Category: Policy & Business

Speaking  at Cereals on 30th June, George Eustice announced more details about the Sustainable Farming Incentive (SFI); the first component of Environmental Land Management (ELM) and the one most farmers should be able enter.  These details are different to the SFI Pilot for which those who expressed an interest are now drawing up an Agreement.  These details are for the ‘main’ scheme which will open in spring 2022 for applications to this first phase.  The scheme will then gradually expand until all elements are available from 2024/25 onwards.  Between 2022 and 2024, the SFI will run alongside existing schemes (e.g. Countryside Stewardship).  Farmers will be able to choose which schemes to participate in and can participate in multiple schemes if they wish, but they will not be paid twice for the same action.

In this initial phase, the SFI will concentrate on soils and also introduce the first element of the Animal Health and Welfare Pathway which will be available under SFI.  There will just be four Standards within SFI 2022, these are:

• Arable and Horticultural Soils Standard
• Improved Grassland Soils Standard
• Moorland and Rough Grazing Standard
• Annual Health and Welfare Review

The payment rates and the standards outlined below are indicative, the final versions will be available by November 2021 following further refinements and feedback from farmers and stakeholders.  With regards to payment, George Eustice has said the rates ‘roughly equate to a 30% uplift’ compared with what would have been available under the old EU methodology – a separate Policy Paper has been released which sets out the principles which will be used to set payments (see separate article).

The Standards

No specific management prescriptions are available yet, but below is the general guidance given from Defra;

The Arable and Horticultural Soils Standard and the Improved Grassland Soils Standard – Farmers will be rewarded for management practices which improve the soil structure and soil organic matter.  With the aim of promoting clean water, improving climate resilience, biodiversity and food production.  There will be three ambition levels for each of the soil standards.  The indicative rates are:

Those drawing up their SFI Pilot agreements will be interested in these payments as it appears these will replace those originally offered in the Pilot scheme.  This would see the Improved Grassland Soils Standard payment increasing significantly compared with those offered in the pilot of £6, £6 and £8 per Ha for the Introductory, Intermediate and Advanced Ambition Levels respectively.  Conversely, the Arable and Horticultural Soils payments will reduce slightly for the Introductory and Intermediate (£30 and £47 per Ha in the Pilot) with the Advanced payment slightly more (£59 per Ha in the Pilot).  Of course, until the precise management prescriptions are known, it is difficult to judge how generous the payment rates are.

Moorland and Rough Grazing Standard – Farmers will be rewarded for assessing the range of habitats and features present on their moorlands.  This has the aim of identifying the pressures on them and also the risks posed by wildfires.  For 2022 there will only be an Introductory level; higher levels of ambitions are planned later in the Agricultural Transition.  No indicative payment rate has been announced for this Standard.  The plan is for this Standard to be developed further during the summer with farmers and stakeholders.  It will be finalised by November 2021 along with a payment rate.  This Standard will be available to all Moorland farmers, including those already taking part in Countryside Stewardship.

Annual Health and Welfare Review – This is the initial phase of the Animal Health and Welfare Pathway.  It will involve a Defra-funded yearly visit from a vet.  It is initially planned to be available for three years.  The review will include;

• Data collection to benchmark against the national herd/flock and to track progress on the holding
• Actions to improve biosecurity, including training, capital investment, changes to farm management practices (unclear whether this will include additional funding)
• A review of medicine usage.  Including uploading medicines to an e-medicines recording hub
• Recommendations to improve health and welfare and signposts for further support to help make changes.
• Diagnostic testing for priority diseases – Bovine Viral Diarrhoea (BVD), Porcine Reproductive and Respiratory Syndrome Virus (PRRS) and for sheep, parasitic resistance to anthelmintic treatments.

Payments are expected to range from £269-£775.  The main difference in the rate is due to the costs of the diagnostic tests which vary across the species.

