Category: Policy & Business

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’.

Details of the Farming in Protected Landscapes (FiPL) programme have been made available by Defra.  The FiPL is one of the elements of the Agricultural Transition in England.   It will support farmers and the wider community in National Parks,  Areas of Outstanding Natural Beauty (AONB) and the Broads.  Land outside of protected landscapes may be eligible but the project must benefit the protected landscape, or the protected landscape body’s objectives or partnership initiatives.

FiPL is not an agri-environment scheme.  It will fund one-off projects that;

• Support nature recovery
• Mitigate the impacts of climate change
• Provide opportunities for people to enjoy the landscape and its cultural heritage
• Suport nature-friendly, sustainable farm businesses

The programme will run from July 2021 to March 2024.  Applications for the first year of funding need to be made between 1st July 2021 and 31st January 2022.  Application forms can be obtained from the protected landscape body where the project will take place.

Projects will be assessed, they need to provide value for money and meet at least one of the outcomes in the following 4 themes;

• Climate – more carbon sequestered or stored, flood risk reduced, landscape more resilient to climate change
• Nature – increased area of wildlife-rich habitats, more connectivity between habitats, increase in biodiversity and land managed better for biodiversity
• People – more opportunities for people and diverse audiences to explore, enjoy and understand the landscape i.e replacing stiles with gates on public footpaths for easier access.  Increase in public engagement in land management (volunteering)
• Place – enhancement of the quality and character of the landscape.  Historic features, conserved and enhanced i.e lime kilns or lead mining heritage. Increase in nature-friendly sustainable farm businesses which contribute to a thriving local economy i.e gathering data and evidence to help inform conservation and farming practices.

Payment rates will vary depending whether a commercial gain can be made through the project.  If no commercial gain is identified then up to 100% of the costs could be available in support.  Land can still be entered into ELM and CS as long as the same work is not being paid for twice.  Those interested are advised to contact their local protected landscape body.  Further information can be found on the Defra website at https://www.gov.uk/guidance/funding-for-farmers-in-protected-landscapes  

The new England Woodland Creation Offer (EWCO) is now open for applications.  This new grant will be available in addition to the Woodland Creation and Maintenance grant provided under the Countryside Stewardship (CS) scheme.  The EWCO will have more emphasis on public and environmental benefits that woodlands bring, with ‘Additional Contributions’ to ensure the ‘right tree is planted in the right place, and for the right reason’.  It will support the creation of a range of woodland types, but will particularly incentivise new native woodland, especially where it extends existing woodland and for woodland creation alongside watercourses which lack shade and where woodland can provide public access.  Sizes range from a minimum of 1 hectare per application with 0.1 hectare per block.

The scheme will be administered by the Forestry Commission and £15.9m will be available in the first year, funded by the Government’s Nature for Climate Fund.  Capital grants covering the standard costs of buying and planting a tree, up to a maximum cap of £8,500 per hectare is available – this compares to a maximum of £6,800 per hectare under the Woodland Creation and Maintenance grant via the CS.  In addition there will be a £200 per hectare per year maintenance payment for 10 years.

The EWCO also has optional Additional Contributions to encourage woodland creation for environmental and public access benefits these are;

• Between £1,100-£2,800 per hectare will be available where woodland creation will help woodland-dependent priority species to recover.
• £1,600 per hectare will be available for the creation of native broadland woodland along watercourses.
• £500 per hectare where woodland creation can reduce flood risk.
• £2,200 per hectare for improved public access and £500 per hectare where located close to settlements.
• £400 per hectare where woodland creation will improve water quality.

Applicants will also be encouraged to register their planting under the Woodland Carbon Code.  This will allow carbon credits to be sold to private buyers or to the Government if successful in a Woodland Carbon Guarantee auction, providing extra revenue from the woodland.

Further information can be found at https://www.gov.uk/guidance/england-woodland-creation-offer 

The first estimates of Total Factor Productivity (TFP) for 2020 show a sharp decline compared with 2019.  TFP measures how well inputs are converted into outputs and thus gives an indication of the efficiency and competitiveness of the farming industry.  It is one of the measures that Defra looks at closely, as it tries to improve the performance of UK agriculture. 

After experiencing a significant increase between 2018 and 2019 (+4%), TFP has fallen back by a larger amont, -6.7% in 2020 compared to last year.  The decrease was mainly due to a decline in the overall levels of production (-6.3%) but there was also a small increase in the volume of inputs (0.5%).

The main driver was the decline in crop output which fell overall by -12.4%.  Cereals decreased by -26% mainly due to the challenging weather conditions.  OSR and sugar beet experienced declines of -41% and -23% respectively as the weather combined with crop pests and diseases impacted establishment and yields.

Even though cattle, pigs and other animals experienced an increase in production by 2.8%, 2.3% and 2.5% respectively the overall livestock output declined by -0.6% as both sheep and poultry declined by -4.3% and -3.8%.  Milk production increased marginally by 0.1% whilst egg production experienced a drop of -0.4%.

