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.

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De Koning, C. 2010. “Automatic Milking—Common Practice on Dairy Farms.” The First North American Conference on Precision Dairy Management. Toronto, Canada.

Dickrell, J. 2019. “More than 2,700 U.S. Dairy Farms Closed in 2018.” Dairy Herd Management. Retrieved from https://www.dairyherd.com/article/more-2700-us-dairy-farms-closed-2018

Livestock Market Information Center. 2019. Spreadsheet data from USDA–AMS, ERS, and NASS [Data files]. http://www.lmic.info/members/spreadsheets

Rossing, W., P.H. Hogewerf, A.H. Ipema, C.C. Ketelaar-De Lauwere, and C.J.A.M. De Koning. 1997. “Robotic Milking in Dairy Farming.” Netherlands Journal of Agricultural Science 45(1):15–31.

U.S. Department of Agriculture, Economic Research Service. 2019. Annual Milk Production and Factors Affecting Supply (Annual). Washington DC, March 26. https://www.ers.usda.gov/data-products/dairy-data/.

U.S. Department of Agriculture, Economic Research Service. 2018. Dairy Products: Per Capita Consumption, United States (Annual). Washington DC, September 4. https://www.ers.usda.gov/data-products/dairy-data/.

W.K. Kellog Biological Station, W.K. Kellogg Farm. 2019. “Robotic Milking.” Retrieved from http://farm.kbs.msu.edu/pdc/robotic-milking/