WHAT YOUR LENDER NEEDS TO KNOW ABOUT YOUR ROBOTIC MILKING PROJECT

A couple of years ago, I consulted on a farm that was planning a robotic milking project. More than once, emphasizing the importance of conservative budgeting, I mentioned “The number you would share with your banker.” More than once, I was corrected – “I am doing this project with my money, and it really doesn’t matter what the banker thinks.” More power to you! Wherever you get the money, it is important to know there will be a return on the investment. There are many ratios to measure that return, and the farm business’s ability to thrive through the changes that go with a transition to robotic milking.

Others are better qualified to calculate the ratios. I am more concerned about how the ratios change during the 3 phases of a robotic milking project. I call them construction, transition, and maturation. Let’s define those phases, and take a look at the financial changes, as the farm business goes through each of them.

The construction stage includes planning, building or remodeling of animal housing facilities,

and purchase and installation of the new equipment. It goes without saying that money is flowing out of the business at an alarming rate. Green site construction costs, including feed and manure storage, are estimated at $18,000 per stall. That’s over four million for a 4-unit barn. Net worth changes dramatically during construction. Anticipate cost over runs on the capital part of the project, and expect delays. Delays become more costly if you are paying interest on robots that are not producing a return. It’s compounded if the plan for your cows to calve, or purchased animals to arrive, is based on a start date that changes. It may be necessary to hire extra labor to offset the owner’s construction-related workload. It’s an important time to review management practices and anticipate changes under the new system. It’s all worth it, because a new way of managing cows is just around the corner.

The financial transition stage begins when the first cows are milked in the robots. Those who have been through it say it takes

3 days, 3 weeks, 3 months, and 3 years to complete the transition. 3 days to push the cows – 3 weeks for the cows to establish a routine – 3 months for the people to establish a routine – and 3 years to turn the herd over to cows that are selected for performance in the robots. Most of the transition will be completed in year one. It may include extra labor to push cows that are still learning the system. It might include higher feed costs as the balance between the bunk and the robots is fine tuned for the farm. The robots should not be expected to reach capacity until cows and people learn the system. Higher cull rates and extra replacements may be needed for cows that do not adapt. Much will depend on how much the cows, and the managers, have to adjust. Free-stall and TMR adapted cows will transition to robots more quickly than cows that need to adjust to new feed, new facilities, and robots. The point is, it will take time, and money, to get from first milking to full production. Again, it will be worth it when the system reaches maturity.

Maturity occurs when the system is operating at its intended capacity. There still will be opportunities to fine tune management and genetics to get more from the system, but you are achieving the budget you started with, and the performance you paid for. This is why you went through all of the challenges in the first 2 stages. Overall, there are fewer surprises when the system reaches maturity.

When I travel to a new destination, the trip seems to take longer if I keep hearing, “Are we there yet?” Especially if I’ve never seen the landmarks that tell me when I am getting close. The journey through the construction and transition phases can feel that way. A clear and realistic financial plan to get through those phases will ensure that your reach the maturation phase ready to achieve all the things that started you on the journey to robotic milking in the first place.