04 Jan 2023
“I” for Investment? A perspective on Sustainable Farming Incentive (SFI)
Peter Beaumont is Managing Director of Cornish Mutual, a company with a long history of providing its members with an exceptional insurance service. Cornish Mutual is looking to extend its protection remit through a wider set of services to address the challenges the sector faces today including the transition under way in farming.
Uptake of the Sustainable Farming Incentive (SFI) has been slow.
While simple to apply for in isolation, the complexity arising from the interplay between SFI and the Countryside Stewardship Scheme (CS) has created uncertainty. Additionally, there is a common observation that, unlike the previous Basic Payment Scheme (BPS), SFI requires inputs that make it less valuable as a funding stream. Though true, this direct comparison may not be helpful when considering the benefits of making an application. While the BPS is a straightforward income subsidy, it might be useful to approach the SFI as an investment subsidy.
Investment subsidies, such as the Farming Equipment and Technology Fund (FETF) capital grant, encourage investment decisions. Investments are assessed on the basis of a return and FETF is taken up, predicated on future benefits, despite it only being a partial subsidy.
The SFI makes more sense when considering potential payback strategies. Farmers and advisors should be looking to achieve future value, rather than just the immediate margin in the payment.
The soil standards are intended to encourage planning, to capture the productivity benefits of healthier soils and lead to practices that build up rather than deplete natural resources.
Individual assessment is required but with a potential benefit of higher production margins and profits through lower inputs including fertiliser, fuel and plant protection products.
It is widely acknowledged this is likely to come at the ‘cost’, at least initially, of lower yield. While uncertain in nature, future access to carbon markets and further nature-based payments, public or private, might be considered a longer-term benefit.
Measurement, analysis and the insights gained from soil testing should allow better input management and start to unlock the profitable benefits of greater attention to detail. Behind the claim and counterclaim, the direction of travel towards returning to a certain set of practices, often labelled ‘regenerative’, is undeniable. The observation that these practices would be recognised by an earlier generation gives some comfort; examples of lost wisdom seem to be regularly unearthed in the agricultural trade press. Supply chains and finance companies, along with consumers and regulators, are all making similar demands or noises and we are all having to respond, not just agricultural businesses.
As an insurance company, our regulator is requiring us to look at the carbon footprint of our customers and the banks are being asked to do the same. While some sectors will increasingly struggle with obtaining finance, agriculture has the potential to be a positive influence through practices which increase soil organic matter. Embracing the journey while there is support available may turn out to be good timing.
