Category: Policy & Business

The main political parties have set out their rural policies ahead of Election Day on July 4th.  Below is a brief summary of some key points.

Conservatives:

• a pledge to increase the agricultural budget for the UK by £1bn over the course of the next Parliament (given a five-year Parliamentary term, simplistically this means an extra £200m per year).  This compares with the ask of the NFU for an extra £2bn per year.
• introduce a legally-binding target to improve the nation’s food secturity – although it is not clear what this means in practice
• improve the process for granting Planning Permission for farm infrastructure (slurry stores, reservoirs etc.)
• retain capital tax benefits such as Agricultural and Business Property reliefs

The full document is at – https://public.conservatives.com/static/documents/GE2024/Conservative-Manifesto-GE2024.pdf 

Labour:

• no specific commitment on future funding for farming and the environment
• set a target that half of all food procured by the public sector should be locally-produced or have high environmental credentials
• reform the Planning system to boost housebuilding
• create three new National Forests in England and also nine new ‘River Walks’
• implement new workers’ rights legislation

See https://labour.org.uk/wp-content/uploads/2024/06/Labour-Party-manifesto-2024.pdf 

Liberal Democrats:

• an extra £1bn per year on the agricultural budget for the UK
• introducing a National Food Strategy and strengthening the role of the Groceries Adjudicator
• negotiate a new arrangements with the EU on veterinary and plant health to improve trade
• allowing Local Councils to buy land for housing at ‘agricultural’ rather than ‘development’ value

See https://www.libdems.org.uk/manifesto

The Scottish National Party is due to launch its manifesto this week (w/c 17th June).  Plaid Cymru’s manifesto can be found at https://assets.nationbuilder.com/plaid2016/pages/10962/attachments/original/1718214059/Plaid_Cymru_Maniffesto_2024_ENGLISH.pdf?1718214059 and the Green Party’s at https://greenparty.org.uk/about/our-manifesto/fairer-greener-food-and-farming/.

 

Details of the Sustainable Farming Incentive 2024 offer are now available (see earlier article for more details).  A controlled roll out via Expressions of Interest is currently taking place with the scheme expected to open to all later in the summer.  To assist farmers and their advisors with understanding what will be accessible we have produced a 4-page SFI Factsheet giving a summary of all the actions that will be available.

Click Here to access our 2024 SFI Factsheet or it can be found via the Bulletins tab at the top of the page.

UK farming made surprisingly good profits in 2023 according to Defra.  The Department has recently released figures for Total Income from Farming (TIFF) – this is the aggregate profit for the whole UK farming and horticultural sector.  The headline figure is that profits fell 16% in real terms between 2022 and 2023, but last year’s figures still came in at a very healthy £7.2bn – the third highest returns in the past 25 years.

The Defra figure for 2023 is much higher than we had been predicting.  We had estimated that profits for the year would fall to around £5bn.  Part of the reason is a sizeable upwards revision for the 2022 year (from 7.9bn to £8.6bn).  This results in the 2023 figure being higher.  There is a history of quite large revisions in the TIFF figures – we would not be surpised if those for the past year were amended in due course as well.

Both crop output and livestock output were down in 2023 compared to 2022 – by 16% and 7% respectively in real terms.  (Both of these drops were lower than we had forecasted).  Variable costs (called ‘intermediate consumption’ in these figures) showed a surpising drop of 9% year-on-year.  The fall was wholly due to a big drop in the value of animal feed consumed on farm.

The chart below shows the evolution (in real terms) of TIFF over the past 25 years.  TIFF shows the return to all entrepreneurs for their management, labour and capital invested.  In simplistic terms, it is the profit of ‘UK Agriculture Plc’.  Also shown on the chart is the contribution of direct support (BPS plus agri-environment scheme payments).  This has declined in recent years as inflation has eroded its real terms value.  However, it continues to contribute a sizeable proportion of farm profits

Given our belief the 2023 figures might be revised downwards somewhat, our estimate for the current 2024 year is for a TIFF (in real terms) around the £6bn mark.  We would expect costs to rise as inflation continues to work its way through the system.  Harvest 2024 looks set to deliver low yields and unspectacular prices.  In contrast, most livestock sectors are currently having a reasonable year.  TIFF at this level would be very much in the normal range seen over the past few years – discounting the very good returns of the past three years.