Further Development 2022-24

More Standards – More Standards will be added to the SFI between 2022 and 2024.  Priority will be given to those Standards which make the most significant contribution to the environment, climate and animal health & welfare outcomes and those that have multiple benefits.  Consideration will also be given to as to how each Standard extends the opportunity to more types, location and sizes of farm.  The Standards which are currently under consideration are;

• agroforestry standard
• hedgerows standard
• arable and horticulture land standard
• waterbody buffering standard
• improved grassland standard
• low and no input grassland standard
• farm woodland standard
• dry stone walls standard
• heritage standard
• farmyard infrastructure standard
• orchards and permanent crops standard
• peat soils standard

Animal Health & Welfare – Defra is working with the livestock industry, including vets to ‘co-design’ the Animal Health & Welfare Pathway.  Other components expected include animal health and welfare grants, endemic disease support and piloting payment-by-results.  It is also continuing its commitments to strengthen the regulatory baseline and consult on animal welfare labelling.

Land Management Plans –  The aim is that, eventually, the Sustainable Farming Incentive will involve each farm having a Land Management Plan.  This would be the basis for farmers to decide how, where and when to produce public goods on their land.  It would then also be possible to use these plans as a basis for assessing overall progress towards environmental, climate, and animal health and welfare targets.  This starts to sound more like the Natural Capital approach to paying for public goods which was discussed when ELMs was first conceived.  

Earned Recognition – the SFI Pilot will be used to trial and evidence how earned recognition could operate for the scheme, including how membership of existing assurance schemes might play a role in reducing checks and inspections.

Agreement Lengths & Flexibility – Defra wants to make the SFI accessible to all farmers and are looking at flexibility in agreements and lengths.  The aim is that those who have control of the land for more limited periods of time, such as tenants, are still able to participate fully.  It also wants to make sure that those farming on common land are able to join the scheme, with group agreements looking most likely to be required in order to enter common land into the SFI.  Flexibility to adjust the content of agreements is being considered, as are ways to make it straightforward for a farmer to roll over an agreement if they wanted to do so.

Monitoring & Compliance – Defra has said it will continue to develop its approach to monitoring to make it ‘fairer, more targeted, more proportionate and more effective’.  One of the barriers to entering Agri-environment schemes is the view that inspections are more common and payment can be held up, even when no problem is found.

Defra has provided a progress report on the Agricultural Transition in England.  This update can be found at – https://www.gov.uk/government/publications/agricultural-transition-plan-june-2021-progress-update/agricultural-transition-plan-june-2021-progress-update.   The document mainly covers the new SFI 2022 (see accompanying article) but also provides a review of the initiatives launched to date, and also a timetable for future schemes.  In respect of the latter, it gives a firm opening date for the Farming Investment Fund (capital grants) of October 2021.  The other main topic covered is payment calculations and scheme funding – again, see our separate article for details.

We reported last month on the new Farming in Protected Landscapes (FiPL) scheme that will provide additional grants in National Parks and Areas of Outstanding National Beauty (AONBs).  Defra and Natural England have also announced the the potential creation of two new AONBs, plus the extension of two existing ones.  The new ones are a Yorkshire Wolds AONB and a Cheshire Sandstone Ridge AONB.  The extensions are to Surrey Hills and the Chilterns.  Unhelpfully, the statement (see https://www.gov.uk/government/news/natural-england-announces-landmark-new-programme-for-protected-landscapes) gives no details on the precise areas to be covered by the designations.  A consultation is promised later in the year.

The deadline to request a Mid-Tier application pack online using the Rural Payments service has been extended from 30 June 2021 to 16 July 2021.  There is no requirement to a request an application pack for online applications to the Wildlife Offers.  The deadline for submitting an application to either the Mid-Tier or one of the Wildlife Offers remains 30th July.

EU Member States have agreed new rules for the Common Agricultural Policy (CAP) to run from 2023 to 2027.  Although no longer directly relevant to the UK, of course, it is the support system in place for our closest neighbours (and competitors) so is of more than passing interest.  In general, the reform is not radical – being largely a ‘tweak’ of the systems already in place.

