Welcome to the Bullvine Podcast, where cutting
-edge tech meets dairy farm reality. Today, we're
tackling the $500 -day question, how are innovative
farmers financing robotic milkers without going
bankrupt? In episode 220, we'll unpack. The shocking
$160 ,000 annual profit difference between robot
rookies and pros. Europe's pay -per -leader financing
model now hitting North America. Why 85 % of
Danish dairies automate while 45 % of North American
farms still use tie stalls. All right, welcome
back to the Deep Dive. You know, we're always
talking to folks in the industry, and one thing
keeps bubbling to the surface. the crunch of
labor. Finding good help is tougher than a $2
steak. And the costs just keep climbing. So naturally,
everyone's eyeing automation, especially those
shiny robotic milkers. But then the cold shower
hits. You're looking at $150 ,000 to $230 ,000
per robot. Well, that's enough to make a grown
dairy farmer weep into their coffee. It is. It's
a figure that certainly gets your attention,
right? And for many, you can feel like a roadblock
the size of a silage pile. But what's fascinating
when you dig into the numbers is how the financial
picture surrounding this technology has been
shifting. It's not just about needing a mountain
of cash up front anymore. The landscape... has
become much more nuanced. Exactly. So for all
of you tuning in, whether you're seriously kicking
the tires on robotic milking or just want to
get a handle on the financial realities, this
deep dive is tailor -made for you. We've wrestled
with the data, explored the financing avenues,
and looked at real -world scenarios to bring
you a clearer understanding of how this investment
can actually pencil out. And we've got a packed
agenda. We're going to get down to brass tacks
on the real return on investment, clever ways
farms are funding these systems, everything from
deals with manufacturers themselves to leasing
and even government incentives. We'll also shine
a light on some of the less obvious financial
wins, like the positive impacts on the environment
and co -health. Yeah, and performance too, right?
Oh, absolutely. Plus, we'll dissect what makes
a robot a top performer versus just another piece
of equipment, flag some potential headaches to
avoid, track where robot adoption is heading,
and map out that crucial transition phase. Grab
your favorite beverage. We've got a lot to get
through. Okay, let's dive right into the big
question. The ROI on these robotic systems. Because
let's face it, shelling out that kind of money
needs to deliver a solid return, right? As we
mentioned, you're looking at $150 ,000 to $230
,000 per robot. And typically one robot handles
around 60 cows. That's a significant chunk of
change to wrap your head around. No question.
That initial investment is a major hurdle. But
here's a key insight. Let's look at how that
cost has changed over time in relation to other
expenses, particularly our old friend labor.
What's really interesting is that back in 2004,
a robotic milker would have set you back around
$250 ,000. Yeah, okay. Fast forward to 2010,
and that price had dropped to roughly $220 ,000.
It's a 12 % decrease in just six years. Now get
this. During that exact same period, labor costs
also rose by 12%. So the core insight here isn't
just that robots are expensive, but that the
relative cost is shifting in their favor, making
them a more economically viable long -term solution
for labor challenges. Huh. That puts a whole
different spin on it. So while the sticker price
is still, yeah, eye -watering, comparatively
speaking, these robots are becoming less of a
financial stretch when you factor in the ever
-increasing cost of good farmhands. That definitely
recalibrates the long -term math. It does indeed.
And when we delve into some of the key performance
indicators, the KPIs, that shift when a farm
transitions to robotic milking systems or RMS,
the financial advantage has become even clearer.
We're seeing an average jump in milk yield of
around 8 .66%. Almost 9%. Okay. Yeah. Now, naturally,
the investment cost itself goes up by about 58%,
which is expected, right? You're acquiring a
substantial piece of equipment. Energy consumption
also sees an average rise of roughly 37%, and
feed costs increase slightly, around 1 .33%.
But the real story is the labor input. Ah, the
big one. The big one. It experiences a significant
drop of about 27 .84%. Hold the phone. Only a
1 .33 % bump in feed costs for almost a 9 % increase
in milk production. That's surprisingly efficient.
You'd figure those cows would be hitting the
feed bunk nonstop to pump out that extra milk.
That's precisely what stands out. The key takeaway
isn't just about higher milk production, but
that the efficiency of milk production seems
to improve with robotic systems. The cows are
being milked more frequently, likely at times
that better suit their natural rhythms, leading
to a more effective conversion of feed into milk.
