Submitted to: Journal of Dairy Science
Publication Type: Abstract Only
Publication Acceptance Date: 7/9/2006
Publication Date: 7/9/2006
Citation: Bewley, J.M., Boehlje, M.D., Gray, A.W., Kenyon, S.J., Eicher, S.D., Schutz, M.M. 2006. Development of a stochastic simulation model to assess the potential economic benefits associated with investments in precision dairy farming technologies. Journal of Dairy Science. 84:1.
Technical Abstract: A dynamic, stochastic, mechanistic simulation model of a modern dairy enterprise was developed to evaluate the costs and benefits associated with investments in Precision Dairy Farming (PDF) technologies. The model was designed to represent the biological and economic complexities of a dairy system within a partial budgeting framework by examining the cost and benefit streams coinciding with investment in a PDF technology. A primary objective of this effort was to provide a flexible, user-friendly, farm-specific decision making tool for dairy producers and technology manufacturers to use in on-farm decision making. The basic deterministic model was created in Microsoft Excel. The @Risk Excel add-in was used to consider the stochastic nature of key variables in the Monte Carlo simulation. Net Present Value and break-even bid prices are the primary metrics used to assess the economic profitability of investments. Estimates of relationships within the model were obtained from the literature. U.S. means and distributions, where available, were used to describe initial herd parameters within the model. In an example to demonstrate the model’s utility, investment in an automatic core body temperature monitoring system was considered. The pricing strategy of the MaGiiX™ Cattle Temperature Monitoring System (CTMS) was used to estimate costs of investment. Benefits of the system were considered by estimating the impact and timeliness of interventions resulting from information provided by deviating temperatures obtained from the MaGiiX CTMS. Sensitivity analysis was conducted to identify the impact of different scenarios and benefit combinations on profitability. Monte Carlo simulation resulted in a series of net present values used to identify the probability of observing a positive net present value associated with investment in the MaGiiX CTMS. This analysis provides a framework for future economic analyses of other Precision Dairy Farming technologies.