An Economic Evaluation of Two Alternative Uses of Excess Capacity in the Milking Parlor

Abstract

Milking parlors are a large and often underutilized investment on most dairy farms. Two viable options for increasing usage of the milking parlor are switching to three times daily milking or increasing the number of cows milked twice daily. A basic scenario was developed from data collected on New York dairy farms in 1992. To determine the economic impact of the two alternatives on the base farm, prepared statements of income and cash flow are reviewed. Net farm income and cash flow increase with the adoption of either alternative. Net cash flow increases more rapidly with the move to three times daily milking and does not require new debt. Expansion of the herd milked twice daily results in a larger increase in net farm income. Fluctuations in milk price, milk production, feed costs, and interest rate have a greater impact on net farm income and cash flow for the herd expansion option.