Farm Business Management
Business Appraisals and Financial Forecasts
A pre-requisite to business planning is having farm performance critically appraised by someone who is qualified and independent. A review is not designed to be complicated or time-consuming or to merely highlight known challenges (which all farms have). It should be thorough and focussed on identifying costs of production and critically assess physical / financial performance against recognised industry bench-marking data, whilst identifying opportunities and management options to enhance overall trading Profit for the future. It is also important to develop personal objectives and to ensure available skills, resources and assets are fully optimised to enable informed decisions to be made.
Following a comprehensive analysis, a projected financial performance for the business should include improvements in technical / management efficiencies, new options for enterprise structure, diversification opportunities and marketing strategies.
Service provision: Financial / physical appraisal, and business opportunities
Service fee: from £600 + VAT
Diversification / Grant Funding
All successful diversification initiatives require detailed planning and a thorough understanding of the market, alongside realistic project expectations and timescales. Principle business operations must not be compromised, and business projects need to be overseen by someone with the necessary drive, intellect and commitment.
With the recent introduction of the Improving Farm Productivity scheme, there is now grant support for farms looking to improve enterprise productivity through technological innovation.
Service provision:
i) Project Financial Forecast: from £400 + VAT
ii) Grant Application and Business Plan: from £1,200 + VAT
iii) Other Capital Grant Schemes: £75/hour + VAT
Countryside Stewardship (CS)
With the pending initial introduction of the Sustainable Farming Initiative (SFI) later in 2022 and its' full introduction by 2024, environmental funding is gaining increasing interest as a means of securing future farm business income. In the interim, Mid Tier and Higher Tier agreements are set to continue through to 2024, with payments for some management options significantly increased earlier this year (although not necessarily by the 30% broadcast by DEFRA). Despite a dramatic increase in construction materials, especially steel, an expected corresponding increase in capital payments has not materialised, causing great uncertainty amongst recent agreement holders on whether or not they can afford to implement certain capital items, such as roofing. However, there are still a number of capital items for boundary and infrastructure improvements worth considering, including fencing and hedging, and farms in a High or Medium (introduced this year) priority water catchment area also have access to funding towards concreting, farm tracks and water recycling.
Applications to the Capital Grant Scheme (capital items only) can now be made any time during the year (subject to funding), and are capped at £20,000 per option category. The application deadline for Mid Tier is 29th July, with a cap of £120,000 for water and air capital items. Whilst applications to Higher Tier need to be made by 29th April.
It is important, however, to accurately assess the financial implications of a potential agreement against current farm performance, and to fully understand the management requirements of CS options selected before submitting an application.
Service provision:
i) Wildlife Offer Application: from £300 + VAT
ii) Mid Tier (incl, Capital items) Application: from £450 + VAT
iii) Higher Tier (incl. Capital items) Application: from £900 + VAT
iv) Capital Grant Application: £75/hr + VAT
v) Mid Tier / Higher Tier Annual Claim: £75/hr + VAT
i) Wildlife Mixed Farming Offer (arable area: 350 ha)
ii) Mid Tier Mixed Farm Agreement (arable area: 350 ha)
CS Capital items - Click to see examples
CS Management Options and Capital Grants -
Final CS applications will be accepted in 2023, and agreements that started after 2021 can be withdrawn and transferred to ELMs without penalty.
Woodland Grants
CS Tree Health Grant
Introduced in spring 2022, the Tree Health Grant is a capital grant that provides support for Woodland Tree Health Restoration and/or Woodland Tree Health Improvement, and includes:
-
the restocking of trees after tree felling to manage infection from certain tree diseases or pests
-
the removal of diseased trees and infected rhododendron.
England Woodland Creation Offer (EWCO)
Administered by the Forestry Commission, replacing previous woodland creation schemes provided via Countryside Stewardship. EWCO provides 100% one-off capital funding to create woodland (min.1 ha) of up to £10,000/ha plus supplements, and a ten-year management payment of £300/ha/yr.
To confirm eligibility, farmers are advised to contact their local FC Woodland Creation Officer:
Bench-marking
ADHB research reveals a strong link between top performing farms that routinely benchmark and analyse performance and farms that don’t, with more than 70 percent of the difference in performance down to management decisions.
By comparing unit costs of production against recognised ndustry data, benchmarking not only puts into perspective the relative physical and financial performance of a business but enables better informed decisions to be made.
Service provision: Physical / financial bench-marking analysis
Service fee: from £350 + VAT
BPS
The new Agricultural Bill proposes a 7-year phasing out of current payments by 2028, by incorporating annual deductions of between 5% and 70% depending on farm size. BPS and Countryside Stewardship will be replaced with ELMs - a 25 year Environmental Plan that delivers 'public money for public goods’.
2021 Entitlement Value: £233.30/ha
The BPS exchange rate for 2021 was the same as 2020, which included the decision not to apply the Financial Discipline deduction of around £1,800, which was previously used to support an EU crisis fund.
BPS payments going forward will be subjected to the following annual percentage deductions up to 2024, equating to roughly half the value of 2020. Annual deductions from 2025 to 2028 are yet to be announced by DEFRA.
BPS Claim Reductions 2021 to 2024
Effect on 2022 Payment
Regenerative Farming and Integrated Farm Management (IFM)
With global warming a serious threat to wildlife and agriculture, the long-term viability of UK farming will require exceptional resilience to cope with future extreme weather occurrences and the loss of ecosystems and habitat. The principles of Regenerative Farming and IFM focus on optimizing soil health and biological activity with attention to diversity, water quality, and ammonia and greenhouse gas emissions through sustainable and profitable environmental farming practices.
