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Sustainable Farming Incentive – Can your farm business survive?

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Farming is changing at an unprecedented rate. The gradual reduction in direct payments through the Basic Payment Scheme and the transition to the Environmental Land Management Scheme (ELMS) is a major change in funding arrangements. Since then, we have also seen a massive increase in the cost of farming inputs: feed, fertiliser, and fuel, as well as the war in Ukraine affecting grain and energy markets across the globe. The requirements to achieve net zero will also begin to be felt as the supply chain starts to meet buyers’ emissions specifications.

 £2.4bn of funding support for farmers per year and we are now starting to see what’s on offer and what must be done to obtain the various levels of support. At the Devon County Show earlier this summer, Secretary of State at DEFRA, George Eustice, confirmed the first stage of the Sustainable Farming Incentive which falls within the Environmental Land Management Scheme.

What is the Sustainable Farming Incentive?

The Sustainable Farming Incentive (SFI) is the first of three new environmental schemes being introduced under the Agricultural Transition Plan. The other two schemes are Local Nature Recovery and Landscape Recovery.

What is the Agricultural Transition Plan?

The Agricultural Transition Plan is the move away from direct payments made through the Basic Payment Scheme (BPS) to an Environmental Land Management Scheme (ELMS) where farmers will be paid to deliver public goods such as:

  • Improved water quality
  • Biodiversity
  • Climate change mitigation
  • Animal health and welfare.

To learn more about the transition plan in England on the government website.

Who is eligible to apply for the SFI?

If you have been eligible for the Basic Payment Scheme (BPS) with land in, you can apply for SFI.

I am in Countryside Stewardship; can I apply for the SFI?

The government confirms here that you can apply for existing schemes alongside SFI. You will continue to receive the reducing levels of the BPS, Countryside Stewardship (CS) and any Environmental Stewardship payments.

You will have to check if you are in a CS revenue option or capital option. There are also some restrictions; for example, you cannot enter an area of land used to establish a cover crop for CS to benefit from SFI.

For how long do I have to commit to the SFI?

The Sustainable Farming Incentive is a three-year agreement.

Is there a deadline to apply for the SFI?

There is no deadline to apply for the Sustainable Farming Incentive. You can apply at any time that suits you. If it is necessary to close applications for any reason, the date will be published in GOV.UK with six weeks’ notice.

What is the current status of SFI?

In June 2022, DEFRA announced the SFI arable and Horticultural soils standard, the first in a series of standards. A standard is a set of land management actions you must complete to get paid. There are three levels to each standard, with each level building upon the last.

What land is eligible for the SFI?

All cultivated land is eligible for the SFI, including Arable, Vegetables, and Horticultural.

Complete information on eligible land can be found in section 3.3 on the government’s website here.

What actions will I have to take?

First, determine what level you want to operate at. There will be three levels: Introductory, Intermediate, and Advanced

Each level requires you to complete:

  • a basic soil assessment
  • establish green crop cover over winter
  • increase soil organic matter content.

The higher the level, the greater the area requirements. It is expected that when the advanced level becomes available in 2023 there will also be a requirement to use no, low or minimum tillage techniques on 25% of the area.

What are the levels of payments for the SFI?

You are paid for all eligible hectares into the standard, even if the actions required only need to be completed on a percentage area of that land.

  • Introductory Level £22 per ha
  • Intermediate Level £40 per ha

Introductory and intermediate level payments will be available from the release of the scheme, with the advanced level payments expected to be available from 2023.

Find more information is available about payments here.

When will I get paid under SFI?

Quarterly payments will be made, with the first payment made three months after your agreement starts.

Will the SFI be enough to help farmers?

Effective farmers will already be reaching the requirements to achieve the Introductory and Intermediate levels of payment. But for some, the levels of payments will be inadequate to incentivise change and profit levels would vary depending on each farm’s set-up. AHDB’s latest Horizon report – Assessing the impact of the Sustainable Farming Incentive on farm businesses – aims to help farmers decide whether joining the scheme is financially viable for their specific circumstances and can be found here.

It is the view of our Head of Farming & Rural Engagement that the payments under the SFI alone are not a panacea for maintaining profitability as the Basic Payment Scheme continues to decrease annually. Farm businesses will have to continue looking for additional income streams, be it expanding the core farming business or embracing diversification in the many forms that can create the extra income needed to survive.

FOLK2FOLK is an experienced agricultural and rural lender, funding land purchases, new farm buildings, farm diversification, renewables – any capital project. We provide interest-only loans for up to five years to help you make things happen.

Find out more about our loans for farm businesses here.

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