Investing in Dairy Livestock Facilities

The farmstead including the buildings that comprise the dairy housing and milking center, machinery storage and repair shop, feed storage and feed mixing room, manure storage, and in most situations the farm home is an important part of the total farm organization.

When investing scarce capital resources, determining the size and type of livestock facilities to build is one of the most important decisions faced by farmers who have livestock enterprises as a significant part of their farm businesses. Buildings have an important impact on livestock performance and worker efficiency. Farm buildings have long, useful lives of 15-50 years or more. Most building investments, therefore, have a certain degree of permanence; to be economical, they must be used for their entire lives.

Unique Problems

Livestock facilities buildings that house milking, feeding, and manure handling equipment are critical to efficient dairy farm operation. Investing in farm buildings presents unique problems. First, buildings are difficult, if not impossible, to sell separately once they are constructed. Buildings area part of a total production system and are, in most situations, too costly to move to a new location. Second, construction of new buildings often results in lost capital. (Lost capital is the difference between the amount paid for the building and the amount the building adds to the value of the farm.) In most situations, a building will add less than half of its cost to the total value of the farm.

Planning Farm Layout

Before constructing farm buildings, the farm manager must consider site selection and building design. The site must have adequate drainage, available water, and suitable topography for construction. The buildings must be oriented properly in regard to prevailing winds and sunlight. The building design should be flexible yet durable. However, buildings that are flexible but not specifically suited to the intended use often lead to serious labor inefficiencies.

The total farm layout must also be considered when selecting a farm building's location. The locations should create efficient pedestrian, machinery, and livestock traffic patterns. The layout should be such that future expansions or additions are practical as well as possible. The buildings also should allow easy access from the highway to accommodate milk pickups, feed deliveries, and livestock transportation. Above all, the plan should be drawn to scale. Pedestrian, machinery, and cattle traffic patterns should be included on the plan drawings and then evaluated to determine if the buildings' sites could be rearranged to reduce travel distances and times without sacrificing site suitability.

Build or Remodel?

Remodeling existing buildings can be less costly than constructing new buildings and thereby reduce overhead costs and debt commitments. These factors can be important for farmers with limited capital resources or for farmers who are not prepared to make a long-term commitment to the industry. However, building from scratch has its advantages; these advantages may outweigh the cost advantages of remodeling. A new building can:

Improve labor efficiency and, thereby, reduce labor costs;

Improve animal performance with adequate ventilation and feed bunk space;

Reduce energy and repair costs;

Accommodate site selection of the building;

Avoid complexities and difficulties often encountered when remodeling, and;

Improve appearance of the farmstead.

Contractor or Farm Labor? When deciding whether to hire a contractor or use farm labor to remodel or construct farm buildings, a good manager carefully examines the pros and cons of each alternative. Even if a farmer has the necessary masonry, carpentry, and electrical skills (as well as available time) to construct new buildings and can thus reduce the cost of building in comparison to hiring a contractor, the time required to build may detract from the management of the existing farm operation and thus cancel out any cost savings. The farm manager should compare contract construction costs with farm labor costs considering the potential value of production foregone or costs increased on the farm. Also compare construction time will farm labor take longer to complete the construction than a contractor?

Build Slowly or Rapidly?

Farmers often choose to add buildings or complete buildings gradually as herd expansion demands. Adding buildings on an as-needed basis allows the manager to test new technologies or building designs before making a total commitment. However, if the costs in any year are greater than the projected income, gradual expansion is not a good plan. Projections for gradual expansion should be compared with having a complete facility at capacity earlier. From a management perspective, it may be wiser to make a complete change at once rather than to be changing some aspect of the business each year for a number of years.

How Much Mechanization? Capital investments in such equipment as mechanical feeders and automated manure handling and storage equipment can reduce labor requirements or make manual labor tasks less strenuous. However, many dairy farmers have found that the lower capital investment requirements of feed storage and feeding equipment, such as bunker silos and mixer wagons, offset increased labor requirements. When evaluating the amount and type of mechanization to include in dairy buildings, the farm manager should analyze whether the higher annual costs of a more mechanized system will lower labor costs or sufficiently increase production to justify the purchase.

Economic Feasibility

Once a building plan has been developed, the farm manager must evaluate the economic feasibility of the plan. For construction of buildings to be economically justifiable, the buildings must add more to the value of farm production than they cost to own and maintain.

Buildings may add to the value of a farm's output by:

Allowing a greater total product from a given set of inputs;

Maintaining or preserving the quality of farm products, or;

Permitting the storage of commodities so they can be marketed at the most favorable times or used when needed.

Buildings may reduce production costs by:

Reducing the amount of labor required to produce a commodity and perhaps adding to the comfort and productivity of the workers;

Increasing machinery life and efficiency and thus lowering machinery costs, or;

Permitting more efficient use of machinery resulting from improved placement.