Makes sense. And then you layer on that nearly
28 % reduction in labor. In today's environment,
where finding and keeping reliable help feels
like chasing your hat in a hurricane, that labor
saving is a massive, massive draw. You're not
kidding. Every dairy farmer I've talked to lately
puts labor right at the top of their list of
headaches. So a potential 28 % decrease in that
area. Wow, that's a game changer for many operations.
Do we have any like real world examples of these
numbers playing out on a farm? Absolutely. We
can look at the experience of Dave Camel, a dairy
producer in Wisconsin. He's been running two
robots for his herd of around 105 cows for the
past seven years and he considers it one of the
smartest investments he's ever made. He estimates
it frees up about three hours of labor every
single day compared to his previous parlor system.
Three hours a day? Just think about what you
could do with that extra time. More focus on
herd management, maybe tackling that backlog
of paperwork. Or maybe even a few guilt -free
minutes with the family, right? Yeah, imagine
that. Okay, so the ROI picture is looking brighter
than just that initial price tag. But how are
folks actually finding the funds to make this
happen? Let's dive into these creative money
moves we've heard about. Right. The manufacturers
themselves have seen that initial financial hurdle
and have become quite innovative in offering
financing solutions. Take Lely, for instance.
They've teamed up with DLL Finance to create
specialized financing packages specifically for
their robotic systems. And here's where it gets
really interesting. They sometimes roll out promotional
deals, like 0 % financing for 60 months for a
new customer. Whoa, 0 % for five years? That
almost sounds too good to be true. Are other
manufacturers stepping up with similar deals?
Yeah, GEA, with their, shall we say, blue -hued
robots, offers comparable financing options with
terms that can extend up to 84 months, seven
years. That longer repayment window can certainly
make the monthly costs more manageable for some
operations. Julie Nenikovan from DLL points out
that they've been specializing in robot financing
for nearly two decades, which really speaks to
their experience and deep understanding of the
dairy sector's unique financial needs. They were
among the early pioneers in this field. So going
directly through the manufacturer or their finance
partners seems like a savvy first step. Explore
potential deals, see what kind of tailored packages
they can put together. But what if those options
don't quite align with a farm's financial situation?
We've heard that leasing is becoming a key strategy
for many. Leasing has definitely emerged as a
powerful strategy, particularly for farms looking
to preserve their upfront capital. Industry data
suggests that leasing can potentially reduce
your initial capital outlay by anywhere from
15 % to 25%. Wow, that's significant. It is.
That's a significant chunk of change that stays
in your pocket. We even have a real -world example
from Wisconsin. A family farm put down just $30
,000 on a $200 ,000 robotic system through an
operating lease. Their monthly payments work
out to around $3 ,800 over a seven -year period.
For many farms, that kind of predictable monthly
expense, especially when coupled with the anticipated
increase in milk production, can be much easier
to budget for than a large initial investment.
That makes a lot of sense. It's almost like you're
renting the technology, but you're still reaping
all the benefits in terms of production and reduced
labor. And at the end of the lease, you typically
have options, right? Exactly. You often have
the flexibility to upgrade to a newer system,
extend the lease agreement, or sometimes even
purchase the equipment at a predetermined price.
And then there's another really intriguing model
that's starting to gain traction, particularly
in Europe, and now making its way to North America.
The paper leader model. Paper leader, huh? That
sounds like it could be a good way to manage
cash flow. How does that structure work exactly?
Well, instead of having fixed monthly payments,
your payments fluctuate based on the actual volume
of milk your cows produce. This model originated
in Europe, which, as our sources indicate, often
seems to be, you know, ahead of the curve when
it comes to these kinds of innovative financial
solutions. They often are. But it is starting
to gain a foothold in North America. The real
advantage here is that your payments are directly
linked to your income. So during that initial
transition period when your cows might be adjusting
to the robots and milk production could be a
bit variable, your payments adjust accordingly,
offering a built -in safety net for your cash
flow. That sounds like a fantastic way to ease
into the technology, especially in those early
days when you're still getting the hang of things
and must take some of the pressure off knowing
your payments are tied to your actual output.
