Dynamic programming to determine optimum investments in information technology on dairy farms

The feasibility of integrating the information about a number of information technology (IT) applications on dairy farms is gaining interest because of the potential to improve economic results. In this study optimal investment patterns involving five IT applications are evaluated: (1) automated concentrate feeding systems; (2) measurement of daily physical activity of cows; (3) in-line automated parlour systems recording milk production; (4) milk temperature; and (5) electrical conductivity of milk. The investment decisions are optimised by dynamic programming taking into account price reduction and technical progress over time. The objective is to determine the pattern value of (stepwise) IT investments that maximises the net present over a given planning horizon. Optimal investment patterns are calculated under different assumptions of technical progress, farm characteristics and farm scale. In this way it is determined under which conditions the applications under research would be incorporated. Results for a typical Dutch dairy farm show that the optimal investment pattern includes automated concentrate feeders. The incorporated electronic individual cow identification and hardware facilitates the appraisal of other in-line sensor investments such as activity measurement of cows.