The data on farm incomes (profits) comes from Defra’s annual publication ‘Agriculture in the UK’.  This compendium of statstics includes data on all aspects of the food and farming sector.  Full details can be found at – https://www.gov.uk/government/collections/agriculture-in-the-united-kingdom

Defra has announced the SFI 2023 will close for new applications at midnight on Monday 10 June (today).  However, it will still be possible to submit any application already started within 60 days of starting it.  New applications for SFI 2024 will open later in the summer, although for those who want to get in early, it is possible to submit an expression of interest and they will be invited to make an application over the next few weeks as the system is ‘tested’ on smaller numbers and different types of businesses, before the full rollout.

 

In our previous article on 22nd May (see https://abcbooks.co.uk/expanded-sfi-offer-for-2024/) which reported on the expanded 2024 offer, we said the 23 SFI 2023 actions would be available in the SFI 2024.  This is true, but there are some (potentially significant) changes to the rules under some of the actions.  Below is a list of some of the key changes, although not exhaustive, and farmers and their advisors should check the new rules for themselves:

• CSAM3 – Herbal Leys.  This action will now be static.  It is also more prescriptive on the seed mix, which should include at least 1 grass species, 2 legume and 2 herb or wildflower species
• CIPM2 – Flower-rich grass margins, blocks, or in-field strips.  This action will be static.  In addition, it will only be possible to put ‘part of the available area in a land parcel’ into this action – it doesn’t actually give advice on what constitutes ‘part’ of a parcel
• CNUM3 – Legume Fallow.  This will be static.  Originally in SFI 2023 NUM3 was a static option and then was quickly changed to rotational.  It seems to have reverted back; this could present a problem to those who were thinking of using legume fallow as a break crop in the crop rotation
• CIPM4 – No use of insecticide on arable and permanent crops.  If the land is being used to grow arable crops (including non-permanent horticultural crops), this action must be done on one ‘cash crop’ from when it is sown until it is harvested.  Many have been advocating for this
• CAHL1 – Pollen and nectar flower mix.  This action will be static.  Furthermore, it will only be possible to put ‘part of the available area in a land parcel’ into this action
• CAHL2 – Winter bird food.  It will only be possible to put ‘part of the available area in a land parcel’ into this action
• CAHL3 – Grassy field corners and blocks.  It will only be possible to put ‘part of the available area in a land parcel’ into this action
• CIGL1 – Take improved grassland field corners & blocks out of management.  It will only be possible to put ‘part of the available area in a land parcel’ into this action
• CIGL2 – Maintain improved grassland to provide winter bird food.  It will only be possible to put ‘part of the available area in a land parcel’ into this action

There are some more ‘general changes’ which sees a slight change to the phrase ‘it is up to you how you do this action‘ which now includes ‘as long as you:

• follow this action’s requirements – these are identified by a ‘must’
• do the action in a way that could reasonably be expected to achieve this actions aims

It is our understanding that the new rules will only apply to agreements under the new expanded SFI 2024 offer, but we will endeavor to keep readers informed of any updates.

For those who like a booklet, Defra has provided a pdf version (366 pages) of the actions this can be found via https://assets.publishing.service.gov.uk/media/6655a85d0c8f88e868d33282/SFI-2024-actions-print-version.pdf. 

Further to our article of 11th April (see https://abcbooks.co.uk/flood-relief-2/), Defra has opened up the Farming Recovery Fund to more farmers.  It has been ‘significantly’ expanded to include a wider geographical area of farmers and also now includes those who have experienced damage due to extreme rainfall.  As previously, the RPA will identify farmers who are eligible – mapping data will be used to identify land close to rivers that have flooded and also rainfall data to establish areas that have received rainfall more than 70% higher than normal.  RPA will contact those that are eligible, outlining the payment due, which will be made this summer.  Support has been updated so that there will be a flat rate payment, set in bands according to farm size.  The minimum payment will be £2,895 and the maximum £25,000.  Those who have already been contacted by the RPA under the existing ‘Storm Henk’ scheme, will either receive the amount they have already been informed of or the new updated bands – which ever is the highest.

