Pilot Scheme for the Sustainable Farming Incentive (SFI)

Introduction:

Whilst this note provides information on the Pilot SFI, at least some of these standards will become available to all farmers in England in 2022. At the time of writing, it is not certain which standards this will be, but the soil ones seems most likely.

Further details of the SFI have been made available ahead of the opening of the application window for farmers to enter the pilot scheme. The advice and guidance is now reasonably comprehensive and certainly enough for plans to be made and an evaluation of the suitability of the scheme for individual
farms to be determined.

With over 2,000 business having expressed an interest in being part of the pilot scheme, the overarching question is does the scheme represent a reasonable financial return for the time, effort and areas of land that are going to be needed to enter the scheme.

Clearly there cannot be a single answer for all businesses as so much will depend upon the resources available to each business and the productive capability of the land. Having said that it is possible to come up with some indications of financial returns and these are dealt with below.

With the previous publications on this subject, it has been possible to condense many pages into something more manageable, however the quantity of information available online makes this too much of an undertaking and so for those of you seeking further details of the scheme the following link will be your portal to many hours of reading. Click Here

SFI Summary of Options and Payments:

There are eight standards (table 1) available under the scheme (it is possible that further standards may be
added) and for all but farm woodland there are three levels:

• Introductory,
• Intermediate,
• Advanced.

The higher the level the greater the commitment and the higher the payment, for each standard the farmer can choose which level to enter at, but that level must be consistent across all fields.

On any single field it is also possible to ‘stack’ schemes, so for example on an arable field the ‘arable and horticultural land’ standard could be added to the ‘agricultural and horticultural soils’ standard and ‘hedgerows’ or ‘waterbody buffering’ added around the edge of this field.

What is Required for the Arable and Horticultural Land Standard?

The full details for all standards are too extensive to list here (see link in Introduction), but it is possible to look at parts of the standard to give an indication of likely levels of income and return. We have therefore looked at the introductory level to illustrate the standard.

There are a set of actions that must all be completed to get paid:

1. Resources for birds and pollinators:

At the introductory level, the farm will have to ensure that at least 5% of the eligible land entered provides year-round resources for farmland birds, pollinators, and other beneficial insects. (This increases to 8% at the intermediate level and 10% at the advanced level.)

The 5% is further broken down into:

• 1% sites for nesting and cover,
• 2% habitats rich in insects & flowers
• 2% sown winter seed
  • some alternatives are available that might prove more attractive to many, including:
    • sow brassica fodder crops on 5% of land
    • keep enhanced over-winter stubble until 31 July of the following year on 5% of land
    • keep basic over-winter stubble on 10% of land
    • keep whole crop cereal as over winter stubble on 10% of land
    • As the levels increase, the options increase to intermediate (2%:3%:3%) or advanced (2%:4%:4%)
      

2. Create buffers around 50% of in-field trees:

A 10m buffer around at least half of all infield trees, which will generate an additional £10/tree/year

3. Use a nutrient management plan:
To ensure applications of manure and fertiliser meet crop and soil requirements and minimise loss of nutrients and emissions

4. Use low emission technologies:
Either use low emission technologies (trailing hose and shoe or shallow injection) to apply organic slurries and other organic liquid manures or where you’re due to cultivate land, apply any organic manures, composted manures, sewage sludge and slurry within 12 hours

Table 2 below sets out the payment rates for all levels of the arable land standard and the amount of land committed to the scheme. The last two columns are the total income and that income expressed per hectare for the land out of production.

For 250 hectares of arable land having to ‘set-aside’ 13 ha of land from crop production does not sound attractive, for the ‘average’ farmer 13 ha of land means a loss of gross margin in the region of £9,425 (£725/ha) to be replaced by revenue of £7,000 before the costs of growing flowers and bird food.

The costs of growing bird food varies but with fertiliser and pesticides can reach £220/ha and for a pollen and nectar mix £106 in the first year.

This would change revenue to a gross margin of £5,370 (£413/ha), which is £312/ha less than the average crop gross margin.

It looks as if this part of the scheme will only be attractive where marginal land can be brought into it, those parts of the arable land that are unproductive and where yields are about 2t per hectare less than the average. But it will require 5% of the arable land to get into the scheme, which is a big ask for reasonably productive farms.

DEFRA are persisting with the income forgone method of calculating what to pay for these standards and will no doubt claim that it must be right as the scheme is oversubscribed, but when expressions of interest were asked for none of this information was available, the number who agree to take it forward will be interesting.

The costs and returns from stacking soil standards and hedges or buffer zones standards on to the same field will make a difference, but it remains to be seen if this is sufficient to compensate for taking good land out of crop production.

Further information on the impact of the other standards will follow once we have determined the implications.