Even Robots Need a House: The Robotic Milking System Facility Investment Decision Case Study

Ryan Feuz and Ryan Larsen

Applied Economics Teaching Resources (AETR), 2020, vol. 2, issue 01

Abstract: 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.

Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaeatr:301864

DOI: 10.22004/ag.econ.301864

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