The BPS remains at the heart of farm support.  However, the rules at EU level will be less prescriptive, with each Member State drawing up Strategic Plans (by the end of this year) setting out the details of their support systems.  Other notable points include;

• the two-Pillar architecture of the CAP is maintained, with most support still going into Pillar 1 Direct Payments (the BPS)
• 25% of the budget for Direct Payments must go to eco-schemes.  This new requirement includes things such as organic farming, agro-forestry, agro-ecology, IPM and animal welfare
• Member States must target support at smaller farmers.  This is either through ring-fencing 10% of the Direct Payment (DP) budget for a Redistributive Payment or introducing Capping (at €100,000)
• Coupled payments are retained at existing funding levels (13% of the DP budget plus another 2% in certain circumstances)
• 3% of DP funds must go to support Young Farmers.  There will continue to be rules limiting support to those that a deemed Active Farmers
• Rules on Social Conditionality are included for the first time.  This means farmers have to comply with labour and employment law or risk having their payments reduced
• The current rules on Cross-compliance and Greening are replaced by a new set of Good Agricultural and Environmental Conditions (GAEC).  These are a mix of existing and new requirements, including the protection of wetlands & peatland, watercourse buffer strips, minimum soil cover, crop rotation, uncropped land and hedge-cutting rules.
• Of the Rural Development Budget, 35% is ring-fenced for Agri-environment schemes

The final ‘political’ deal was thrashed-out between the European Parliament and European Farm Council (Member State representatives) on 25th June.  Like most compromises, it did not meet universal acclaim.  EU farmer groups stated it causes an ‘unprecedented challenge’ for European farmers.  At the other end of the spectrum green groups claimed it did nothing to shift EU farm policy to properly align it with the organisation’s environmental commitments (such as the Green Deal) and that the many of the elements in the CAP deal simply amounted to ‘greenwashing’.  

Defra continues to undertake Tests and Trials for the new schemes that are becoming available as we transition away from the BPS.  One of the areas it has been looking at is the need for advice and guidance.  Findings from the Tests and Trials confirm there is an important role for assistance with good advice encouraging farmers to take part in environmental land management.

Results show most farmers think they will need help from an advisor to apply for the Local Nature Recovery Scheme and some feel they would also need advice for the Sustainable Farming Incentive (SFI).  Many involved in the Tests and Trials also said they would like advice on financial planning as it would help show the impact of the delivery of the scheme on their farm business.  Feedback has also shown farmers would like flexibility to decide who they obtain their advice from, with practical experience and local knowledge key factors.  A Test led by Exmoor National Park found the cost of advice varied considerably, starting from £200 per day but increasing significantly for specialist advice.  The average was £400 per day.  Many farmers would prefer the new schemes to include the cost of advice.

In terms of the wider advice ‘offer’ as part of the Agricultural Transition in England, the next round of the Farm Resilience Fund is due to open in August.  This offers fully-funded advice, training and events to farmers.  The next round is billed as ‘interim’ and will run until March next year.  At that point the scheme is designed to be scaled-up with a greater amount of funding. 

 

 

Further details of the Sustainable Farming Incentive (SFI) Pilot are available.  The SFI Pilot opened for Expressions of Interest earlier in the year and over 2,000 land managers have now been invited to take part.  This will include:

• implementing the Pilot version of the SFI on their own farm
• taking part in learning activities based on their experiences
• providing regular, comprehensive feedback on what is working and what is not

The scheme will launch in 2022, initially for farmers in England who currently get payments under the BPS.  More details will be available later this year.  It is worth highlighting that the SFI 2022 will be different from this Pilot.  Firstly it will cover fewer Standards – possibly only soils to start with.  Secondly, the payment rates and requirements may be quite different.  The Pilot has borrowed heavily from Countryside Stewardship (CS) in terms of prescriptions and rates.  Defra is working up the ‘real’ SFI now and this will be a chance to improve the scheme.   

Those involved in the Pilot, will be invited to make an application shortly (‘late June’) and will receive a reminder from RPA.  They will have 8 weeks in which to prepare and submit an application.  Pilot agreements will commence in October 2021 and will continue until late 2024 when the pilot ends.  The application will be online through the Rural Payments service.  All the usual process of ensuring land is correctly mapped will be necessary and any changes will need to be made via an RLE1.  Adding land can be made via the email ‘Add land’ process.

Applicants will need to decide which land to enter in the scheme (not all land has to be included), which Standard is appropriate for the land and an Ambition level.  There are eight Standards and three Ambition levels for each (except woodland which only has one).  See our article of  15th March https://abcbooks.co.uk/sfi-pilot/ for an overview of the Standards and the payment rate for each Ambition.  Support will also be available for capital items, but these will need to be applied for via the Countryside Stewardship Capital Grant Scheme.  As per the ‘main’ CS scheme, there will be a maximum of £60,000 available per application with a £20,000 cap within each capital item option group.

