Careful decision making required on SFI26
SFI26 offers potential in terms of helping farms to reduce risk and deliver a more resilient farming system – but careful analysis is needed to ensure the figures stack up.
The scheme is due to open on 18 June for a limited group of farmers and then more widely on 30 June to farmers with less than 50ha, or for those without an existing ELM agreement.
However, farmers who already have an agreement are also looking ahead, planning for when the scheme opens more generally in September.
Natalie Gaibani, Head of Farming for Strutt & Parker, says now is the time to consider the options available and suggests a good starting point is to ask the following key questions:
- Does the option fit my rotation / existing farming system?
- What will it cost to establish?
- What income am I giving up taking land out of rotation?
- Does it fit alongside existing agreements?
- What are the long-term benefits?
- Can I deliver it with existing labour and machinery?
“While the headline payment rates can sound attractive, they do need to be weighed up against lost production, how each option fits within your farming system and the costs of delivery. For example, if you rely on a contractor to sow cover crops, check what their rates will be for this additional work as it may be disproportionately expensive if you cannot do it in-house.”
Strutt & Parker has developed a calculator which provides indicative costing for each of the options to help clients assess the net financial benefit of entering into the latest version of the scheme.
To support smaller farms, who may be looking at entering into the scheme in June, it has run two example scenarios:
| Examples of net financial benefit of SFI26 for small farms (<50ha) – June window | ||
| Scenario 1 | Scenario 2 | |
| Type of farm | Organic livestock, pasture only | Arable farm |
| Objective | Additional support for an organic system | To utilise maximum options possible without disturbing current crop rotation of wheat, spring barley and maize. |
| Size | 38ha | 50ha |
| SFI options | Organic land management, managing grass with very low nutrient inputs, haymaking supplement. | Grass buffer strips, grassy field corners, unharvested headlands, wild birdseed plots, pollen and nectar strips, no use of pesticide, overwinter stubble, summer and winter cover crops. |
| Total SFI payment available | £12,791 per year | £12,772 per year |
| Estimated costs of implementing SFI options. | Haymaking – £7,500. There are no other costs associated with the other options. | £9565 in the first year, which takes into account the cost to establish the cereal headlands and buffer strips. |
| Additional income generated | £12,600 – Value of hay (8 round bales per ha at £45/bale). | – |
| Net financial benefit | Approx. £17,800 per year However, £5,100 of this ‘profit’ is from making and selling (or feeding) hay | £3,208 – Year One £4,414 – Year Two £4,414 – Year Three |
“The cost figures are indicative only and will vary between farms, but our calculator highlights that for a small arable farm entering the scheme may take a lot of effort but with little reward,” says Natalie.
“If conventional cropping is making you money, you could be losing £8,000 gross profit per annum in crop sales and only bringing in £4,000 in grants.
“However, if you have unproductive areas that you can’t crop or that yield poorly, that should be the focus. There could be benefits to taking poorer ground out of production too, as those areas could be causing you price penalties on your crop.
“It is also worth assessing how cover crops will complement or detract from your existing system. While they have been proven to provide long term soil resilience and increased soil organic matter, they can also result in significant management issues.”
Strutt & Parker has also run some calculations for the indicative costs of an agreement for a larger farm, looking to maximise the grant support available.
It has looked at a 600ha arable farm with a proposed 400 ha in SFI26, made up of 300ha of arable land and 100ha of pasture.
The following table shows the SFI payment which could be generated, set against an estimate of the costs of implementation.
| Larger farm example for September window – capped at £100,000 | |||
| SFI code | Description of action | Total SFI payment per year | Estimated costs per year |
| CHRW2 | Hedgerow management | £1,400 | £225 |
| CIGL2 | Winter bird food on improved grassland | £2,575 | £1,857 |
| CLIG3 | Manage grassland with low inputs | £15,100 | No additional cost |
| CAHL2 | Winter bird feed | £22,680 | £15,854 |
| CNUM2 | Legumes on improved grassland | £1,530 | £1,343 in year one, then £525 in years two and three |
| CNUM3 | Legume fallow | £7,980 | £5,067 in year one, then £525 in years two and three |
| CIPM2 | Flower rich grass margins or blocks | £9,576 | £2,395 in year one then £420 in years two and three |
| SOH1 | No-till | £21,900 | 0 but potential yield/quality deficit of 15% |
| CIPM4 | No use of insecticide | £13,500 | 0 as above |
| CIGL3 | Grass buffer strips | £1,410 | £1,223 |
| £97,639 | £32,733 in year one, then £19,673 in years two and three | ||
“In this example, it has been assumed that the farmer will need to pay contracting costs for establishing SFI actions and so if they have buffer strips already and their own equipment, then clearly the costs can be reduced,” says Natalie.
“Adopting the no-till and no-insecticide options could also result in potential savings of £26,000 on ploughing operations, if the farm is switching from heavy ploughing, along with saving of maybe £6,000 on insecticides.
“Whilst some farms manage the transition to no-till seamlessly, others report issues with weed control and yield, and so if we assume an initial reduction of 15% in output, then we are also looking at a reduction in output of £60,000, which overall means a potential additional cost of £28,000 in lost arable revenue.
“In this example, it does look as if the net financial benefit is there and if the farm plans to transition to no-till anyway, the SFI payments will certainly help to mitigate losses in the two to three years it may take to stabilise yields. But, of course, the precise figures will depend on crop, land type and the previous system. The farmer will also need access to a direct drill.”
If you would like assistance in drawing up an SFI26 agreement which works for your business, contact our Head of Farming Natalie Gaibani.
