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ECONOMICS OF SUCCESSFUL STALL BARN MODERNIZATION
Published by the American Society of Agricultural and Biological Engineers, St. Joseph, Michigan www.asabe.orgCitation: Pp. 117-124 in Fifth International Dairy Housing Proceedings of the 29-31 January 2003 Conference (Fort Worth, Texas USA) 701P0203.(doi:10.13031/2013.11611)
Authors: W. F. Lazarus, K. A. Janni and J. K. Reneau
Keywords: Remodeling, Dairy facilities, Financial analysis
Many dairy producers in the Midwest have stall barns that could be remodeled to improve labor efficiency and increase income with modest investment. This presentation describes changes three dairy operations made over several years to upgrade and modernize their dairy operations. Their goals were to increase income and better manage labor and capital. Each operation remodeled a two-story stall barn to house either a walk-through step-up parlor or swing parlor and a holding area. They all added freestall barns and manure storage over a period of years. Projected financial analysis compared continuing to milk in a tie-stall barn, 50% expansion of a tie-stall barn, remodeling an existing barn to house a parlor, and a constructing an all-new dairy facility. The results indicated that a debt-free 58-cow operation with two operators would be able to generate a net farm income of $53,907. Expanding the tie-stall barn by 50 percent is unlikely to increase income if a third worker must be hired to handle the additional chores. If a retrofit parlor makes it possible to improve labor efficiency by roughly tripling the herd size with less than a doubling of labor requirements, net farm income would increase to $70,954. An all-new facility promises to generate three times that amount of net farm income, $156,714, but management and capitalization resources required for that 11-fold increase in herd size would be much greater. Return on equity depends on parlor throughput, milking time (hours per day), milk production per cow (kg per day), and herd size, as well as depending on the initial amount of equity capital available. Return on equity values ranged from 2.5% to 10.3% for $13 milk adjusted under the Farm Security and Rural Investment Act but turned negative at $11 milk. Remodeling projects can usually be done with substantially less initial equity. As with any major farm investment, the minimum amount of equity required will depend on the producer's risk preference and the lender's assessment of credit worthiness.(Download PDF) (Export to EndNotes)