Category: Policy & Business

Last month, the Irish Government published its Climate Action Plan.  This is designed to achieve a 51% reduction in greenhouse gas (GHG) emissions across the Irish economy by 2030 and achieve net-zero emissions by 2050. The key points from an agricultural perspective are;

• Agricultural emissions reduction target: Irish agriculture is tasked with reducing its footprint by 22-30% in 2030 versus the 2018 base of 22.03 million tonnes (MT) of CO2 equivalent. This equates to a 4-6Mt reduction in annual emissions. This target is to be achieved via;
  • GHG-efficient farming practices: increased uptake of innovative practices to help to improve animal breeding (genetics) to assist with earlier finishing of cattle (reduce average slaughter age of prime animals from 27 to 24 months by 2030).  Targets to reduce crude protein in animal diets (0.7Mt reduction) and increased organic farming.  Reduced fertiliser usage is also a key target, particularly chemical nitrogen (325-350Kt by 2030), coupled with greater utilisation of clover and multi-species swards.  There will also be a research programme to bring new technologies and feed additives on stream to aid efforts. Notably, there is not a specific target to reduce livestock numbers which had been a major concern for farmers.
  • Diversification of farming activities: includes exploring the development of a carbon farming model and increasing organic farming.   There is €260 million ear-marked under the CAP Pillar II spending for an organic farming scheme.  This aims to switch an extra 275,000 ha to organics by 2030.  Current organic area is 76,000 ha and by 2030 this would increase to 350,000 ha under the plans and reduce farming’s carbon footprint by an estimated 0.3Mt.
  • Biomethane business opportunities: exploring the possibility of increasing biomethane production from sustainable feedstocks such as waste and agriculture. This is part of a wider effort to inject 1.6TWh of biomethane into the gas grid by 2030 which is intended to result in a 0.1-0.2MtCO2e abatement of emissions in agriculture.
• Land Use, Land Use Change and Forestry (LULUCF): has a 37-58% emissions reduction target range by 2030. Here the focus is on re-afforestation, rewetting of peatlands and more efficient grassland management. Specific objectives include;
  • Forestry: by 2030, achieve a planting rate of 8,000 ha/year to increase carbon sequestration. A new forestry programme will be prepared for launch in 2023.
  • Deforestation: limit to less than 900 ha/year by 2030.
  • Peatlands and wetlands: by 2030, rehabilitate 65,000 ha of peatlands and reduce management intensity of 80,000 ha of drained organic soils. The latter target could potentially affect grass production and will be aided by a shift to organic farming.
  • Grassland (mineral): improve the management of 450,000 ha of (mineral) grasslands to increase carbon sequestration.
  • Cover crops: increase the area under cover crops to 50,000 ha.
• Other targets: of relevance to agriculture include;
  • Renewable electricity: increase renewables’ proportion of electricity production to 80% by 2030. An extra 8GW of electricity from onshore wind and an extra 1.5-2.5 GW from solar PV is also targeted. This will include a small-scale generation scheme for farmers, businesses and communities to generate their own electricity and to feed surpluses back into the grid.
  • Zero emission gas storage: to include greater utilisation of biogas/biomethane as well as green hydrogen. This includes ambitions to blend zero-emission gas into fuel use in buildings and industry.
  • Biofuel blend rates: bioethanol blend rate will increase to 10% by 2030 to reduce petrol car emissions. Biodiesel blend rate to reach 20% in the same period.

Whilst many farmers are concerned about how the Climate Action Plan is going to affect their businesses, there was some relief that a specified reduction in livestock numbers was not included. That said, many believe that significant advancements will be required in areas such as genetics, feed additives etc. for the 22-30% target to be attainable. With the eye-watering price hikes in chemical fertiliser, projected to be 120-200% higher in Ireland in 2022 versus 2021, many see this as being the biggest driver of decreasing usage in the short-term.

