concern
• Transition period is substantial 2 years
• More information on cows
• Avoid labor management
• Free time

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Tough Choice!

• Good record keeping is the key!
• Without, possibility of bad choice increases

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Tough Choice!

• Good record keeping is the key!
• Without, possibility of bad choice increases
• Do your homework
• Take a trip!

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Tough Choice!

• Good record keeping is the key!
• Without, possibility of bad choice increases
• Do your homework
• Take a trip!
• Use the Penn State Decision Tool
• http//farmmanagement.aers.psu.edu

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Thank You!
A computer doesnt charge for overtime and
doesnt get health care benefits.
-Adam Smith