As an Endorsed LEAF Consultant, I assist farmers with management and technical support using LEAF's resources alongside my own professional services, which include environmental assessments; cover crops; soil structure surveys; soil organic matter and biological analysis; enhancing biodiversity; water management; carbon efficiency; plus sources of grant funding.
Service provision: Soil assessments, Environmental audits, Cropping plans, Management plans, etc
Service fee: £75/hr + VAT
ELMs (from 2022)
Under ELMs (Environmental Land Management scheme), farmers will be paid for work that enhances the environment based on the principle of 'public money for public goods', with annual funding of £1.8bn per year. There will be three ‘tiers’ of entry. The first is the Sustainable Farming Incentive, which will include crop rotations, soil conservation and water pollution. Tier 2 is Local Nature Recovery for creating, managing or restoring habitats, natural flood management and species management, and Tier 3 is Landscape Recovery, which focuses on landscape and ecosystem recovery, including woodlands and wetlands.
Priority areas of ELMs are:
-
Protecting 'heritage, farm buildings and stone walls
-
Expanding hedges
-
Capturing carbon in soils and cutting pesticides
-
Natural flood management including restoring river bends
-
Landscape recovery, restoring peatland and planting new woods
-
Reducing antibiotics
-
Improving animal health and welfare
Summary of the Arable and Horticultural Soils Standard
Farmers can choose whether to do the introductory or intermediate level. The rates set out below are total payments for this standard per hectare.
Introductory level – £22 per hectare
-
test soil organic matter
-
undertake a soil assessment and produce a soil management plan
-
70% winter cover to protect soil:
-
at least 70% of land in the standard must have green cover over the winter months (Dec-Feb)
-
this can include any kind of green cover, including autumn sown crops and weedy stubbles
-
-
addition of organic matter:
-
add organic matter to 1/3 of the land in the standard each year
-
this can include any kind of organic matter, including sown green cover crops
-
Intermediate level – £40 per hectare
-
test soil organic matter
-
undertake a soil assessment and produce a soil management plan
-
70% winter cover to protect soil:
-
at least 70% of land in the standard must have green cover over the winter months (Dec-Feb)
-
this must include land with multi-species green cover – covering at least 20% of total land in this level of the standard
-
-
addition of organic matter:
-
add organic matter to 1/3 of the land in the standard each year
-
this will include multi-species green cover grown under the cover crop requirement above, plus the rest made up of other ways to add organic matter as per the introductory level
-
Advanced level
DEFRA plan to introduce this standard from 2023 onwards, which is likely to include use of no-tillage techniques.
Summary of the Improved Grassland Soils Standard
Farmers can choose whether to do the introductory or intermediate level. The rates set out below are total payments for this standard per hectare.
Introductory level – £28 per hectare
-
test soil organic matter
-
undertake a soil assessment and produce a soil management plan
-
95% green cover to protect soil (no more than 5% bare ground over winter)
Intermediate level – £58 per hectare
-
test soil organic matter
-
undertake a soil assessment and produce a soil management plan
-
95% green cover to protect soil (no more than 5% bare ground over winter)
-
Establish or maintain herbal leys to improve soil health on at least 15% of land in the standard
Advanced level
To be introduced from 2023.
Carbon and Natural Capital
The natural capital approach provides a way to measure and value public and private goods from land. It includes the amount of renewable and non-renewable resources (such as plants, animals, air, water, soils, minerals) that combine to provide a flow of benefits to people and the environment.
Wider commercial businesses are increasingly keen to offset their carbon emissions by investing in environmental assets on farms. To capitalise on this opportunity, farmers need to:
-
Understand the link between natural capital and farm productivity
-
Assess the long-run sustainability of farming practices
-
Quantify the current private benefits to the farm and public benefits
to others from well-managed farmland
-
Highlight potential future benefits of looking after natural assets
(and the risks of not doing so)
Farmers with net positive carbon can sell surplus carbon sink capacity through carbon credits, with a current value of up to £100/ha. It is important, however, that the business' carbon performance is properly calculated by a recognised professional body before committing to a contractual agreement.
Woodland Carbon Guarantee (WCaG) scheme
The WCaG scheme aims to help accelerate the planting of new woodlands and develop a domestic market for woodland carbon for the permanent removal of carbon dioxide (CO2) from the atmosphere.
The Scheme provides farmers with the opportunity to sell Woodland Carbon Units (WCUs) to the government for an agreed guaranteed price that is index-linked for the life of the 35-year contract. Because carbon credits have a registered value for 100 years, they can be sold on the open market at any time during the 35-year agreement for a higher price than that received from the government. Applications need to comply with The Woodland Carbon Code, which provides verification of standards required to access the carbon market.
The guaranteed price of an applicant’s carbon dioxide removal is agreed via an online reverse auction run by the Forestry Commission. Typical carbon sequestrated over the growing life of a woodland is 8 to 10 t CO2/ha/yr, primarily depending on tree mix and intended management, although little carbon is captured during the first 5 to 10 years of establishment. Auction prices so far have averaged around £24 per tonne CO2, with the next auction expected in May/June 2022. High demand from private sector purchasers is expected to see carbon values increase in coming years.
Alongside are grants for woodland management and creation, which can be claimed in conjunction with carbon sales i.e. the England Woodland Creation Offer (up to £10k/ha).
Service provision: ELMs / Natural Capital / WCaG
Service fee: £75/hr + VAT
BPS Calculator
To see how annual reductions will affect your BPS payment up until 2024, click on the following calculator link:
Service provision: BPS Annual Claim Form submission
Service fee: £75/hr + VAT