Even Robots Need a House: The Robotic Milking System Facility Investment Decision Case Study

Abstract

In a classic labor vs. capital trade-off, some dairies are opting to install automatic milking systems (AMS). AMS has the potential to increase efficiencies but comes at a cost. Although the AMS units themselves are costly, the facility that houses them can often be a more significant expense. This case presents a fictional family dairy, typical for the western United States, that is now considering adoption of AMS. The case analyzes the economics of installing AMS under three facility investment scenarios; minimal retrofit to an existing facility, building a new open-sided barn, and building a new fully enclosed barn. This case study provides an opportunity to apply capital budgeting to a modern agriculture investment and addresses broader questions related to technology investment and adoption on farm.