It does. Matt Line, a DLL customer down in southwest
Victoria who recently integrated Lely Robots
into his operation, found that exploring various
financing avenues, including leasing and the
potential for a paper leader type arrangement,
was instrumental in finding a solution that really
aligned with his specific business objectives
and financial capacity. Interesting. And interestingly,
Matt was relatively new to the dairy sector.
And Lely Finance took a holistic approach, considering
his existing farm assets, his previous business
experience, and his projections for growth. This
really highlights that manufacturers and finance
companies are often willing to look beyond just
traditional financial history when it comes to
these significant investments. Okay, so we've
covered some really interesting and diverse ways
to finance these robotic systems. Good stuff.
But it's not just about the immediate financial
returns, is it? There are other potential benefits
that can have a significant financial impact
down the line. I was particularly interested
in the environmental edge that our sources mentioned.
This is a real eye -opener for me as well. It
turns out that robotic milking can contribute
significantly to reducing a farm's carbon footprint.
The example of the Devon dairy farmer in the
UK is quite compelling. After transitioning to
robotic milkers, his farm's carbon footprint
dropped from 1 ,369 grams per liter of milk down
to 12 ,204 grams per liter in just a single year.
That's a substantial reduction equivalent to
taking 13 round -trip flights off the table.
And it was even lower than his 2011 level of
1 ,729 grams per liter. So the key takeaway isn't
just robots are greener, but that... This translates
to a potential competitive advantage in a market
increasingly valuing sustainability. Wow, that's
a pretty dramatic decrease. How does robotic
milking actually lead to such a significant drop
in a firm's carbon footprint? Is it just efficiency?
It's largely a combination of factors, yeah,
driven by increased efficiency. In the Devon
example, his milk yield saw a remarkable 30 %
jump from 5 ,700 to 8 ,198 liters per cow per
year, while maintaining similar feed rates, around
0 .34 kilos per liter. Impressive. As one farmer
succinctly put it to researchers at the University
of Waterloo, robotic systems empower you to produce
more milk with fewer cows. This naturally means
you're milking fewer animals, feeding fewer animals,
breeding fewer animals, which all adds up to
less manure and a reduced need for acreage for
feed production. Fewer inputs leading to the
same or even greater output. That definitely
sounds like a recipe for a lower environmental
impact and potentially significant cost savings
in the long run, too. Exactly. And some of the
newer robotic systems even incorporate battery
-powered components, which can lead to lower
electricity consumption. Furthermore, the more
precise nutrient management that often accompanies
robotic systems can mean farmers find they can
potentially manage with smaller manure storage
facilities due to more efficient resource utilization.
In a world where sustainability is becoming increasingly
important, not just ethically, but from consumer
demand and evolving regulations, this environmental
advantage can translate into a real competitive
edge and potential cost savings down the road.
Absolutely. Consumers are increasingly seeking
out sustainably produced goods and regulations
surrounding environmental impact are likely to
become more stringent. Farms that can demonstrate
a lower carbon footprint might find themselves
in a much stronger market position in the years
to come. Okay, so better for the planet, potentially
better for the bottom line. Now, what about the
actual performance of the robots themselves?
Because simply installing one isn't a guarantee
of massive success, is it? There's got to be
a difference between a robot that's humming along
efficiently and one that's just there. That's
a critical point. Our sources highlight that
the financial difference between an average and
an excellent performing robot setup can be in
the ballpark of $500 per robot per day. Per day.
Per day. Let that number sink in for a moment.
$500 every single day. Holy Holstein. That's
a massive swing. What are the key factors that
differentiate an average performing robot from
one that's really knocking it out of the park
financially? It largely boils down to efficiency
in the milking process itself. The data shows
that a farm with lower efficiency might see around
1 .4 zero kilograms of milk produced per minute
of milking time. Whereas a higher efficiency
farm could be achieving 2 .0 kilograms per minute.
That's a 42 .9 % difference. Okay, so faster
milking. Yeah. Over a typical 24 -hour period
with roughly 11 ,180 minutes of potential milking
time per robot, that difference translates to
a daily production potential of 1 ,650 kilograms
for the lower efficiency farm compared to a whopping
2 ,360 kilograms for the higher efficiency one.
That's a difference of 710 kilograms of milk.