The move towards organics is in line with targets elsewhere in the EU. However, whilst organics might help in terms of emissions, the gains are projected to be relatively small and many are concerned that there is insufficient demand for premium-priced organic produce and these premia will erode with significant supply increases.

More information is available via:  https://www.gov.ie/en/publication/6223e-climate-action-plan-2021/

The RPA paid 97% of BPS claimants on the first day of the window (1.2% more than last year).  In addition, 59% of Environmental Stewardship and 54% of Countryside Stewardship annual revenue claims have also been made.  In total just over 97,500 payments have been made totalling £1.725bn in the first few days of the payment window, making it the best performance by the RPA so far.  This is the first year of the Agricultural Transition and all payments will have been reduced by 5%, with larger payments receiving a higher deduction.  With regards to environmental payments, a reminder these are all paid in one tranche now.

Defra has announced more details on how the Sustainable Farming Incentive (SFI) will operate in 2022 and the years after.

Standards and Rates

As previously outlined, the SFI 2022 will contain four Standards  – Arable & Horticultural Soils, Improved Grassland Soils; Moorland & Rough Grazing and Animal Health and Welfare.  The table below summarises the payment rates and actions required;

There will be no capital payments under SFI2022 but these will be added later.

Scheme Rules

The following general SFI rules will apply to all the 2022 Standards and any additional ones added later (see below);

• applicants for the SFI must be current BPS claimants.  This restriction will be dropped in future to let other land managers enter.
• SFI agreements will last for 3 years.  There will be a 12 monthly review of agreements at which point more land can be added, additional standards incorporated or the ambition level within standards raised.  During the 3 year agreement farmers will only be able to reduce ambition levels or coverage in exceptional circumstances – therefore the flexibility in agreements is only one way.
• payment levels will be fixed for the three-year period at the prevailing level when the agreement starts.  They may be adjusted subsequently as more experience of the scheme develops.  Payment will be quarterly in arrears (i.e. more frequent than current schemes).
• the SFI will operate on a land-parcel basis.  Standards can be signed-up for on a field-by-field basis rather than the whole farm having to be entered.  It appears that different fields can have different ambition levels under the same Standard.
• land must be under the ‘management control’ of the applicant.  This is taken to be the the Tenant under let situations.  There will be no requirement for Tenants to gain Landlord’s permission to enter the SFI.  Where a tenancy has less than 2 years to run this land will not be allowed in the SFI.  As a transitional measure, land with 2-3 years remaining on its lease will be allowed in.
• Land already in Countryside Stewardship (or other existing schemes) can also be entered into into the SFI as long as the prescriptions do not overlap or conflict.  This in unlikely for the Soils Standards as they are asking for different actions than CS.  It is also stated that land entered into the SFI can be used for biodiversity offsets or other private agreements.
• Common land will be able to enter the SFI through group agreements.  A ‘single entity’ (e.g. the Commons Association) will be required to submit the application.
• a 10-week application window for the SFI will open in 2022.  The precise timing of this will be given in the New Year (although it is stated it won’t clash with the BPS).  Given the statement from Defra that it would like to ‘make the first SFI payments before the end of the year’ this seems to indicate SFI applications after May.  In future years, probably from 2024 onwards, applications will be possible year-round
• the monitoring of agreements is stated to be ‘simpler, fairer and more proportionate’ than previous EU schemes.

Future SFI

Whilst only indicative at present, Defra has set out when further Standards may be added to the SFI;

• 2023:  Nutrient Management; Integrated Pest Management; Hedgerows.
• 2024:  Agroforestry; Low & No Input Grassland; Moorland & Rough Grazing (all levels); Water Body Buffering; Farmland Biodiversity
• 2025:  Organic; On-farm Woodland; Orchards & Specialist Horticulture; Heritage; Dry Stone Walls

It is possible other Standards will be included as well.  It is notable that in the list above there is no Arable Land Standard or Improved Grassland Standard – both of which were in the Pilot scheme.  Possibly they have been subsumed into ‘Farmland Biodiversity’ or they may have been deemed too unattractive.  

