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Capital Investment in Robotic Milking
Capital Investment in Robotic Milking
Post date
January 2018
The Dairy Industry is currently under pressure from two key challenges- a lack of good quality farm labour and the confidence to invest in the future given recent milk price cycles. The challenge of getting people of my generation with the desire to work on Dairy farms is greater than ever as highlighted by a labour survey announced by Tim Brigstocke at the recent RABDF conference in London. The vast majority of participants to the survey had little interest due to the perceived working environment.
However, does this factor alone justify spend on a robotic milking system? I would argue no, as having conducted some recent analysis for a client the costs of production of a very high output all year housed robotic system are very similar to that of a traditional lower yield, grazing based system when assuming very good performance in both these systems, and factoring in the relative finance charges of the capital invested in a robotic system. Only in a high milk price environment can these systems produce high profits. As a global, potentially non-subsidised producer is it safe to assume that the market will enable every Dairy farmer in the UK to invest in high output systems? History would suggest no. Currently, the opportunities to borrow capital are relatively cheap but when looking at a spend in excess of £1,000,000 for a commercial herd this adds another volatile factor in interest rates and also has big cashflow implications. All of this potentially with no decrease in the cost of production and no economies of scale for the larger herd.
There is an opportunity I believe in the industry currently for a large number of multi-skilled ‘Herd Managers’. The emphasis being on people who have the character and skills to manage large herds of cows, larger teams of people and also who are able to manage and understand financial risk.
Only through excellent technical performance and realizing economies of scale can the industry move forward and become more globally competitive. The missing piece in the jigsaw for many Dairy farms seems to be these herd managers who have the ability to take these farms to the next level. Lower labour units/ cow is inevitable and investing in the latest technology, which may include robots will be key to this but attracting the right type of manager (who is likely to want to realise some equity), and who will want higher remuneration is a more significant issue to address. Only the farms which are investing in the best technology and genetics are likely to be able to attract the people of this caliber, who incidentally may not come from a traditional farming background.
The capital cost of setting up a greenfield site robotic Dairy unit can potentially be grant funded under the recently announced RDPE funding. However, the potential variance in profitability (5ppl) in one year on a 240-cow robotic Dairy unit could virtually wipe out the grant funding income if technical performance/ milk price was to fall. This highlights the relative risk and reward of investing in robotics purely on the basis of grant funding. Perhaps looking at somebody who can manage robots, cows and people is the way to start!
