Our financial results have been highly influenced by the high milk price and the high inflationary market, both of which caused disruption to the business and the trial.

We intended to run 4.0 cows/ha and 3.5 cows/ha on the conventional and regenerative sides respectively but ended up peak milking 3.7 and 3.2 cows/ha and this skewed our budget significantly. We were anticipating 1800 kgMS/ha on the conventional side and 1450 kg/ha on the regenerative side, but actually achieved 1601 kgMS/ha and 1255 kgMS/ha. The entire Align Farms group was back 4.5% in production from last year, due to climatic conditions, and this impacted our financial results.

It is very attractive to produce milk at a high payout of $9.30, so that price motivated decision-making on farm. The revenue of the conventional side was $2,267,079 and the regenerative side earned $1,776,887, which results in a $490,193 loss of potential earnings for the regenerative side.

If we can reduce the costs on the regenerative side, we believe this farm system can be competitive against the conventional model. This season our FWE were $5.23/kgMS for the conventional side and $5.36 for the regenerative side.

At our 6+6 reforecasting in December, we were on track to have a lower FWE on the regenerative side than the conventional side. Supplement usage on the regen side was forecasted to be $92,000 with $225,000 expected on the conventional side and fertiliser spending was $80,000 on the regenerative side and $157,500 for the conventional.

Our (un-audited) year-end results tell a different story however and have been heavily affected by additional, and unanticipated, importation of supplementary feed. We ended up spending $143,000 on supplements for the regenerative side and this was mainly due to the poor autumn performance of the diverse pastures and the attractive milk pay-out.

Last autumn we were also chasing the high milk pay-out, so we dried off with 1850 kgDM/ha residuals and paid the consequences for that the following spring. This season we set a target dry-off cover of 2200 kgDM/ha on the regenerative side, and when autumn growth rates of the diverse pasture plummeted, we elected to import an additional $50,000 in supplement to maintain our cover, due to the attractive pay-out. We are unsure about this decision and fundamentally believe we need to work out a method of growing more feed in the autumn. We are comfortable with the growth of the diverse pastures in the spring, and very impressed in the summer, but it is in late lactation that improvements are needed, and in our eyes, this will be the deciding factor in the success of this farm system.

We have discussed a few options for dealing with this poor autumn growth, such as running a higher stocking rate throughout summer to consume the excess feed and then cull earlier, or using 20-30 units of N in March to push feed into April or May. We are planning to test this on some, but not all, of the regenerative paddocks next season.

Final fertiliser spending was $143,000 on the conventional side and $75,000 on the regenerative side, so we made savings in this space. Animal health was not an area of strength for regenerative this season, but we expect this coming season’s results to be more indicative now they have been on diverse pastures for a full season and will be wintered on diverse crop. 34% of both herds received an animal health treatment this season, but there was more mastitis on the regenerative side, which is significantly more costly than lameness treatments, which were higher on the conventional side, resulting in more spending on the regenerative side.

We consider EBIT/ha the most significant metric for comparing profitability and it was $6943 and $5292 for the conventional and regenerative side respectively, which is a $1662 difference per hectare. At the 6+6 reforecast we were on track for the $900/ha difference, so this unfortunately has almost doubled since November. $333/ha of this is attributable to the increase in supplements. We are disappointed by this result and recognise that it is too big of a gap for anyone to follow suit in what we are doing, so a big focus on this coming season is how we can lift production on the regenerative side.

We are going to open the season with 3.0 cows/ha on the regenerative side and focus on lifting per cow production. We will also be exploring ways to increase our pasture growth in late lactation, by either using crops to shift feed or using a bit of nitrogen strategically. We will likely do a combo of both, and trial N on some, not all, of the regenerative paddocks in March to determine the outcome. We have also discussed wintering our regenerative heifers on-farm next season, which would reduce our wintering costs by $30-40,000. Additionally, we are trying to drive our empty rates down so we can lower replacement rates which will in turn lower costs (and methane emissions).

From a pasture production perspective, we have lifted the pasture curve with the diverse pastures and are growing more feed during summer. If you put our pasture curve over our milk production, you can see the regenerative herd was producing slightly better early in the season, but we lost production in summer. We need to balance pasture quality over summer, we focused too much on growing more pastures, rather than growing quality pasture. Urea would influence this, but we are exploring other options as well and trying to determine that sweet spot between maximising pasture production and maximising quality. Rhys believes you set your business up to drive quality or quantity, we got stuck between the two and need to choose one road to go down. This is why we are slowly dropping the stocking rate – we were pinching cows when we shouldn’t have been on the regenerative side, and this impacted milk production.

All in all, from a financial perspective, we need to produce more milk first and foremost. We left a bit on the table at times because we are still learning, and this was a tough season for all in general. On the regenerative side, we have an additional 350 kgDM/ha of feed at the end of this season compared to last season, so we are optimistic about the coming spring. We need to nail late lactation pasture production and are optimistic we can fix these issues, but can we do this without urea? We grew 400 kgDM/ha more feed on the regenerative side (based on 46 weekly pasture measurements) so if we can turn that into milk this season, we will be very pleased with our results.

Overall, we still consider this season a success. We are moving into a volatile and rough season with He Waka Eke Noa, the new Freshwater rules, increasing costs, and a tight labour market all putting pressure on farmers. We are pleased to be able to navigate these rough seas with logic and data rather than assumptions. While we would have preferred to have the same earnings on both sides of the farm, we have learned a tremendous amount in the process and provided good information to the industry where it was lacking.

We are looking forward to this season, the cows are in better condition and the team is feeling more confident after a fairly successful season under their belt and are motivated to improve on this season’s results. Our budget for the 2022-23 season will be coming soon and we plan to do another 6 monthly update in November, then a final review in June. If you would like to see anything additional or have suggestions on how we could better present this data, we are open to feedback in this space. Please note this is our un-audited financial data, and if anything changes following our accountant’s review in October, we will announce those changes. We are not anticipating any significant changes; it is really just the final month of the season that may shift slightly.