Jeremy's Blog 22nd April 2022: SFI Requires Judgment

This article by Jeremy Moody first appeared in the CAAV e-Briefing of 21st April 2022

England’s SFI 2022 opens in a few weeks as the initial SFI offer, using some of the limited funds so far taken from Basic Payment and mainly focused on the soils issues that can benefit both productive farming and wider public goals. The application process and other aspects are to reflect lessons from the continuing SFI Pilot with its exploratory role and wider range of standards. Further standards and levels are to develop on the road to the full SFI offer for late 2024.

With further detail to come, the soils standards require actions for the payment, applying the transactional approach of “public money for public goods”. Some actions like soil testing may seem general, others will have different issues for different farms, making SFI more attractive to some and perhaps not financially attractive to others. That may illustrate DEFRA’s expectation that 70 per cent of farmers might take up the new schemes – 30 per cent might not. Clients will be in need of advice on the business issues.

AHDB modelling has now helped illustrate this. With simplified models and using 2021 values, it points to where the standards, each with two present levels, could impose costs in gaining the payment, reducing its headline benefit. It does not consider the more intangible and variable possible gains from soil improvements that might be achieved or where knowledge and plans might assist better management.

Perhaps the biggest issue is whether meeting the arable and horticultural soils standard with cover crops and applying organic matter will require taking land out of immediate production.

It also points to the enormous variations in the application of organic matter to arable land from many mixed farms and farms with a relationship enabling muck/straw swaps to farmers in purely arable areas, perhaps selling straw to a power station. The latter might not find this standard attractive; a move to straw incorporation might shorten straw supplies to livestock farmers.

The obvious point is that the less change a farm has to make to meet the standard, the more likely it is to profit from it – but the net environmental benefit might then be less.

Nonetheless, SFI 2022, an opportunity for many farms but now tested by today’s produce and input prices, is the formal start of the new schemes which, in contrast to the periodic spasms of CAP reform, will see continuing evolution with experience.

The issues here show the need for good client-focussed advice, taking a view over at least the three years of an SFI agreement.