Tag: SFI

More details on the operation of Biodiversity Net Gain (BNG) have been released.  This may seem incidental to agriculture, but it potentially opens up a new income stream for land managers.  An impact assessment published by Defra alongside a consultation indicates that the annual market for BNG offsets may be in the region of £135m and require up to 10,000 Ha of land (see the market analysis here – http://randd.defra.gov.uk/Default.aspx?Menu=Menu&Module=More&Location=None&ProjectID=20608).

In summary, BNG is a new policy being introduced in England under the Environment Act.  It requires any development to deliver 10% more biodiversity after the development has been done than was present beforehand.  Whilst it is possible to deliver some of the ‘after’ biodiversity through measures on the site itself such as ponds and tree planting, in many cases compensating biodiversity will need to be sourced away from the development site – the concept of biodiversity offsets.  When Planning Permission is being applied for, the application will have to submit a biodiversity gain plan with the application.  There is a calculator (the Biodiversity Metric 3.0) that is used to work out the ‘before’ and ‘after’ biodiversity.  A market will develop in biodiversity offsets to meet developers’ needs.  Any biodiversity created must be guaranteed for 30 years.  Conservation covenants are seen as a keyway of ensuring this.

Whilst the Environment Act provides the overall legislative framework, the scheme details need to be filled-in by Secondary legislation.  This is what is being consulted on.  One important announcement is that BNG will not become mandatory until November 2023 – therefore the market for land owners will not be fully developed in the short term (although some firms are already active and trying to set up a ‘bank’ of BNG offsets).  Another important date is that only habitats created after 30th January 2020 can be used as offsets.

One unresolved issue is the interaction of all the various ‘land management’ initiatives.  For example, could a landowner create a habitat to sell the biodiversity offsets, but then also sell the carbon credits, nutrient balances or any other environmental ‘service’.   This also applies to land entering a Defra scheme under ELM – could this also pick up BNG credits?  The consultation indicates Defra is ‘minded’ to allow BNG offsets and other markets to co-exist as long as any outcomes paid for are ‘distinct and additional’.  This builds on Defra’s payments principles under ELM schemes where it seems ‘stacking’ of payments will be allowed as long as different agreements do not ‘pay for the same thing twice’.  Although this seems positive for landowners the precise interpretation of these rules is still not clear and may not become so until both ELM and BNG scheme rules are published.  

The consultation on BNG runs until 14th April 2022.  The documents can be found at https://www.gov.uk/government/consultations/consultation-on-biodiversity-net-gain-regulations-and-implementation.

The latest figures for our Friesian Farm model illustrate the rapidly changing fortunes of dairy farming as milk prices and costs both move sharply upwards.

Friesian Farm is a notional dairy business milking a little over 200 cows.   It has been used to track the fortunes of British dairy farming for well over a decade.  It has a year-round calving system, like most of the UK industry, but it is trying to maximise yield from forage.  The farm comprises 130 hectares (of which 60 hectares are rented on an FBT).  The proprietor provides labour along with one full time worker (plus casual/relief).  The table below shows the farm’s actual results for the two previous milk years (April to March), a budget for the current 2021/22 year, then a forecast for 2022/23.  

The figures are averages for an entire milk year.  For the current 2021/22 year, this means milk prices are not as high as presently seen, as, for a large portion of the year values were lower.  By the same token, whilst costs have risen (winter concentrate feed being a big element) the biggest rises have only been over the last few months.  In particular, fertiliser for the year was bought last spring at far lower values.  This means the returns for the current milk year look likely, on average, to be good.

It is in the following year that cost increases are really seen.  This is not just in areas such as feed, fertiliser, fuel and electricity, but also in costs such as labour, property repairs and machinery purchase.  Even with a higher milk price, returns are much reduced.  The effect of the Agricultural Transition in England can also be clearly seen with the pence per litre value of the BPS declining.

Budgeting ahead is currently difficult due to the fast-moving situation with costs and prices.  However, it is fairly clear that more testing times for dairy profitability lie ahead unless the cost situation quickly turns around.

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

Standards and Rates

The SFI 2022 will contain four Standards – Arable & Horticultural Soils, Improved Grassland Soils; Moorland & Rough Grazing and Animal Health and Welfare.  The payment rates and the actions required have been updated since the first announcement back in July 2021, the table below summarises these;

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.  

The full details can be found via the Defra website at https://www.gov.uk/government/publications/sustainable-farming-incentive-how-the-scheme-will-work-in-2022

Under the new Animal Health and Welfare Pathway farmers will receive a fully funded annual visit by their own vet.  The Animal Health and Welfare Pathway aims to improve the health and welfare of English farmed animals by controlling and eventually eliminating endemic diseases.  The Annual Health and Welfare Review, which is due to be launched in spring 2022 as part of the Sustainable Farming Incentive (SFI 2022), will be the first element of the Pathway.

The Review will consist of a yearly visit by the farmer’s own vet for the lifetime of the Pathway (planned to initially be 3-years).  The vet will carry out diagnostic testing for priority diseases – Bovine Viral Diarrhoea (BVD), Porcine Reproductive and Respiratory Syndrome Virus (PRRS) and for sheep, parasitic resistance to anthelmintic treatments.  Grants 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.

The vet will also provide farmers with tailored advice and management to improve the health and welfare of their animals.  Having completed this first step, farmers will continue along the Pathway supported by Animal Health and Welfare grants which will be launched later in 2022.  These could include capital grants to improve the sustainability and reduce the environmental impact of the business or increase animal welfare.

Vets will also collect data. This will be used for benchmarking, to increase the health and welfare of the farmer’s own herd/flock, but it will also be shared with Defra so it can get a better understanding of the health and welfare of the national and regional herds/flock.  This information will then be used to inform and develop future policy to ensure it is targeted in the right areas.  There will be a review of on farm medicine usage and farmers are likely to be expected to upload medicines to an e-medicines recording hub

The Review will initially only be available to commercial cattle, pig and sheep farmers in England who are currently eligible for the BPS.  Eventually, it will be open to all livestock farmers above a minimum threshold – 50 pigs, 20 sheep or 10 cows.  The application process is currently being tested, but should be simple, either online or via a telephone call.

The Review is just the first element of the Pathway, a payment by results programme is also in the planning stages, which will reward farmers for achieving higher welfare outcomes by supporting the ongoing costs involved in delivery.