Other Schemes

The announcement on the SFI was made by George Eustice at a speech to the CLA.  At the same time he announced that the payment rates under next year’s Countryside Stewardship (for agreements starting Jan 2023) would be increased.  Details of the payment rates are promised in January.

It was also stated that more details on the Local Nature Recovery (LNR) scheme and the Landscape Recovery Scheme would be provided in ‘the New Year’.  Landscape Recovery Pilots are likely to be offered in 2022 but Local Nature Recovery Pilots may not be seen until 2023.

 

Latest farm income figures released by Defra show a surprising increase.

The figures are for Farm Business Income (FBI).  This effectively shows the profit for an average full-time farm in each of the main sectors of English farming.  The data is for the 2020/21 year (March to Feb) which covers the 2020 harvest, 2020 BPS payments and the first months of the Covid outbreak.

The aggregate farm business profitability figures (Total Income from Farming – TIFF) released in May showed a 15% fall in returns.  Although this was for the calendar year 2020 and the whole of the UK, it might be thought that the FBI figures would show a similar trend.  However, looking at the table below it can be seen that all sectors, apart from General Cropping and Poultry showed higher profits.  And, overall, FBI rose by 5%

The latest figures show significant (upwards) revisions from the first estimates of FBI published in April 2021 (figures in italics).  It seems there was a general under-estimation of output in the first set of data.

This means that the TIFF figure for 2020 could well also be revised upwards.  An update of this is expected shortly, along with the first estimate for farm profits for the 2021 year.  Overall, the emerging data suggests that the 2020 harvest year was not as bad, financially, as many feared.

Farm Business Income represents the financial return to all unpaid labour (farmers and spouses, non-principal partners and their spouses and family workers) and on all their capital invested in the farm business, including land and buildings.

Following a consultation earlier this year, the Scottish Government has published new legislation for the protection of water.  The Water Environment (Controlled Activities)
(Scotland) Amendment Regulations 2021 set out new standards for storage of slurry, silage, manure and digestates.  Furthermore, the legislation also outlines new measures for slurry application.  The key points are summarised below.

Silage storage (not in bags or bales)

• Stores built pre-September 1991, previously covered by grandfather rights, must now meet a new set of standards.  These are lower than the British Standards for new stores, however.
• Where stores built pre-1991 are enlarged, reconstructed or remedial works conducted, they must comply with the British Standards by 1 January 2026.
• Stores built before 1 January 2022 but after 1 September 1991 must comply to the British standards by 1 January 2024.
• Stores which are built, substantially reconstructed, or enlarged after 1 January 2022, must have a 20-year life span, with proper maintenance.
• the Scottish Environment Protection Agency (SEPA) must be notified at least 30 days prior to the start of construction, substantial rebuilt, or enlarged stores or effluent tanks.  Engineers Certificate to be retained for life of store.

Silage making and storage (bags or bales)

• Must not be stored, opened, or unwrapped within ten metres of surface water or opening to a surface water drain.

Slurry storage

• Where slurry is produced on farm by housed animals, storage must be sufficient for the quantity likely to be produced in 26 weeks for pigs and 22 weeks for cattle.
• New measures relating to the design of slurry storage are also introduced.  Including the need to notify SEPA prior to construction.
• Systems constructed pre-1991 must now comply with a set of basic standards to ensure they are fit for purpose and protecting the environment.  Where a pre-1991 system has been enlarged, reconstructed, or remedial work conducted, systems have until 1 January 2026 to comply.
• As with silage storage, systems constructed prior to 1 January 2022 have until 2024 to comply with new standards.
• If new, substantially reconstructed, or enlarged on or after 1 January 2022, a store must have a life expectancy of 20 years.

The rules for liquid digestate storage are largely in line with those for silage and slurry stores.

