Investment appraisal of automatic milking and conventional milking technologies in a pasture-based dairy system

The successful integration of automatic milking (AM) systems and grazing has resulted in AM becoming a feasible alternative to conventional milking (CM) in pasture-based systems. The objective of this study was to identify the profitability of AM in a pasture-based system, relative to CM herringbone parlors with 2 different levels of automation, across 2 farm sizes, over a 10-yr period following initial investment. The scenarios which were evaluated were (1) a medium farm milking 70 cows twice daily, with 1 AM unit, a 12-unit CM medium-specification (MS) parlor and a 12-unit CM high-specification (HS) parlor, and (2) a large farm milking 140 cows twice daily with 2 AM units, a 20-unit CM MS parlor and a 20-unit CM HS parlor. A stochastic whole-farm budgetary simulation model combined capital investment costs and annual labor and maintenance costs for each investment scenario, with each scenario evaluated using multiple financial metrics, such as annual net profit, annual net cash flow, total discounted net profitability, total discounted net cash flow, and return on investment. The capital required for each investment was financed from borrowings at an interest rate of 5% and repaid over 10-yr, whereas milking equipment and building infrastructure were depreciated over 10 and 20 yr, respectively. A supporting labor audit (conducted on both AM and CM farms) showed a 36% reduction in labor demand associated with AM. However, despite this reduction in labor, MS CM technologies consistently achieved greater profitability, irrespective of farm size. The AM system achieved intermediate profitability at medium farm size; it was 0.5% less profitable than HS technology at the large farm size. The difference in profitability was greatest in the years after the initial investment. This study indicated that although milking with AM was less profitable than MS technologies, it was competitive when compared with a CM parlor of similar technology.