Whilst a good period of spring weather will have allowed many arable enterprises to catch up with drilling, harvest 2020 is still likely to produce only average returns at best and, in many cases, cropping activities will barely show a surplus over subsidy receipts.

For businesses operating typical contract farming systems, the difference between crop margins after contract charges is stark and this is particularly true for oilseed rape which is becoming more and more difficult to grow successfully. The push towards a greater proportion of spring cropping in the rotation to help to control blackgrass is also, often producing poorer crop margins and some soil types just aren’t suitable for this cropping regime.

We see a number of contracting agreements where individual crop margins are not accurately recorded or reported. This clearly leads to a situation where the parties are unaware that certain crops consistently lose money or make very low margins. Historically, we have advised farmers and landowners running contract agreements to increase the area of rotational fallow to remove loss making crops from the rotation and to significantly improve work profiles but now, with the availability of good Countryside Stewardship scheme options we can improve on this dramatically.

Having managed a number of these options for three years in some cases, we have a good understanding of the establishment and annual maintenance costs involved and can illustrate the net margins available, we are then able to compare these against budgeted and actual crop margins.

The table below shows the expected net margin from a number of Rotational and Non-Rotational Countryside Stewardship options and the margin retained by the farmer from a number of combinable crops, after payment of the contractor’s fixed fee and typical split of divisible surplus. Owner occupiers will compare this given their own labour, power and machinery costs.

It shows very clearly that winter wheat is the only crop which can be expected to consistently outperform the available rotational options from a good Countryside Stewardship scheme. We see arable contracting arrangements which deliver better cropping margins than those below, but even those have “Cinderella” crops or are looking to find a reliable alternative to oilseed rape.

The three Rotational CSS options below produce reliable, competitive margins and, particularly in the case of GS4 and AB15, should improve soil fertility, structure and assist in blackgrass control.  All farms have some unproductive or difficult areas which are suited to non-rotational options, some of which are noted below. The financial argument for implementing a Countryside Stewardship agreement is very compelling even before one has considered the wildlife, environmental, and aesthetic benefits.

We have recently submitted a number of large CSS schemes on behalf of clients, two of which will provide gross income of over £250,000 per annum. We will be submitting further applications prior to this year’s deadline which we expect to generate a total of over £3,000,000 to the entrants over the five years.  In the main, Natural England have been extremely positive in dealing with applications but clearly, ongoing funding must be at risk given  the other current and future demands on government spending. Acting on this now would seem prudent.

Whilst devoting substantial areas of croppable land to non cropping activities might appear to be a difficult decision, uncertain crop prices caused by Brexit and the inevitable pressure from aggressive exporters to this country, a big question mark over oilseed rape as a reliable crop, the decline in availability or efficiency of blackgrass control chemicals and the known future reduction in Basic Payment receipts mean that a  CSS scheme must form part of any discussion on cropping plans going forwards. It must be remembered that these schemes are for five years and so, if the above uncertainties have been resolved and crop prices have risen substantially, businesses can increase their cropping areas again. A strategy of replacing poorer, marginal areas with non rotational options and reviewing your own break crop options and considering which rotational environmental options might provide better return is a good starting point. Along with the consideration of capital funding that might be available depending on your location and local target priorities.

The deadline for a Higher Tier application for this year has recently passed but, for Mid-Tier the date by which we must apply for an application pack is the end of June for electronic packs, and a submission must be completed and lodged by the end of July.

In considering the integration of a CSS scheme within an existing arable contract, there is an argument that some or all of the option income and costs should be included within the agreement. The rotational options particularly will require good establishment and maintenance if they are to provide maximum benefit and should have a positive impact on the rotation as a whole. If this principle is adopted, we would advise that the main terms of the contract are reviewed to reflect the changes in input required from the contractor, the importance to all parties that the scheme is compliant and the relatively certain nature of the income.

Similarly, we expect that future subsidies under ELMS will be substantially linked to mainstream farming activities such as cultivation techniques, protection and improvement of organic matter, prevention of soil erosion and water run-off and even fertiliser and agrochemical application rates. So optimising subsidy receipts will be closely linked to cropping decisions and systems. Therefore, to align all parties’ interests, the subsidy receipts and associated expenses should probably be included within the contract agreement. Again, the terms will need to be amended. The simplest arrangement would involve a farmer’s first charge to reflect the certainty of subsidy receipts.

Going forwards, there are a number of issues which farmers and landowners need to consider carefully and which may provide further opportunities.

Farming businesses will have to start to measure their carbon emissions and sequestration. We are working with a number of landowners to start to understand how to do this with some certainty. There will be opportunities to proactively improve the carbon balance for many farming businesses by such simple actions as establishing cover crops, implementing zero tillage, reducing nitrogen use, tree planting and using more grass in the rotation. Many businesses will be in a position to trade carbon credits when a formally recognised audit system is in place and indeed, an informal market already exists where individuals are seeking to offset travel emissions by paying farmers to establish crops with measurable carbon sequestration benefits.

Currently, we can assist farmers and landowners to measure the effect on carbon of implementing changes so that everyone can understand the measurable benefits of making these changes. Clearly this is not yet a perfect science, but many farmers and landowners want to make a start with what we have got and learn from the process rather than wait for a recognised system to develop. There are currently dozens of different carbon calculation tools available so we are a little way away from a single, recognised audit system for carbon in agriculture.

What is very clear though is that many of the CSS options noted above and the changes expected through ELMS will have a positive impact on a farm business’s net carbon position and also its ccological footprint; its natural capital and biodiversity resource are all areas that will be affected and with the right management improved.