The profitability of automatic milking on Dutch dairy farms

Several studies have reported on the profitability of automatic milking based on different simulation models, but a data-based study using actual farm data has been lacking. The objective of this study was to analyze the profitability of dairy farms having an automatic milking system (AMS) compared with farms using a conventional milking system (CMS) based on real accounting data. In total, 62 farms (31 using an AMS and 31 using a CMS) were analyzed for the year 2003 in a case control study. Differences between the years 2002 and 2003 also were analyzed by comparing a subgroup of 16 farms with an AMS and 16 farms with a CMS. Matching was based on the time of investment in a milking system (same year), the total milk production per year, and intensity of land use (kg/ha). Results from 2003 showed that the farms with an AMS used, on average, 29% less labor than farms with a CMS. In contrast, farms using a CMS grew faster (37,132 kg of milk quota and 5 dairy cows) than farms with an AMS (-3,756 kg milk quota and 0.5 dairy cows) between 2002 and 2003. Dairy farmers with a CMS had larger (euro7,899) revenues than those with an AMS. However, no difference in the margin on dairy production was detected, partly because of numerically greater (euro6,822) variable costs on CMS farms. Dairy farms were compared financially based on the amount of money that was available for rent, depreciation, interest, labor, and profit (RDILP). The CMS farms had more money (euro15,566) available for RDILP than the AMS farms. This difference was caused by larger fixed costs (excluding labor) for the AMS farms, larger contractor costs (euro6,422), and larger costs for gas, water, and electricity (euro1,549). Differences in costs for contractors and for gas, water, and electricity were statistically significant. When expressed per full-time employee, AMS farms had greater revenues, margins, and gross margins per full-time employee than did CMS farms. This resulted in a substantially greater (but not statistically significant) RDILP per full-time employee (euro12,953) for AMS farms compared with CMS farms. Depreciation and interest costs for automatic milking were not available but were calculated based on several assumptions. Assuming larger purchase costs and a shorter depreciation time for AMS than for CMS, costs for depreciation and interest were larger for AMS farms than for CMS farms. Larger fixed costs should be compensated for by the amount of labor that has become available after introducing the milking robot. Therefore, farm managers should decide whether the extra time acquired by automatic milking balances against the extra costs associated with an AMS.