Under the heading "LESS EXPENSIVE THAN EXPECTED" the Dutch professional magazine for dairy farmers, De Boerderij, reported in February 2009 on a review conducted by a Dutch study group among dairy companies on 11 years of robotic milking. From their calculations and in hindsight, the costs of robotic milking were significantly less than initially anticipated. The annual maintenance costs were fairly stable and the trade-in price of the old milking robots was much higher than the residual value previously estimated. Currently the financial figures are better compared with standard companies, while flexibility is appreciated to the max and working days of just 4 hours are quite common!

When it is time for a new milking system most dairy farmers compare the pros and cons of an automatic milking system with those of a conventional one. Farmers are very often deterred by the annual costs of an automatic milking system but in fact, these costs have turned out better than expected. They are actually lower than 20 per cent of the purchase price, which is often taken into consideration. The depreciation costs of the milking robot are particularly lower than expected, which is apparent from the calculations of the Denzo group. Denzo is a Dutch acronym for ‘during the week and Sundays too'.

The four farmers in the Denzo group bought one or more Lely milking robots in 1998. This year, the old milking robots will be traded in for new A3 versions. In 1998, information on the lifespan and the residual value was not available and these were calculated based on assumptions. In consultation with the dairy farmers, Alfa Beag Accountants, economic advisers to the Denzo group, decided to write off the economic value of the milking robots to zero in 12 years time. This represented an average of 8.33 per cent per year. The trade-in price is now established and the balance sheet over the depreciation can be calculated.

High residual value
The trade-in price is much higher than the previously established residual value after 12 years. The Denzo group's practical example is calculated on the purchase of two milking robots. Because the milking robots are sold after 11 years, a pre-estimated residual value of €20,000 remains, which amounts to a theoretical depreciation of €222,000 over this period. It now appears that the average depreciation of €50,000 in 11 years was too much as the residual value (trade-in price) appears to be €70,000 instead of the previously assumed €20,000. A depreciation of €192,000 : 12 years = €16,000 per year would have been more realistic. This amounts to 6.6 per cent of the purchase price. For that matter, it could be useful to apply a slightly higher depreciation to correct for inflation.

Peak Maintenance
Furthermore, longer use of the automatic milking system would appear to be beneficial. One of the dairy farmers traded his milking robot in after five years and at that time the trade-in price was half the price of a new one. In this particular case, the depreciation was higher, namely 10 per cent per annum. Therefore, it is better to have a higher depreciation in the first few years and a lower depreciation later on, which quite often happens in order to avoid high maintenance costs towards the end. This is not, however, the experience of the Denzo group. The annual costs for maintenance are fairly stable and can show a peak when an expensive part, such as the vacuum pump, needs replacing.
According to Jan Dirk van Mourik of Lely, it would appear from multi-year averages that the annual costs for the maintenance of one box amounts to €4,000 and for two boxes €7,500. This corresponds to 3.5 per cent of the purchase price.

Interest slightly higher
Interest costs increase slightly due to the higher residual value. Interest is calculated over the average invested amount. With the higher residual value, that amount is higher. According to the example: (€242,000 + €70,000) : 2 = €156,000. With an interest rate of 5 per cent, this would amount to annual costs of €7,800. With a purchase price of €242,000, this would be 3.2 per cent.

The total annual costs amount to 13.3 per cent of the purchase price, which includes 6.6 per cent depreciation, 3.5 per cent maintenance and 3.2 per cent interest. In the example of €242,000 for two robots, annual costs of 13,3 per cent of the purchase price would amount to €32,180.

 

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Wijnand Hogenkamp

THE CONVERSION YEAR AND THE SUBSEQUENT FEW YEARS WERE DISAPPOINTING ECONOMICALLY. CURRENTLY THE NUMBERS ARE BETTER THAN WITH STANDARD COMPANIES.

Last year with robot +3.5 cent per kilo of milk
The economic accounts demonstrate that the robot companies are certainly able to compete with companies from the comparison group. The companies are comparable because they are almost equal in size and intensity. In the two financial years, the Denzo group has averaged 950,000 kilos of milk on 70 hectares. The comparison group has averaged 900,000 kilos of milk on 75 hectares. The Denzo group is, therefore, 1,500 kilos of milk per hectare more intensive than the comparison group. Incidentally, the Denzo results are composed of the results of four companies.
During the first years following the start-up of robotic milking, the financial results were not as good as those of the comparison group. Only after three years were the numbers and the final annual results in align once more.
Now that dairy farmers have been working with robotic milking for ten years, the Denzo group can demonstrate that they are capable of obtaining better results with robotic milking than the comparison group. This is not as a result of yield, since that is equal. Even the allocated costs - crop and livestock costs - do not differ too much.
In the non-allocated costs, maintenance and utility costs are mostly higher with the robot companies. Also, depreciation is higher with the robot companies than with the comparison group. On the other hand, the costs for rent and lease are slightly lower with the robot companies.

Less work at Denzo
The main difference can be found in the number of hours worked. The number of hours that Denzo dairy farmers work is significantly lower and, consequently, the operating result is much better than that of the comparison group. The social freedom, considered to be one of the great advantages of robotic milking, is highly appreciated by the Denzo farmers. A standard working week of 70 to 80 hours is a thing of the past. And Sundays, when only work that is absolutely necessary is carried out, still means an 8-hour day for many conventional dairy farmers. The Denzo farmers are usually finished within 4 to 5 hours on average.