Stacking options for SFI 2024: Grain market daily

• UK feed wheat futures (Nov-24) closed at £196.50/t yesterday, up slightly (£0.25/t) from Wednesday’s close. The May-25 contract gained £0.60/t over the same period, ending the session at £205.40/t.
• Domestic wheat futures followed global markets up yesterday on the back of short coverings and bargain buying. Though harvest progress and Northern Hemisphere crop conditions also remain in focus. FranceAgriMer released data this morning showing that French farmers are making little headway, with wheat harvest just 4% complete on Monday, compared to 26% a year ago and the five-year average (19%). Just 57% of the soft wheat crop was rated in good or excellent condition, compared to 80% at the same time last season.
• Nov-24 Paris rapeseed futures fell €1.25/t yesterday, to close at €482.50/t. The May-25 contract ended the session at €485.75/t, down €1.00/t over the same period.
• Despite some support in the wider oilseeds complex yesterday, EU rapeseed was pressured slightly following balanced conditions in the region. LSEG left its EU-27+UK rapeseed production figure unchanged this week at 20.4 Mt.

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Applications for the expanded offer of the Sustainable Farming Incentive (SFI) are due to open on 22 July 2024. We calculated the likely effect on arable farm profit levels of stacking SFI actions over a three-year period.

Main findings:

• The SFI alone is not going to be enough to mitigate the loss of Direct Payments – this is an intentional design of the scheme. But the right combination of actions could make up a considerable amount of the shortfall.
• Taking part in the SFI can provide substantial extra income for arable farm businesses.
• If farmers carefully select actions that are right for their farm, they can boost the farm’s net profit level.
• If actions can be carried out on unproductive areas of the farm without sacrificing the area of cash crops, an increase in net profit is likely; such actions are also likely to help regenerate unproductive land and make it more productive in the long term.
• Farmers have the opportunity to maximise the potential of every hectare of land on their farm.
• The SFI has a greater impact on farms with low gross profit margins compared with those that have high gross profit margins.
• For all farms, the financial benefit of taking part in the SFI is most likely to be felt in years where crop prices are average or below average; it can act as buffer in lean years.
• Looking ahead, the SFI can play a role in stabilising farm business incomes.

The analysis

Our analysis considers two ways of stacking actions:

• Option A: SFI ‘lite’ – a combination of SFI actions which do not require additional land
• Option B: SFI ‘ambitious’ – option A plus a combination of SFI actions which require additional land

The analysis is carried out on a 455 ha arable virtual farm. In the analysis, the farm received between £18,400 and £40,700 in additional income, depending on whether actions under options A or B were undertaken. The more ambitious the actions selected (option B), the higher the extra revenue.

More ambitious actions require additional land; however, if the area where cash crops grow has to be compromised to make space for agri-environmental options, net profit levels are likely to suffer.

The expanded SFI offer gives farmers much more flexibility in terms of choosing actions which suit their farms, but only careful planning and selection will ensure each farmer benefits economically in their particular situation.

With applications for the SFI expanded offer due to open on 22 July 2024, it is in farmers’ interests to investigate which options work for their farm and make the best-informed decision about their business.

Find the full analysis and other useful links here.

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