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Dairy Facility Investments and Labor Economics¹

Department of Agricultural Economics, Michigan State University, East Lansing 48823

ABSTRACT

Investments in modern dairy housing systems range from $800 to $1,200 per cow, depending largely on type of housing selected; degree of mechanization built into the milking, feeding, and manure handling systems; and types and cost of material used. Next to feed, labor is the most costly input in producing milk, accounting for 15 to 30% of total costs. Cost of labor largely determines the profitability of investing in labor saving housing and equipment. With labor priced at $2 or less per hour, high mechanization does not pay off. When dairy farmers must pay $3 to $4 per hour, which is comparable to industrial wage rates, investments in moderately to highly mechanized milking, manure handling, and grain and silage feeding systems result in lowest per unit cost. Management will become especially important in the development of complete systems, resulting in efficient and profitable milk production.

¹ Published with the approval of the Director of Michigan Agricultural Experiment Station as Journal Article 5611.