Every single day. And that translates to? And
that's where that estimated $500 daily revenue
difference comes into play, which could lead
to an annual profit potential difference of over
$160 ,000 per robot. So it's not just about buying
the robot. It's about how well it's managed and
optimized. $160 ,000 a year just from maximizing
performance. That's the kind of figure that really
makes you sit up and take notice. So it's not
just about the initial investment or the financing.
It's about squeezing every last drop of potential
out of that investment. Precisely. And the research
backs this up. Studies from Minnesota. have shown
a 9 .3 % increase in milk production compared
to conventional parlors, Iowa studies reported
a 12 % increase. And some producers in New Zealand
have even documented increases in milk solids
of up to 50%. Now, While those extreme numbers
might not be typical for every farm, the general
trend is a significant 5 -10 % increase in milk
yield after making the switch to robotic milking,
with some farms seeing jumps from around 7 ,000
to 9 ,000 liters per cow annually. And often
that increased production goes hand in hand with
improved milk quality, which can potentially
command higher prices from processors. So performance
truly is paramount. It's not just about having
the technology. It's about leveraging it effectively.
Now, another aspect that really grabbed my attention
was the impact on cow health. We all know that
healthy cows are happy and productive cows. But
how do robots specifically contribute to improved
animal well -being? This is one of the more compelling
and perhaps often underestimated benefits of
robotic milking. That Devon Farmer we mentioned
earlier. He not only saw a drop in his carbon
footprint, but also experienced some remarkable
improvements in his herd's health. His use of
intramammary tubes per cow dropped significantly,
from 1 .83 down to 1 .02. His conception rate
saw a healthy jump from 32 % up to 42%. A 10
% jump. Nice. Yeah. And his calving interval
was reduced from 427 days down to 401 days. These
are significant improvements in key reproductive
and health metrics that directly impact profitability.
Those are definitely metrics that get any dairy
farmer's attention. So what's the direct link
between the robots and these positive changes
in cow health? Well, a significant factor, according
to a March 2024 University of Waterloo case study,
is the reduced stress levels in the cows. With
voluntary milking, the cows have the freedom
to choose when they want to be milked rather
than being herded into a holding pen at a parlor
at set times throughout the day. Less pressure.
Exactly. Additionally, the real -time monitoring
capabilities through computer vision and various
sensors allow for much earlier detection of potential
health issues. As one tech company representative
put it, cows and robotic systems tend to live
longer and experience less stress compared to
the traditional parlor environment. They're also
typically milked more frequently, which can be
beneficial for overall udder health. That makes
perfect sense. A less stressed cow is undoubtedly
going to be a healthier and more productive cow
in the long run. And I can certainly imagine
that the constant movement and sometimes crowded
conditions of a traditional milking parlor can
be quite stressful for some animals. Absolutely.
The representative even noted a visible difference
in the demeanor of the cows in robotic barns.
They often tend to be quieter and much calmer,
almost exhibiting pet -like behavior, sometimes
even approaching people without hesitation. In
contrast, in a parlor setting, cows might be
more skittish when people enter the barn because
they associate it with being moved to the parlor.
These improved health outcomes translate directly
into financial benefits for the farm. lower veterinary
costs, enhanced reproductive efficiency, and
longer, more productive lifespans for the cows
in the herd. So healthier cows not only mean
better animal welfare, which is, you know, a
priority for all good dairy farmers, but also
a healthier bottom line through reduced vet bills
and increased milk production over a longer period.
That's a pretty powerful combination of benefits.
But as the old saying goes, if something sounds
too good to be true, it probably is. Are there
instances where robotic milking systems don't
live up to these promises? It's absolutely crucial
to maintain a realistic perspective, and our
sources do include a cautionary tale that serves
as an important reminder. A former robotic dairy
farmer who invested in the technology way back
in 2007. Okay, early adopter. Yeah, very early.
He didn't experience the typical benefits over
his 12 to 13 years of using the system. In fact,
he calculated that the robots actually increased
his costs per liter of milk for both maintenance,
about 4 .5 cents a liter, and feed, another 2
.5 cents a liter. And his labor costs remained
essentially unchanged. Ouch. That's a stark contrast
to the success stories we've been hearing. What
do you think went wrong in his particular situation?
