New research digs deep into economics of SFI

The Sustainable Farming Incentive (SFI) in its current form will fall far short of offsetting expected direct payment losses, according to AHDB.

AHDB’s latest Horizon report examines in detail the pros and cons of taking part in the Sustainable Farming Incentive (SFI) at farm level.

The analysis shows that, at the current payment rates, most SFI standards will only provide a small financial benefit to many farmers when the costs of undertaken SFI actions are included. However, those farmers who are already undertaking some of the actions required and don’t have to take land out of production will benefit the most.

Assessing the impact of the Sustainable Farming Incentive on farm businesses aims to help farmers and growers decide whether joining the scheme is practically and financially viable for their individual circumstances.

SFI, which will be rolled out on a wider scale this summer, is intended to financially reward actions beneficial to the environment, against a backdrop of helping the industry achieve ambitious environmental targets coupled with reductions in direct payments in England.

Schemes including SFI are being developed through co-design, a more open and collaborative approach than previous policy decisions, based on feedback and learnings from trials and pilots.

Amandeep Kaur Purewal, AHDB senior analyst, said: “It is vital that AHDB’s role as a provider of impartial evidence is recognised by policy makers to help shape and inform the new schemes as they progress. Government needs to ensure that all these schemes are attractive and appropriate for farmers across the board. Only then can the industry’s challenging environmental targets be reached.”

The report features qualitative research, conducted in partnership with Harper Adams University, looking at farmers’ attitudes and intentions to both the pilot SFI scheme and the 2022 roll out. It goes on to model the likely impact on net profit of participating in the scheme using AHDB’s virtual farm network.

But the report’s authors emphasised there was no ‘one size fits all’ approach and farmers should assess the costs and benefits of participating in SFI as part of a wider review of their individual farm business.

Amandeep added: “Farmers would benefit from treating environmental outputs like any other agricultural output within their businesses. If they became a top performer in terms of the efficiency with which they can produce these public goods, they will benefit the most from the current and future schemes.

“It is important that farmers consider the SFI within a wider review of their business in order to ensure they mitigate the loss of direct payments and remain profitable throughout the agricultural transition period and beyond.”

Levy payers who have signed up to take part in Shape the Future have until midday 9 May to have their say about the challenges they want AHDB to focus on and the services delivered to them in future. To find out more go to: www.ahdb.org.uk/shapethefuture.