Investing in a robotic milking system: A Monte Carlo simulation analysis

Abstract

This paper uses Monte Carlo simulation methods to estimate the breakeven value for a robotic milking system (RMS) on a dairy farm in the United States. The breakeven value indicates the maximum amount that could be paid for the robots given the costs of alternative milking equipment and other important factors (e.g., milk yields, prices, length of useful life of technologies). The analysis simulates several scenarios under three herd sizes, 60, 120, and 180 cows. The base-case results indicate that the mean breakeven values are $192,056, $374,538, and $553,671 for each of the three progressively larger herd sizes. These must be compared to the per-unit RMS cost (about $125,000 to $150,000) and the cost of any construction or installation of other equipment that accompanies the RMS. Sensitivity analysis shows that each additional dollar spent on milking labor in the parlor increases the breakeven value by $4.10 to $4.30. Each dollar increase in parlor costs increases the breakeven value by $0.45 to $0.56. Also, each additional kilogram of initial milk production (under a 2x system in the parlor) decreases the breakeven by $9.91 to $10.64. Finally, each additional year of useful life for the RMS increases the per-unit break-even by about $16,000 while increasing the life of the parlor by 1 yr decreases the breakeven value by between $5,000 and $6,000.