Well, he acknowledged that he was likely working
with some of the earlier generations of the technology,
and there were undoubtedly some growing pains
associated with that. But importantly, he also
took some responsibility himself, suggesting
that his management practices might have played
a role in the lack of success. This really underscores
the fact that you can't simply install robots
and expect instant, effortless success. A successful
implementation demands a well -thought -out strategy,
meticulous planning, comprehensive training for
both the cows and the farm staff, and, crucially,
a willingness to adapt and fine -tune your management
practices to fully optimize the system. The investment
extends beyond just the physical hardware. It
crucially includes investing in the knowledge
and expertise to utilize the technology effectively.
That's a really vital point to emphasize. It's
not just about the machine itself. It's about
how you integrate it into the entire fabric of
your farm operation and having the right know
-how to manage it properly. Okay, so while there
are potential pitfalls and it's not a guaranteed
slam dunk, the overall trend seems to be pointing
towards increased adoption of this technology.
What does the data tell us about where things
are heading? The adoption of dairy robotics is
definitely on an upward trajectory, no doubt
about it. In Ontario alone, the number of farms
utilizing them more than doubled between 2016
and 2021, jumping from 337 to 715 farms. Doubled
in five years? Yeah. The livestock sector is
now leading the way in agricultural robotics
adoption right across Canada. And on a global
scale, the market is substantial and growing
at a rapid pace. It reached a value of $2 .98
billion in 2024 and is projected to hit $3 .39
billion this year. That's a significant 14 %
increase in just one year. 14 %? Yeah. And by
2029, market forecasts estimate a value of around
$6 .03 billion. Those are some serious growth
numbers, indicating a strong and increasing interest
in this technology worldwide. Those are some
impressive growth figures. So while it might
still feel like a relatively new or niche technology
to some folks here in North America, the global
trend is clearly moving towards greater automation
in the dairy sector. Absolutely. And what's particularly
striking is the comparison with adoption rates
in other parts of the world. In Denmark, for
example, over 85 % of all new dairy facility
constructions are now incorporating robotic milking
systems. 85 % of new builds, wow. Yeah, that's
a massive difference compared to North America,
where a recent National Dairy Farm Program survey
indicated an adoption rate of only around 3%,
with a significant percentage of farms, 45 .4%,
still operating with traditional tie stall systems.
This gap really highlights a substantial opportunity
for early adopters here to gain a significant
competitive advantage in the years to come. Huge
opportunity. Huge. We're already seeing numerous
success stories on this side of the Atlantic,
like Hinchley Dairy Farm in the U .S., and the
Elliott Family Farm, which operates with an impressive
20 Delaval robots, both reporting significant
increases in production and substantial reductions
in labor costs. So while North America might
be somewhat behind the curve compared to places
like Denmark, growth and the tangible benefits
being realized by those who have already embraced
the technology are undeniable. Now, for those
dairy farmers who are seriously contemplating
making this leap, what does the transition period
typically look like? Because I can't imagine
it's as simple as just uncreating a robot and
having everything run smoothly from day one.
No, definitely not. The research from the University
of Waterloo suggests that achieving full profitability
with dairy robotics can take up to four years.
That's a crucial piece of information to factor
into your long -term financial planning. The
initial upfront costs can be considerable. especially
if you need to undertake significant barn retrofits
or infrastructure upgrades to properly accommodate
the robotic system. Right, the barn itself. Exactly.
As one tech company representative pointed out,
in regions like Ontario and Quebec, a large number
of dairy farms still have existing tie -stall
barns, which often necessitate major renovations
or even entirely new building construction to
integrate robotic milking effectively. That's
a big additional cost. Four years to reach full
profitability is a significant time frame. So
it's absolutely vital for farmers to develop
a realistic and robust financial plan that can
withstand that initial investment period and
any potential unforeseen challenges along the
way. Exactly. And it's also important to recognize
that these necessary upgrades and new construction
projects do generate positive economic activity
in other sectors. Barn builders, agricultural
engineers, farm design consultants, you name
it. Julie Nenikovan from DLL offers a valuable
piece of advice. She recommends starting the
financing conversation early in the process,
potentially even two years before you anticipate
beginning construction. Two years before? Wow.