Slurry and liquid digestate application

• Precision spreading equipment to be used for application from 1 January 2023.  This includes the phasing-out of spreading via splash plate.  There will be a phased introduction by 1 January 2027 in some circumstances.

Organic fertilizer application

• Where organic fertilisers are applied, a risk assessment including a farm map is required.

Over the past month or so, you are unlikely to have turned on your TV and not seen mention of COP26.  But what was agreed and discussed in Glasgow and how might it affect (UK ) farming?

The main result from COP26 is agreement of the 197 nations on the Glasgow Climate Pact.  The pact outlines a ratcheting-up in the effort of nations to limit global warming.  Whilst no direct statements are made in the pact in relation to agriculture it is nonetheless very import for the sector.

The main points in the pact relate to:

• A commitment for nations to review and strengthen their 2030 emission reduction targets by the end of 2022.
• Accelerating efforts towards the phasedown of unabated coal power and phasing out of inefficient fossil fuel subsidies.
• Step up efforts to transfer finance from developed to undeveloped nations, to the $100 billion per year, by 2025, agreed at COP15.

The aim of these points is bringing the current trend in global emissions in line with the Paris Agreement.  The Paris Agreement set a target of limiting global warming to well below 2°c above pre-industrial levels.  Further the agreement aims to keep a 1.5°c reduction by the end of the century within reach.  Climate Action Tracker, an independent scientific analysis, suggests that the current 2030 targets would lead to 2.4°c of global warming.

For agriculture, there are three indirect points from the Pact.  These are:

• A renewed focus on ending deforestation.
• Further drive to improve the integrity of ecosystems and protect biodiversity.
• Nations invited to consider further actions to reduce by 2030, non-carbon dioxide emissions i.e., methane.

The Environment Bill finally received Royal Assent on the 9th November.  The Government’s flagship environmental legislation has had a long gestation, being first announced in October 2019 and presented before Parliament back in January 2020.

The Act, which mostly just covers England, is wide-ranging.  Some of the most important areas for agriculture are;

• Targets:  the Act sets out long-term, legally-enforceable, targets for the improvement of air quality, water, and waste reduction.  Binding targets on biodiversity improvement were added during the legislative process.  These targets must be of at least 15 years in duration, and be proposed by late 2022.  There is no requirement to set interim targets.  The air quality measures will impact on farming through a focus on ammonia emissions from intensive livestock.  The water quality is likely to touch on many areas of agriculture.  Waste reduction could see a charge for single-use plastics introduced, including farm use.  There are no binding targets specifically on soils, which many believe to be a large omission.  Defra is working on a separate ‘Soil Health Action Plan’, but this will have no legal basis.  
• Environmental Improvement Plans:  these will effectively be the delivery plans for the long-term targets set under the Act.  They will build on the current 25-Year Environment Plan which is seen as the first EIP.
• Environmental Principles: there are five principles of environmental management set out in the Act, including the polluter pays and precautionary principle.  It remains to be seen whether this will have an effect on farming.  For example, a very strict reading of the polluter pays principle could see growers responsible for the costs of any diffuse pollution from fertilisers or agro-chemicals.  
• Office of Environmental Protection: the OEP will be established to hold public authorities (including Government ministers) to account for applying the environmental principles and complying with environmental law.  The OEP has in fact already been running on an interim statutory footing and under early use of powers under the Act has now been put on a statutory footing (as from 17th November).Whilst some environmental groups feel the way the OEP has been set up is not independent enough of Government, there is a fear, including in farming, that it will become ‘captured’ by environmental interests and not weigh other factors such as economic development in its decisions.    
• Local Nature Recovery Strategies: these will be a set of spatial strategies covering the whole of England.  The relevant authorities (probably Local Authorities) will map existing habitats and set out a plan for improvements.  It will be similar to Local Plans under the Planning regime and may have implications for what landowners can do with their land. 
• Biodiversity Net Gain (BNG): the Act requires developers of land to generate 10% BNG – i.e. there must be more biodiversity on the site once the development has finished than before it commenced.  This will drive the development of a Biodiversity Credit market where landowners create biodiversity offsets in situations where developers cannot create extra biodiversity on site. 
• Conservation Covenants:  the Act will create a new legal instrument.  At present covenants on land that pass from one owner to the next can only be restrictive (i.e. you cannot do something).  There is no way to tie future owners into positive management (i.e. you must do something).   This is seen as vital in securing the long-term management of land for things such as BNG – which require management for 30 years.  An amendment to the legislation means that Conservation Covenants will now need to be executed as deeds (i.e. by a solicitor).
• Water Use:  reform of the water abstraction regime is covered by the Act (a consultation on abstraction reform was launched in September).

