The SFI: A North East Case Study

As the Sustainable Farming Incentive (SFI) appears to be finally rolling out, and those who expressed an interest gradually being invited to sign up to the scheme, Chris Gill, Farm Business and Environmental Advisor from H&H Land & Estates, explains how he is using an SFI agreement to increase farm profitability for one of his client’s farms.

House Farm* is a 200ac (80Ha) arable and grassland farm situated in the North East of England. Due to off-farm commitments, the majority of the arable land is farmed through a Contract Farming Agreement (CFA) with a local contractor. Annually, this agreement is returning in the region of £230/ha to the farmer across the 60ha in the CFA, but this can vary year on year as would be expected.

Upon the announcement of the SFI 2023 and the actions which farmers would be able to receive payments for, we started having a discussion around the viability of incorporating it into the current farming system, with the aim of increasing profitability.

Initially, the first stage in the process was to sit down and look at the most (and least) productive areas of the farm. As is the case for many farms in the region, soil type and characteristics vary hugely at House Farm, so using a combination of yield mapping, the farmer and contractor’s knowledge of the land and its attributes, and squaring off awkward field corners, those less productive areas were highlighted on a map as the most logical areas to enter into certain SFI actions. Following that, the client and I worked though the list of SFI options to determine which would be most viable for the areas we have identified.

Matching up the land characteristics with the requirements of actions is vital in ensuring an effective scheme. When calculating the viability of each action, the associated costs were accounted for (seed, establishment, how many years the option would be in place before re-seeding etc) to give the return on a gross margin basis. This is also imperative when assessing the viability of a scheme as it can often be easy to take the payment rates listed in the handbook, without factoring in the costs.

 

Summary of the actions, payment rates, estimated gross margins and overall return

Option Code	Payment Rate per ha:	Gross Margin per ha:	Area (Ha)	Total Annual Return
AHL2 – Winter bird food	£732	£654	7.28	£4761
LIG1 – Manage grassland with very low nutrient inputs	£151	£139	8.42	£1170
SAM3 – Herbal leys	£382	£308	1.83	£564
IGL1 – Take field corners or blocks out of management	£590	£590	1.64	£967
NUM3 - Legume fallow	£593	£475	8.88	£4218
SAM1 – Assess and Test Soil	£5.80	£5	77	£385
SFI Management Payment	£20	£20	50	£1000
			TOTAL	£13065

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Once the areas and actions had been decided, a partial budgeting exercise was carried out to show the overall impact on the bottom line, allowing us to make comparisons from before and after the SFI. It is worth noting that not all of the actions chosen for the SFI meant that land had to be removed from the CFA – only the winter bird food and legume fallow actions totalling 16.16Ha.

The table below shows the impact on the bottom line with returns at a per hectare basis increasing from an average of £230/Ha over the 60Ha CFA area to £290/Ha over the full 80Ha farm. Additionally, the introduction of the SFI helps to mitigate the effects of market volatility as the £13,065 is guaranteed income for the next three years, making for better budgeting and business planning.

 

Summary of returns before and after SFI

BEFORE SFI		AFTER SFI
CFA: 60Ha @ £230/ha average	£13,800	CFA: 43Ha @ £230/ha	£9,890
		SFI: Total Annual Return	£13,065
TOTAL	£13,800	TOTAL	£22,995

*For the purposes of this exercise, BPS income was not included in an effort to ensure viability without it.

                                                                          

If you wish to enquire about any of the services offered by H&H Land & Estates, please contact Chris Gill on 0191 370 8530.

*Farm name changed.