Yeah. This allows ample time to thoroughly explore
all available financing options and develop a
comprehensive and well -structured financial
strategy for the transition. Less stress later
on. That early planning definitely sounds like
a key ingredient for a successful and less stressful
transition. So to bring everything together,
what's the core message you'd want to leave with
anyone listening who's currently on the fence
about exploring dairy robotics for their farm?
The central message, I think, is this. Delaying
the exploration of robotic milking might actually
mean leaving money on the table in the long run.
The costs of the technology itself are showing
a downward trend. generally speaking, while the
expenses associated with labor continue their
upward climb, making the overall financial equation
increasingly favorable for automation. The math
is changing. The math is changing. We heard about
the Ontario farmer who wisely started with just
two robots for his herd of 110 cows as a way
to gradually get comfortable with the technology
and refine his management practices before considering
further expansion. Adopting this kind of phased
approach can be a smart way to mitigate initial
risks and learn as you go. Alex Hucker -Stewart
from DLL emphasizes that understanding and strategically
addressing that initial investment hurdle is
paramount, and there is a growing range of accessible
financing options available, often with tailored
repayment structures designed to meet the specific
needs of dairy farms. So it's no longer just
a futuristic concept. Robotic milking is rapidly
evolving into a strategic investment for the
long -term sustainability and viability of daily
farming operations. Yeah. So the fundamental
question for each listener really boils down
to this. Is now the right time for you to seriously
explore your robot financing options? Have you
already begun considering making the leap, or
have you perhaps already taken that plunge into
the world of robotic milking? Precisely. It's
about looking ahead, anticipating the future
challenges and opportunities in the dairy industry,
and strategically positioning your farm for long
-term success. Absolutely. So to recap our deep
dive into dairy robot financing today, we've
uncovered that while the initial investment is
significant, the potential for substantial gains
in milk production and significant savings in
labor costs are very real and increasingly compelling.
The emergence of creative and flexible financing
options, ranging from manufacturer -backed deals
to innovative leasing programs and even paper
leader models, is making this technology more
accessible to a wider range of farms than ever
before. And beyond the direct financial returns,
we've also explored the noteworthy environmental
and cow health benefits that can contribute to
long -term sustainability and profitability.
Healthier cows, smaller footprint. Right. However,
as we've learned, optimizing the performance
of robotic systems through diligent management
and operator expertise is crucial for achieving
the best possible financial outcomes. It's not
automatic. And a well -thought -out transition
plan that realistically accounts for initial
costs and that a multi -year path to profitability
is absolutely essential. Crucial. And the global
trend towards robotic adoption is accelerating
rapidly, presenting a considerable opportunity
for North American dairy farmers to gain a valuable
competitive edge in the evolving landscape of
the dairy industry. Definitely an opportunity
there. And we strongly encourage you, our listeners,
to carefully consider everything we've discussed
today in the context of your own farm's unique
circumstances and long -term goals. Think about
whether proactively exploring these financing
options and the potential benefits of robotic
milking aligns with your vision for the future
of your dairy operation. We'd genuinely love
to hear your thoughts and experiences regarding
dairy robots and the various financing strategies
you've encountered or utilized. Please feel free
to reach out and share your insights. Let's keep
this important conversation going within the
dairy community. We've also compiled some Learn
More resources that delve deeper into specific
aspects we've touched on today. Yeah, good stuff
in there. Covering everything from crucial financial
considerations and strategies for maximizing
dairy farm efficiency to a closer look at the
robotic milking revolution, the often hidden
aspects of ROI, benefits beyond just milking,
and the critical importance of ongoing maintenance.
These resources are there for you to explore
the topics that are most relevant to your operation
in greater detail. And finally, as you reflect
on all of this information, consider the broader
future of dairy farming. Automation is clearly
poised to play an increasingly pivotal role.
What will your farm's place be in this dynamic
and evolving landscape? What is your long -term
strategy for embracing technological advancements
and ensuring the continued sustainability and
success of your dairy operation in the years
to come? Some truly important questions for all
of us in the dairy industry to be pondering.
Thanks for tuning into this deep dive. We'll
catch you next time. That's our deep dive into
dairy robot financing. From 0 % manufacturer
deals to the four -year profitability timeline
every farmer needs to know. Got a robot success
story? Tag us at The Bullvine. We'll feature
the best insights in our May roundup. For show
notes and full financial tables, visit www .thebullvine
.com.