It can be seen that the Act is likely to have a long-term impact on farming for many years.  However, the effects will not be immediate.  In most cases the Act simply sets the legal framework, with detailed provisions needing to be introduced through secondary legislation.  For example, it is not thought the Biodiversity Net Gain requirement will be fully enacted for another two years.  We will keep you up-to-date as elements of the Act are introduced.

A new capital grant scheme for English farmers has opened.  The Farming Investment Fund (FIF) is designed to help farmers invest in new technology and equipment and was launched on the 16th November.  Full details can be seen at https://www.gov.uk/guidance/farming-investment-fund

The scheme is similar to the previous Countryside Productivity Scheme having two elements – for small and large investments.

Farming Equipment and Technology Fund (FETF)

This is the small-scale scheme.  This pays a fixed amount for specific items of equipment (usually 40% of the cost).  The full list can be seen at  – https://www.gov.uk/guidance/farming-equipment-and-technology-fund-round-1-manual/annex-3-eligible-items-specification-and-grant-amount.  The list is longer than under the previous Countryside Productivity Small Grants Scheme (CPSGS) having an extra 38 items, bringing the total to 120.

Other points to note are;

• the minimum grant per application is now £2,000 – reduced from £3,000 under the CPSGS, so more people should be able to apply if they only want a few items
• the maximum grant is raised to £25,000 (from the previous £12,000).  There are a number of ‘big ticket’ items such as drills added to the list
• this round of funding is open between the 16th Nov and 7th January.  Claims will have to be made (i.e. the equipment purchased) by 30th Sept 2022.  There will be further rounds in future
• applicants can apply for a total of £50,000 of grant during the scheme’s lifetime (meant to run to 2026).  Any funding received through the CPSGS will not count towards the £50,000 – i.e. those that claimed under the old scheme can also apply for this one
• the eligibility for the scheme is wider than previously, as it is open to contractors, foresters and those who have not claimed the BPS.

Farming Transformation Fund (FTF)

This is for larger items of spending with grants of between £35,000 and £500,000 (again, based on a 40% grant rate).  Like the FTF, it is open to contractors as well as farmers.  The grant funds projects in three areas;

• Water Management – applications for this opened on the 16th Nov
• Improving Farm Productivity – to open ‘later this year’
• Adding Value (i.e. processing and marketing) – to open ‘early next year’

There is a two-stage application process for the FTF;

• An online check of an applicants ‘eligibility and desirability’ (a bit like an expression of interest)
• A full application if the first test is passed

The current scheme on water management will support investments in such things as reservoirs and irrigation systems.  The online first-stage check closes on the 12th January with full applications needing to be made by 30th June 2022.

The Scottish Government has announced the Agri-Environment Climate Scheme (AECS) will open for a full application round in 2022.  In addition, it has confirmed it will open for future rounds up to and including 2024.  The 2021 round of the scheme was quite restricted with only certain categories eligible to apply.  The rounds from 2022 onwards will be much more comprehensive.  Support will be available for – organic farming, land management practices which protect and enhance the natural heritage, improving water quality, managing flood risks, mitigating climate change, increasing diversity and improving public access.  Although no application dates have been announced, it usually opens in January, we will endeavour to keep readers up-to-date.