Horizon blog: SFI 2022 update brings some flexibility and clarity for uncertain farmers

Today (2 December) Environment Secretary George Eustice set out his vision for farming, including further detail on how the Sustainable Farming Incentive will operate over the coming year and beyond. Our senior policy analyst Amandeep Kaur Purewal delves into the nitty gritty of what this new information means at farm level.

Further details about the Sustainable Farming Incentive (SFI) early rollout in 2022 were announced today (2 December), including more information on agreement flexibility, actions required and payment levels.

One of the first key points is that the SFI early rollout will work at a ‘field level’, i.e. farmers can choose how many fields they would like to enter. The idea behind this approach is that farmers who are unsure or interested in ‘testing things out’ can do so at relatively low-risk.

There’s also flexibility within the three-year agreement as farmers have the option of:

• increasing the number of fields (land) they enter into SFI
• moving to higher ambition levels within a standard (e.g. introductory to intermediate level)
• adding more standards as they become available

From work we’ve been doing on farmers’ attitudes towards the SFI (more on this later on), we’re aware that farmers taking part in Countryside Stewardship Schemes (CSS) were not able to take part in the SFI pilot that’s currently underway as their land was tied up and they would not be paid twice for carrying out similar actions on the same patch of land. In which case, SFI 2022 could be a useful option for farmers in this position as they could enter more land into the SFI as it comes out of CSS.

The conditions highlighted above can all be reviewed after each year of the agreement, but farmers won’t be able to reduce number of fields they enter or move from a higher to lower ambition standard unless there are exceptional circumstances.

Defra have stated that they ‘expect the standards and payment rates signed up to in 2022 will remain stable for the full 3-year agreements.’ They may be changed after this period once the feedback and learnings from SFI 2022 have been incorporated, but this should help farmers who are interested in joining the scheme with planning, to some extent.

Another interesting addition is that a farmer can enter the same parcel of land into both the SFI 2022 and private sector schemes such as carbon trading, biodiversity net gain credits and nutrient trading. Defra see it as a low risk that actions undertaken within these schemes would overlap with actions within the SFI, so there’s little if no chance of paying farmers twice for the same action. The interaction with private sector schemes will be reviewed in 2023.

Now, onto the nitty gritty about standards and payment rates.

The three standards available for SFI 2022 are:

• Arable and Horticultural Soils standard
• Improved Grassland Soils standard
• Moorland and Rough Grazing standard

We carried out some simple analysis on SFI 2022 back in July, looking at the financial implications for arable and livestock farmers. Following today’s announcement there are some differences:

• In 2022, the two soils standards will only have introductory and intermediate levels to begin with – there are plans for an advanced level to be introduced from 2023 onwards
• The table below highlights the differences in payment rates announced today and in June 2021: 

• Defra have stated that the payment rates have been set on the basis that farmers are compensated for the additional cost they undertake to carry out actions for a given standard ‘beyond regulatory requirements and existing widespread good practice’. This explains the slight drop in payments for the arable soils standards as arable farmers would be carrying out some form of soil assessment and testing anyway under current requirements.
• The actions required under the arable soils standard requires a much larger percentage (95%) of green cover on the entered land compared to guidance published in June (at least 15%), with at least 70% cover over the winter months. This could potentially, impact farmers’ winter cropping plans.
• The grassland soils standard for 2022 also states that no more than 5% of the land entered into the standard should be bare ground over the winter.
• The details of the Moorland and Rough Grazing standard still need to be finalised but some indicative payment rates have been published.

Indications of when additional standards could become available have also been published. For example, there may be an integrated pest management and hedgerows standard available from 2023 and low and no input grassland standard in 2024.

Further details regarding the Annual Health and Welfare Review show that farmers who keep more than 50 pigs, 20 sheep or 10 cattle (and are eligible for BPS) will be able to take part. Payment rates per review (which will be on an annual basis) are:

• Pigs £684
• Sheep £436
• Beef cattle £522
• Dairy cattle £372

In summary, there’s a lot of areas covered in today’s announcement and more information for tenant farmers and those who farm on common land and organic farmers is available here. I think the flexibility that’s been introduced into SFI 2022 agreements is a welcome step forward as if you are unsure how the scheme could work for you, there’s the option of entering a field or two to start with and then review how things are going after a year rather than committing a large chunk of your business.

We’ve been working with Harper Adams University looking at how farmers are feeling about the changes in domestic policy and what their plans are for dealing with them. This work also involves modelling the financial impact using AHDB representative farms and will be published in the new year.

Nevertheless, if you are a farmer that’s reading this, it would be worth your while to see how things could potentially map out for your farm, if you haven’t already done so. The BPS Impact Calculator under the AHDB Farm Business Review service will show how your basic payments will reduce from now until 2027. You can also sign up for a free business consultation to look at your options so you’re in the best position to make decisions about your business going forward.