SFI in a productive grass-based system

The options available to English farmers under the Sustainable Farming Incentive and other environmental schemes are complex and can be confusing. James Webster, senior agribusiness analyst with The Andersons Centre, offers advice on when and how taking part can be worthwhile in grassland-based systems.

In 2024, the Basic Payment Scheme (BPS) for all claimants will be less than half its pre-Agricultural Transition level in 2020. This decline in income, coupled with an elevated fixed cost picture following Russia’s invasion of Ukraine and rampant inflation, has left many questioning how they can recover lost revenue.

A key source of ‘new’ revenue for many will be the Sustainable Farming Incentive (SFI). SFI is Defra’s flagship farm support policy, which pays farmers for the delivery of public goods. There is a strict economic definition of public goods – they are non-rival, meaning that if someone benefits from them, that doesn’t prevent others from benefiting, and they are non-exclusive, meaning that once provided you cannot stop anyone from consuming the good, eg: clean air. These definitions are important for considering why food is not a public good.

How does SFI fit in a productive grass-based system?

The first point to highlight is that SFI is a broad scheme. Even if you feel the grass-based management options don’t work for you, there are options relating to testing organic matter, hedgerow management, and nutrient management and integrated pest management plans. These offer payments for actions that may already be taking place on farm.

Grassland in production

There are a handful of actions which can take place on grassland that remains in production. These include herbal leys (SAM3), legumes on grassland (NUM2), and low-input grassland (LIG1 and LIG2). It isn’t possible to give advice on SFI that relates to all farmers in all situations.

The decision to implement, or not, SFI needs to be a considered business decision. How will adjusting your grazing affect your profitability? Do the benefits outweigh the costs?

That said, there will certainly be cases where implementing an SFI scheme which involves a management option is a no-brainer. For example, where there is already a high degree of clover within a sward, claiming £102/ha for NUM2 provides valuable revenue, with little to no impact on performance. This has the added benefit of reducing nitrogen requirement, although it can be challenging to sow into established swards.

The level of legumes within the grassland is not specified by Defra; the aim is to manage nutrient efficiency, protect the soil surface and provide root growth. There should be legumes growing from spring to autumn.

Where NUM2 is being considered, it may be valuable to look at herbal leys (SAM3) instead. The mix includes the legumes of NUM2 with the addition of further grass and herb species. At Andersons, we have seen productive livestock businesses entering large swathes of their farms into SAM3, in many cases with grassland already meeting the standard’s requirements. There are some elements of caution with SAM3, and it is important to consider the function of the grass you are entering into the action. Some of the species within SAM3 mixes, while beneficial for grazing, improving soil structure and fixing nitrogen, may be more challenging for preserved forage. This is especially true where species are more ‘woody’ or liable to bolting, such as chicory and plantain.

With both NUM2 and SAM3, there are no additional limits with regard to cutting or fertilising which have been historic concerns of grassland management under Countryside Stewardship.

There is added flexibility to SFI, which allows farms who haven’t previously utilised herbal leys or clover rich swards to ‘trial’ them, in a lower risk manner. Both options are rotational, meaning that the area entered into these standards could be reduced by up to half in the second year of the three-year SFI agreement.

Additionally, if after placing a small area into these actions, the benefits outweigh the cost, the area entered into the action can be increased either through a second agreement (not recommended as it complicates administration) or on the anniversary of the application.

Where grassland is less productive, the low input grassland action at £151/ha may be beneficial. But this action is, understandably, more restrictive in terms of what can and can’t be done.

Grassland out of production

For areas which are marginal in terms of productivity, it is worthwhile looking at the options which take grassland out of production. These areas are capped at 25% of the farm area and include taking grassland field corners or blocks out of management (IGL1), winter bird food on improved grassland (IGL2) and 4m to 12m buffer strips (IGL3, but not capped).

The winter bird food action offers more flexibility in terms of management, and can be cut, provided it achieves the action aim, with provision of seed in autumn and winter. The grassland blocks out of production can only be cut in a localised way to control injurious plants. The IGL2 action pays more than 1.5 times the IGL1 action, but also has higher set-up costs.

Other support and funding

While this article has focused on SFI, it is also important to consider the other sources of support and funding available to farmers at present, including Countryside Stewardship.

Alongside the revenue elements of support are capital grants. The Farming Equipment and Technology Fund (FETF) provides 50-60% grants for equipment in a variety of categories including productivity, animal health and welfare and slurry management. The claim window for the first round of grants closed earlier this spring. However, two more application windows are expected to open in 2024.

For larger scale projects, it is worthwhile looking at the Farming Investment Fund. This includes grants for calf housing and to replace slurry stores which aren’t fit for purpose, or to expand and cover slurry stores. Additionally, grants are available for implementing solar on farm although these are at a lower grant rate (25%).

One important element of Defra’s support for farmers through the agricultural transition is the Future Farm Resilience Fund. This offers farmers free business advice and support. The scheme is delivered by a number of providers including Andersons, through Ricardo. This is an excellent opportunity to get some external advice on how to ensure your business survives and thrives.