SFI 2024 update: All you need to know

Starting your Sustainable Farming Incentive (SFI) journey is becoming an increasingly urgent task for farm businesses looking to increase resilience and improve cashflow.

SFI has been through multiple revisions since it was first piloted in 2021 with a further update released since the Labour government took over in July.

This constant state of flux has left some farmers lacking confidence in the scheme and reluctant to enter into agreements that subsequently become unworkable or too complex.

But with farm incomes falling, weather conditions becoming unpredictable, Mid-Tier Countryside Stewardship discontinued and Basic Payment Scheme (BPS) on track to be completely phased out by 2028, the need to replace some of the shortfall with SFI payments is pressing.

See also: Scottish agricultural support scheme changes: What we know

What’s new?

The latest move is the expanded SFI 2024 offer, which was unveiled in July and is undergoing a controlled rollout.

As such, expressions of interest must be submitted to the Rural Payments Agency by farmers, before they are invited to apply.

For those wondering about the best timing for setting up an SFI 2024 agreement, or even considering starting another agreement to increase their involvement, it’s important to note that the expanded SFI 2024 offer does contain some potentially significant changes.

Farmers must be alert to these, stress advisers, who highlight that the costs and management implications of any proposed scheme should be considered in the planning stage.

Just considering the headline income figures will not be enough – as some will be expensive to deliver.

Others are more difficult to get right, such as flower-rich margins with their requirement to establish wildflowers, which can be tricky on fertile land.

Likewise, rotational actions must be planned for the next three years, so that they work on a practical level.

What’s changed?  

Expanded SFI 2024 has 102 actions to choose from, with the pick-and-mix approach continuing so that farmers can tailor their agreements accordingly.

Of those actions, 22 were carried over from SFI 2023, 57 come from Mid-Tier Countryside Stewardship and 23 are new actions.

Among the 23 new actions are:

• payments for no-till
• precision farming
• variable rate application of nutrients
• dry stone wall maintenance
• moorland options.

The latest update also includes new capital items, the first endorsed action, some technical changes and voluntary advice around what Defra considers to be good practice.

As a result, it is now much clearer what farmers must do to get paid for each action, as well as how they should go about it.

CNUM3 legume fallow and CSAM3 herbal leys

A significant change is that CNUM3 legume fallow and CSAM3 herbal leys can now be either rotational or static.

It was originally rotational and then changed to static in 2023, before being changed back again.

The wording surrounding the legume fallow action has been tightened up, so that it must be established by the autumn and remain in place for longer than was previously possible.

It also clarified that it is possible to add supplementary actions to the 23 actions that made up the SFI 2023 offer, as well as SFI 2024, adding to the extra income potential.

In addition, another four actions were added to the six which are restricted to 25% of the farmed area, taking the total to 10.

Known as limited area actions, this move was made to prevent too much land being taken out of production. A further four remain under review.

Less welcome was the confirmation that land and actions can’t be added on the anniversary of existing SFI 2023 agreements.

This meanins that farmers who wish to do more will need to start a new, separate agreement.

Why enter now?

Despite the chop and change of the past few years, the fundamentals of the SFI scheme remain the same, confirms Georgina Wallis, head of environmental services at Hutchinsons.

The rolling application window, quarterly payments, flexible rotational actions which allow a 50% decrease annually and an SFI management payment are all still features, she says.

While many of the actions will be familiar to those who were in Countryside Stewardship.

“Mid-Tier stewardship has been rolled into the SFI, which is why there is now a broader range of actions on offer, most of which have been reduced in length from five to three years.

“It means there are more opportunities for a wider range of farm types, which is why it’s a good time to be embracing all that it has to offer.”

Another relevant factor is the current speculation surrounding the farming budget, which is believed to be under threat as the new Chancellor Rachel Reeves looks for department cuts.

That adds to the urgency to get an agreement approved, before an estimated £100m is removed from the farming pot.

What’s been popular?

According to Defra, 83% of the farms that are in the SFI have at least one of the plan actions included, having produced an integrated pest management (IPM), nutrient management or soil management plan.

Of the management actions, the most popular are the zero insecticide action, the establishment and management of herbal leys and the use of winter cover crops.

Strutt & Parker has taken that a step further and looked at the three most popular actions in 2023 agreements by farm type, along with the proportion of farms with an SFI agreement taking them up:

Arable

• IPM4 – no use of insecticides – 54%
• AHL2 – winter bird food on arable land – 29%
• SAM2 – multi-species winter cover crops – 28%

Lowland grassland

• LIG1 – manage grassland with very low nutrient inputs – 85%
• NUM2 – legumes on improved grassland – 42%
• IGL2 – winter bird food on improved grassland – 23%

Upland grassland

• LIG1 – manage grassland with very low nutrient inputs – 85%
• NUM2 – legumes on improved grassland – 42%
• IGL2 – winter bird food on improved grassland – 23%

N.B. These codes have now changed in the SFI 2024 offer.