Defra has announced BPS balance payments will be made from 1st September this year instead of December.  It has said the decision has been made to ‘help all farmers with cash flow following the impact of the wet weather’.  The announcement was made alongside details of an expansion of the Farming Recovery Fund (see additional article).  This will mean farmers receiving 50% of their delinked payment from 1st August and the remainder from 1st September.

The Prime Minister, Rishi Sunak, has called a UK General Election for the 4th July.  We wait to see what the various parties promise in terms of agriculture in their manifestos – especially whether there are any pledges on the budget for farm support from 2025 onwards.  The ‘purdah’ period leading up to the vote means that there will be no major policy announcements until after the election.

Defra has recently released statistics on Business Management practices on farms.  The information is taken from the Farm Business Survey (FBS) in England and covers the period from March 2022 to February 2023.  The areas covered include;

• Business planning, benchmarking and management accounting principles
• Risk-management practices
• Accessing advice

Some of the key results include;

• 86% of farms undertook at least one business management practice in 2022/23; this compares with 83% in 2016/17.  The most common practice was an informal plan (60%).  However only 20% carried out a formal plan.  General Cropping farms were more likely to carry out at least one practice with very large farms more likely than smaller farms to undertake business planning
• only 28% of farms had no risk-management strategy in 2022/23, this compares with 25% in 2016/17.  The most common risk management practice in 2022/23 was selling some commodities on a contract basis with an agreed price, which was undertaken by 36% of farms
• the leading reason for farms not undertaking more business or risk-managment practices was that they felt all the practices they needed were already being carried out on farm; 41% stated this in 2022/23 compared with 40% in 2016/17
• 8% of farms did not feel they needed any business management advice.  This was less likely for large farms than for other farm sizes.  Just under half of farms (46%) accessed business management advice through informal farmer to farmer discussions in 2022/23, with LFA grazing livestock farms being more likely to do so.  A similar proportion of farms (44%) got business advice from the farming media
• over half of farms (57%) accessed business management advice supplied without a charge.  Fewer farms (43%) got advice supplied at a charge.  Very large farms were more likely to access business advice at a charge than small farms.

The full statistical notice can be found at https://www.gov.uk/government/statistics/farm-business-management-practices/farm-business-management-practices-in-england-202223-statistics-notice#accessing-advice.

Defra has released information on how and when existing Countryside Stewardship (CS) and Higher Level Stewardship (HLS) agreement holders can exit their current agreements if they wish to.  From September, CS Mid Tier and HLS agreement holders will be able to apply to end their existing agreements early to go into the SFI or a CS Higher Tier scheme (opening this winter) either:

• at the end of the current agreement year and receive the full payment due for that year (subject to meeting the requirements of the agreement)
• before the end of the current agreement year, but not receive payment for the part of the current agreement year that’s already completed

Note, that it will not be possible to end existing agreements before September.

Contrary to previous advice, there will not be any requirement for the new agreement to be the same or ‘better’ than the existing agreement.  Previously the message had been that early termination would only be allowed if the new agreement would deliver the same or greater environmental benefits as the existing agreement.  However, we always thought this would be difficult to show when the system doesn’t allow a new scheme to be applied for when the old one is still running.

If the existing agreement includes an SSSI or Scheduled Monument, agreement holders will need to keep managing the land in line with the requirements of those designations.

The case is not so straight forward for those with a CS Higher Tier agreement.  It will only be possible to end the existing agreement early ‘by exception’.  Defra has not expanded on the criteria for this as yet, and has said more information will be available in the summer together with details on how CS MT and HLS agreement holders can apply to end their agreements.

In terms of agreements which end on 31st December 2024, Defra has said it should be possible to apply for an SFI or CS Higher Tier agreement ahead of this date, so that the new agreement is ready to commence on 1st January 2025.  Furthermore, agreement holders are reminded that they can apply for an SFI agreement to run alongside an existing agreement as long as the actions under both schemes are compatible and there is no double funding.

Ending an existing agreement early to enter the SFI is one of the most common questions we receive.  This does give a time frame, even if we still don’t have all the detail.  We also know of cases where there has been a problem applying for SFI when an HLS or CS agreement is coming to an end or has recently finished, hopefully this means Defra has addressed or will be addressing this problem shortly.