These results, whilst disappointing following 2019’s ‘better’ figures, were not completely unexpected after such extreme weather events during the 2019 autumn drilling period and the spring of 2020.  Rather than one-year figures, it is the trend over a number of years that is important.  Getting TFP, and other productivity measures, moving upwards more strongly is one of the key policy goals of Government over the next few years.

For more details see https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/989745/agriproductivity_statsnotice-27may21.pdf

Applications to the fourth Woodland Carbon Guarantee (WCaG) auction are now open.  The WCaG provides owners of new woodland projects the option to sell their captured carbon in the form of carbon credits, called Woodland Carbon Units to the Government for a guaranteed price, protected against inflation, every 5 to 10 years for 35 years.  Applications to the scheme must be made by 9th July and the auction will take place online between 26th July and 1st August 2021.  In order to apply, applicants must first register their project with the Woodland Carbon Code (WCC).  The WCC verifies and records the amount of carbon a project will capture and have available to sell in the future.  More information on the Woodland Carbon Guarantee scheme can be found at https://www.gov.uk/guidance/woodland-carbon-guarantee

The area of UK land managed according to organic principles grew marginally in 2020.  Latest (provisional) figures from Defra put the organic land area (both fully organic and in-conversion) at 489,000 hectares.  This is a rise of 0.8% compared to 2019.  Over the last two years, the area of organic land has just started to increase again after a number of years of decline (except 2017).  The organic area peaked in 2008 at over 700,000 hectares, but has declined by 34% since then.

Organic land represents 2.8% of the total farmed area on agricultural holdings in the UK.  Grassland makes up, by far, the largest organic area, with permanent pasture taking 62% of the share and temporary grassland 20%.  Cereals are the next highest at 9% and have seen the highest year-on-year increase at 7.5%.

In the organic red meat sector all classes of livestock numbers fell in 2020 compared to 2019.  Organically reared sheep experienced the largest decline, by 13% to 678,000 head; organic sheep account for 2.1% of the UK flock.  Cattle numbers fell by 8.9% to 274,000 head, making up 2.8% of the total herd. Pig numbers fell by 7.6% and at 31,000 head make up just 0.6% of the total UK pig herd.

In contrast the number of poultry farmed organically increased by 2%, to just over 3.5m birds and 1.9% of the total UK poultry population.

The full details can be found at  https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/989695/Organic_Farming_stats_notice-27may21.pdf

UK farm profits fell by 20% in real terms between 2019 and 2020 according to Defra.  The latest figures for Total Income from Farming (TIFF) were released on the 27th May and show that profitability fell to its lowest level since 2007 at £4,119m.  TIFF is the aggregate profit from all UK farming businesses for the calendar year.  It shows the return to all entrepreneurs for their management, labour and capital invested.

The main reason for the drop in TIFF was a 15% (real-terms) fall in the value of crop output.  This was a result of lower yields caused by the wet weather through the autumn and winter of 2019-20.  Another major reason for the decline in profits was a reduction in income from diversification of almost a quarter (‘inseparable non-agricultural activities’ in Defra jargon).  Output from the livestock sector was broadly flat between 2019 and 2020 whilst costs were down slightly in real terms.  These all combine to produce the drop in profits of a fifth.

Whilst the data just published are called a ‘first estimate’, a figure was published in December (see our article https://abcbooks.co.uk/farm-profits-2/).  This was an initial forecast and also showed a 20% drop in profits – this means there has been little revision in the data in the meantime which is quite unusual.  A ‘final’ TIFF figure for 2020 will be published in November.

Looking to the current 2021 year, the prospects are for a recovery in returns.  Crops currently look in good condition and prices for both crops and livestock are generally good (with some exceptions).  With lockdown restrictions easing, there should also be some bounce back in returns from diversification.  Input prices are nudging up, but not too dramatically.  Overall, TIFF could recover back to over £5bn for the year.  Full details of the Defra statistics release can be found at – https://www.gov.uk/government/statistics/total-income-from-farming-in-the-uk

It seems that the British are not the only ones who have fallen out of love with the EU.  On the 26th May the Swiss decided to cease negotiations on a new Partnership agreement with the EU.  The deal for a single framework to replace a patchwork of around 120 different treaties between the Swiss and Europe had been in negotiation for many years.  The Alpine nation decided not to go ahead due to fears of a loss of sovereignty.  The existing arrangements will continue, so there will be no ‘cliff edge’.  However the EU has stated that ‘our bilateral agreements will inevitably age’ and thus Swiss access to EU markets will gradually deteriorate as the current procedures get ever-less fit-for-purpose.  This has some lessons for the UK – bilateral trade relations are not just about doing a deal and then moving on.  To gain the most benefit they need to be constantly updated (and even deepened).