The latest update means that the detail attached to some of these actions has changed, so these rankings are likely to change as new agreements are finalised.

The inclusion of others gives greater choice for a wider range of farm types.

What are the risks?

Including too many options, failing to keep the required records and underestimating the costs involved in delivering the environmental outcomes are all potential pitfalls with the SFI 2024 offer.

The impact on the farm’s rotation is another watch point, agree advisers, who stress the importance of maximising farming returns in the longer term.

Taking land out of production may have an impact on the fixed cost structure of the business.

To this end, changes made for 2024 schemes mean that some of the actions that were being used to replace risky break crops are now non-rotational, so are now less likely to feature for that purpose.

Making sure that actions complement the cropping plan rather than compromise it is key.

Another relevant factor is that high payment actions can be high risk – careful and time-consuming management can be required to get the desired outcome.

Strutt & Parker has produced some standard costings for popular SFI actions, to help farmers understand what the returns might be:

• CSAM3 herbal leys – payment of £382/ha – establishment costs in the first year of £291/ha, including a seed cost of £204/ha. If used for grazing, management costs in subsequent years will be much lower.
• CAHL2 winter bird food – payment of £853/ha – annual establishment and management cost of £310/ha, which reduces the average return to £543/ha. However, it can be combined with other actions

What are the rewards?

Unlike the situation with BPS, income from SFI agreements is not profit.

There are costs associated with carrying out many of the actions, so these must be considered.

On average, arable farms can expect to receive £102/ha from SFI 2023 agreements, some 45% of the BPS received.

For lowland grassland farms the figure is £95/ha and for upland farms it’s £51/ha.

This is expected to rise as new actions are taken up and supplementary actions are added to existing agreements.

In terms of environmental reward, it’s early days.

It is widely accepted that existing farm habitats will be the most valuable in terms of biodiversity, so actions which can expand or buffer them, or provide connectivity, will deliver more.

The stacking of actions can lead to greater financial rewards.

Work done by the AHDB suggests that arable farmers in particular will be able to benefit from stackable, well-paying options, with higher revenues being generated by more ambitious schemes.

Of course, the greatest financial rewards will come where the SFI is combined with private funding.

Land that attracts private money – such as for carbon or flood management – can be included in the SFI, Defra has confirmed.

This is as long as the actions are compatible and there’s no double-funding – if in doubt, consider whether you are taking additional action over what is already being done.

Agroforestry funding boost

© Andy Bason

The unveiling of new capital items to support tree planting in the latest SFI update has been welcomed and makes the business case for trees on farms much stronger.

It means there are now specific agroforestry capital items to plant trees and create new agroforestry systems.

There are also annual revenue grants to support maintaining and managing the trees, explains Jim O’Neill, agroforestry development manager of the Forestry Commission.

“Of the capital items available, the agroforestry plan at £1,268/plan has been designed to help with the planning and creating of agroforestry,” he says.

“It takes a whole farm approach and looks at how agroforestry might fit, both on the farm and within the local landscape.

“It also outlines how it will support the business objectives and what contribution it will make to biodiversity.”

For those who want to put agroforestry into practice, the specific capital items and grants are as follows:

Capital grants

• PA4 – Agroforestry plan: £1,268/planAFI – Plant an agroforestry woodland tree: £5.40/tree
• AF2 – Plant an agroforestry fruit tree: £17.83/tree
• AF3 – Supplement: species diversity bonus (at least five species): £1.16/tree
• AGF1 – Maintain very low density in-field agroforestry on less sensitive land, 30-50 trees/ha – £248/year (renewable after three years)
• AGF2 – Maintain low density in-field agroforestry on less sensitive land, 51-130 trees/ha – £385/year (renewable after three years).

The ability to stack these on top of other actions, across the whole field, shouldn’t be ignored, say experts, who cite examples of farmers growing low input spring cereals or herbal leys between the rows of trees.

Soil carbon is another potential income stream.

They also highlight that agroforestry requires real commitment from farmers, so the same is needed from the government with a long-term approach to funding.

“Three years is disappointing – it needs to be more like 10 years,” says one.

As Jim points out, the science behind agroforestry is sound, but there have been challenges in the past in terms of the upfront capital required and the skills and confidence involved.

“This latest update goes some way to solving those,” he stresses.

“There is other help and support too – the Forestry Commission has10 new agroforestry woodland officers across England to help potential applicants.”