More and more farmers are opting for a form of regenerative, nature-inclusive agriculture. Often the question arises: is it worthwhile to change my farming practises?
Whilst it is true that more extensive operational management reduces overall production, cost savings too, are significant, owning to no or less fertilizer- and concentrate use. How does this adaptation work out on the balance sheet? Recent studies concluded that extensive dairy farming is less profitable than intensive equivalents. These studies however, fail to explicitly look at regenerative and nature-inclusive businesses on a company level. To paint the whole picture it is important to acknowledge that regenerative and nature-inclusive businesses often have different revenue models compared to intensive companies.
On behalf of, among others,Wij.land, Living Lab Fryslân, Vogelbescherming Nederland, Deltaplan Biodiversiteitsherstel en RVO, and in collaboration with Alan Accountants en Adviseurs, we have intended to provide an answer to the question: Is there a revenue model for regenerative dairy farming in the current market? If so, conventional farmers will be shown that securing a future in dairy farming through regenerative and nature inclusive models is possible. If not, arguments are created for rewarding and publicly funding the ecosystem services that are being provided through regenerative and nature inclusive farming.
In the project we have developed a methodology that calculates various business administrative indicators. Economic indicators such as the balance sheet and the results of everyday company business activities are examined, as well as indicators that show the financial performance of a company, such as the income per annual unpaid work unit. By combining a diverse range of indicators, a comprehensive picture of the farm’s economic performance emerges.
We applied this methodology with a first group of farmers, affiliated with Wij.land, Living Lab Fryslân and the Vogelbescherming. These are nature-inclusive dairy farms on peat, clay and sand, from the Groene Hart and the Northern Netherlands. After inspiring company visits to the participating companies, these farmers provided openness in their accounting and we were able to calculate the indicators for the participating companies. A sounding board group was set up for valuable input and a critical view from the professional field. The members represent the professional field and are employed at Rabobank, Friesland-Campina, Wageningen University & Research, ABAB Accountants and Advisers, Ministry of Agriculture, Nature and Food Quality, BoerenNatuur and in dairy farming.
The insights from the project were first shared with the farmers in cluster meetings. Using overview tables, graphs and assays, we have guided ourselves and the farmers through the large amount of data compiled, after which we further refined the methodology (based on the data as well as the feedback that the participating farmers provided). In addition, in collaboration with Alan Accountants, we have provided insights into the specific business operations of the participating famers by applying the Activity Based Costing method, in which the division of costs within the company is visualized by allocating costs and labour to certain activities.
After fine-tuning the methodology through discussions with the sounding board, a guidance group and participating farmers, an analysis was carried out that examined the performance of the involved farms. This resulted in the following results:
- It is possible for regenerative companies to arrive at a good revenue model: 11 of the 13 companies studied, achieve an income per annual unpaid work-unit, that is higher than the national average.Six of the 13 companies achieve a higher operating result from normal business activities than a reference group comprised out of above average performing conventional farmers situated in the Northern parts of Netherlands. Due to the small sample size, this does not mean that nature-inclusive farmers automatically perform better in economic terms than other farmers, but it does show that a earning a decent livelihood is possible for regenerative dairy farmers.
- Every company is different: the research shows that there is not one decisive factor that makes or breaks a revenue model and there is not one sole indicator on which a comparison or assessment of all companies can be established. Choices are inevitable whilst entrepreneurship, creativity and craftsmanship suited to the farmer, his/her environment, and his/her general economic performance is required. At the same time it appears that, in order for a nature-inclusive company to achieve a positive result, it does not depend on having a niche product, a side-branch or being in close proximity to a large city.
With the purpose of communicating these results to a wider audience, we organized a webinar, in collaboration with Wij.land, in which we shared the most important results and discussed the relevance of this research for nature-inclusive dairy farming. With more than 300 online visitors, we can look back on a successful webinar.
Thereport elaborates on preliminary and detailed results regarding the earning capacity of nature-inclusive dairy farming. In addition to this account, a methodological memo has been developed containing a further explanation of the methodology used. The premise of this memo is that it will enable people to start working with the constructed method themselves, herewith contributing to the broadening of the methodology’s application and the development of a larger and more reliable dataset. Utilizing this methodology should help farmers to gain more insights into the economic and financial aspects of their business operations. Farmers, advisors and other interested parties who want to apply the methods themselves can download both the methodology report and the calculation sheet below.