Defra wants to learn from applicant’s experience and is encouraging them to make notes on the application process.  There will be a short survey after submission and further feedback will be required once the Pilot begins in October 2021.  Successful applicants will be paid £5,000 per year for taking part in ‘learning activities’.  These will take up to 15 hours a month, including questionnaires, keeping a diary etc.  All the details on the SFI Pilot can be found at https://www.gov.uk/government/collections/sustainable-farming-incentive-pilot-guidance

The Sustainable Farming Incentive (SFI) is one of the components of the new Environmental Land Management (ELM) scheme.  The other two being the Local Nature Recovery and Landscape Recovery.  The SFI is the one Defra is hoping most farmers should be able and willing to enter – and help the Department reach its uptake targets.  It aims to reward farmers for managing their land in an environmentally sustainable way.  However, when land managers do the calculations it might not look so appealing.  Most of the Standards require land to be taken out of production and looking at just the Introductory level payments it is questionable whether a fully ‘productive’ holding would find these payments adequately cover the income foregone.  Inevitably there would be some cost savings, but also there will be some additional costs associated with the implementation of each Standard.  Careful budgeting is required.

Latest information from the Royal Institution of Chartered Surveyors (RICS) and the Royal Agricultural University (RAU) show the Weighted Average land value is back above £10,000 per acre.   We have previously used the RICS/RAU Farmland Market Survey to report land values, but this has been discontinued.  However RICS/RAU produce the Farmland Market Directory of Land Sales.  The Directory is generated from information provided by land agents from across the country and provides a detailed list of land transactions.  Within this Directory an Average Price is calculated as well as the Weighted Average – comparable with the figures in the previous Farmland Market Survey.

The overall Average Price for all property reported to the directory in 2020 was £12,968 per acre (£32,045 per Ha), this compares t0 £10,336 per acre (£25,540 per Ha) for the full year in 2019 (the Directory is usually produced twice yearly, but due to Covid no data was collected in July 2020).  Within this figure, bare land averaged £8,602 per acre (£21,255 per Ha), Land & Buildings £13,870 per acre (£34,273 per Ha) and Land, Buildings and Dwellings £17,149 per acre (£42,375 per Ha).  There is a wide range of property included in the reported transactions and consequently the overall Average Price can vary significantly between surveys depending on the nature of the sample.  This is where the Weighted Average calculation is useful.

When previously reporting on the Farmland Market Survey, readers will recall, the Weighted Average has been reported alongside the Opinion-Based average.  The latter is no longer available, but the data provided shows the Weighted Average farmland price for the full year 2020 was £10,390 per acre (£25,674 per Ha).  This is a heft 20% rise over the two surveys combined for 2019, where the price was £8,602 per acre (£21,257 per Ha).  The Weighted Average Value excludes those sales which have been identified as having a residential value of more than 50% and a regional adjustment is also made.

Taking a look at the general farmland market in 2020, considering the uncertainties due to Brexit coupled with Covid-19, the market has remained very resilient.  Demand for land, particularly good land in the right location remains strong.  Lifestyle buyers looking to relocate out of the cities due to the pandemic have strengthened amenity property values.  The biggest challenge seems to have been delays in taking a sale to completion due to the pandemic restrictions.

Tenants will be able to challenge their Landlords’ refusal to allow them to enter into land management agreements under new regulations just introduced.  The snappily-titled ‘Agricultural Holdings (Requests for Landlord’s Consent or Variation of Terms and the Suitability Test) (England) Regulations 2021 SI 619’ came into effect from the 21st June.  It applies to 1986 Agricultural Holdings Act (AHA) tenancies only.  Tenants can apply to arbitration to vary the terms of the tenancy, or to gain Landlords consent, to enter one of the new financial assistance schemes (such as ELM) or to comply with a statutory duty (e.g. erecting a slurry store to be NVZ compliant).  The regulations apply to England with equivalent Welsh ones expected later in the year.

The regulations also cover changes to the rules on succession under 1986 AHAs.  These will only come into effect from the 1st September 2024 – to give parties time to adjust to the new rules.  They abolish the Commercial Unit test – previously it was not possible to succeed to a Tenancy if you farmed another Commercial Unit.  The Suitability Test is also being reformed with the requirement that successors must be able to ‘farm commercially to high standards of efficient production and care for the environment’.