Farming Focus

The 2026 harvest is now complete across almost all of the British Isles – in record-early time in many cases, due to the prolonged hot, dry, weather.  This made for an easy harvest, but the same weather has meant yields have been reduced, especially in the South and East.  Whilst this is the ‘big picture’, there has been a lot of variability in yields once again – between regions, between neighbouring farms, and even within farms and fields.  This appears to have become a theme of recent harvests as the climate has thrown extremes of weather at the sector.  Some farms will have recorded above-average yields this year whilst others have had awful results.

This is to be remembered when looking at the results for Loam Farm.  It is only a single business and, although it aims to show the overall picture for combinable crop returns, it cannot show the diversity across the sector.  To recap, Loam Farm is a notional 600 hectare business that has been used since 1991 to track the fortunes of British arable farming.  It is based on real-life data.  It is partly owned and partly rented, has a working proprietor plus one full time member of staff and harvest casual.  It grows wheat, oats, beans and barley and has a SFI agreement (a ‘core’ agreement signed in 2024 with additional options added in 2025).  The figures for the model have recently been updated for the actual yields for the 2026 year.  This has reduced output, although this is partly offset by higher prices than used in earlier budgets.  The 2026 year is not quite final as the farm still has some grain to sell – the outcome is unlikely to change greatly however.

The figures show that it is the third year in a row that Loam Farm has failed to make a profit from its farming activity – 2023 was the last year when it made a positive Margin from Production.  The farm is reliant on its SFI scheme to make an overall Business Surplus.  The overall result is slightly better than last year, although poor in historic terms.

A budget has been produced for the 2027 harvest.  This has yields returning to normal (although it is perhaps increasingly difficult to say what ‘normal’ is).  This helps increase overall Output.  Variable costs are higher due to increased fertiliser prices.  Some of Loam Farm’s rented land reached the end of its term in 2026.  Given low profitability in the sector for a number of years, it has negotiated a (small) rent reduction which reduces the Rent & Finance charge.  There may have to be more of these sorts of adjustments in combinable crop rent levels and contract farming agreement charges if the sector is to be profitable.

The farms ‘core’ SFI agreement ends this winter.  It has been assumed that it will be able to replace this with an application in Window 2 for SFI26 which should open shortly.  Most of the same options are rolled-over, but the loss of the various ‘plans’ means the value of the new agreement will be slightly lower in 2027.  If the farm is not successful in its application (e.g. the money runs out too quickly), then this would leave a large hole in Loam Farm’s finances for 2027.

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SFI26 Window 2

Defra has announced Window 2 for the SFI26 will open for applications on the 22nd September.  Window 2 will be available to all farmers and land managers who have an SBI at the point of application, with at least 3ha of eligible agricultural land linked to it.  It will also be available to ‘soon-to-expire’ ELM agreement holders.  This means existing Environmental Land Management (ELM) revenue agreement holders with agreements due to expire on or before 28th February 2027 can apply as soon as SFI26 Window 2 opens, including land still in a ‘soon-to-expire’ agreement.  The new agreement will commence after the existing agreement ends.

Those requiring help or advice with an application are strongly encouraged to contact us as soon as possible.  Early discussions will allow us to assess your eligibility, help you draw up a scheme that works for you, and ensure that the necessary information is in place so that your application can be submitted promptly when the Window opens.  Experience from recent schemes suggests when the Window does open, the money will go quickly and it won’t be open for long. Please contact one of our consultants  or email us via [email protected]

SFI26 Window 1

This has now closed.  It seems that not all of the allocated funding was used – Defra stated that 75% had gone by the 13th July, but the ‘100% used’ announcement was not forthcoming before the application window shut on the 28th August.  Unused funds will be rolled into the Window 2 budget, see below.

Defra received around 6,500 applications in this Window. The average value of an agreement in Window 1 was just under £10,000.  The Department seems pleased that its aim of distributing funding more widely, especially to smaller farms, has been met.  Applicants are reminded that they have 30 days to accept an agreement offer or it will be withdrawn.

Some farmers will have started an application, but had not submitted it when Window 1 closed.  Most of these people should be able to restart the same application when Window 2 opens.

SFI26 Budget

Unused funds from Window 1 will be rolled into Window 2, although there is no indication of the precise figure.  Furthermore, Defra has confirmed £50 million will be added to the SFI26 budget as part of a package of measures to support farmers affected by the drought.  This brings the total for both Windows this year to £290m.  This may help deal with the expected high demand for agreements, especially now that those with ‘Soon-to-Expire’ agreements have been added to those who will be looking to apply. 

SFI 2027

Defra has confirmed that there will be an SFI27 scheme next year.  However, there are no further details at present.  The Government is keen to minimise changes to the scheme as it wants the SFI to be ‘stabilised’.  However, it will incorporate what it learns from both Windows of SFI26 into future schemes.  Therefore, more information is only likely to arrive some time after Window 2 closes.

Capital Grants

The Capital Grants scheme in England closed on the 1st September when the £225 million budget for this round had all been allocated.  The scheme funds works to improve the environment.  Defra received around 17,000 applications during the month the scheme was open.  Of these, 9,500 were applying for a Capital Grants agreement for the first time.  As in previous rounds, hedging and fencing were the most popular options.  Due to the large number of applications, Defra states that it may take the rest of the year for them all to be processed and agreements offered.  The Department has indicated that there will be a further round of the scheme next year, but no details on timing or budgets has been offered.

In a package of measures to help farmers in England cope with the prolonged hot and dry weather, £15m will be made available to help grant-fund on-farm reservoirs.  Details are awaited, but presumably this will be channelled via the ‘larger’ Farming Investment Fund (FIF).

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