Defra pruning, COP27, AgriPV

It’s encouraging, as discussed below, to see regenerative agriculture receiving calls for more support during COP27. I believe it has a lot of potential to reduce input costs and cut carbon emissions and every farming business should at least consider if it could work for them (do shout if we can help with that). But it does concern me that as awareness grows among policy makers and corporations it could now be seen as some kind of agri-environmental silver bullet. Forcing farmers down the regen route would be extremely counterproductive. To start with, unlike organic farming, there is no set of standards that defines regen ag, how people practice it varies widely based on their own circumstances. And focusing on it too much at the expense of other parts of the food chain could be extremely counterproductive. Farmers have a key role to play in mitigating climate change, but we mustn’t allow all the responsibility to be shifted on to their shoulders.

Do get in touch if we can help you navigate through these interesting times
Andrew Shirley, Head of Rural Research

In this week’s update:

• Commodity markets – Budget carefully for 2023 crops
• Defra – Report recommends huge cuts
• COP27 – Big food calls for more regen ag
• Borrowing costs – Interest rates settling down
• Bird flu – Lockdown deepens
• Environmental schemes – Farmers still lukewarm on Elms
• Staff salaries – Take our survey and win wine
• The Farmland market – Video and podcast update
• International news – Agri-solar around the world

Commodity markets – Budget carefully for 2023 crops

Wheat markets settled down quickly last week after an initial £13/t futures’ surge following Vladimir Putin’s announcement he was withdrawing from the Black Sea grain corridor initiative. Russia later backtracked and prices ended up slightly down on the week, but the short-term spike shows just how sensitive markets are at the moment. Meanwhile, some potential good news regarding fertilise prices. Although European production is down 65%, Fitch Credit forecasts an average price of just under £400/t by 2024. Nowhere near pre-invasion levels, but far more palatable than £1,000t, points out my Agri-consultancy team colleague Andrew Martin. A glut of supply means anybody planning spring beans as a break crop for 2023 needs to take a careful look at their gross margins and consider a cover crop instead if the numbers don’t add up, adds Andrew.

Defra – Report recommends huge cuts

Last week I suggested one of new Defra minister Thérèse Coffey’s pressing jobs would be to protect her department from the inevitable cuts that the vorpal blade of Rishi Sunak will be dealing out soon. However, maybe she shouldn’t. A thought-provoking new report that I just stumbled across from the Adam Smith Institute, a free market think tank, claims the ministry, which has grown is size by 36% since 2016 and now employs over 30,000 staff across its core and agency functions, has become far too bloated and needs to be drastically pruned.

Some of the more radical surgery, which would see almost 16,000 roles binned, includes scrapping the AHDB; selling off the Forestry Commission; consolidating the five sets of Defra inspectors, who between them make 150,000 farm visits a year; slashing the headcount at the RPA by around 1,000, close the Office for Environmental Protection and turn Natural England into an Executive Agency that focuses on wildlife.

It’s a tough prescription and whether the author fully comprehends the complexities of the issues Defra has to deal with is open to question, but some of the measures seem to make sense, especially if they reduce unnecessary red tape.

COP27 – Big food calls for more regen ag

As you read this, the great and the good – now including our PM Rishi Sunak, who decided to attend after all, but not environmental campaigner Greta Thunberg who’s labelled it “greenwashing” – will be in the midst of saving the world (we hope) in sunny Sharm-El-Sheik at COP27. Cue the release of plenty of reports from various parties urging the world to do more in the battle against climate change.

One in particular, Scaling Regenerative Farming: An Action Plan produced by the Agri-business taskforce of the Sustainable Markets Initiative, part of King Charles’ Terra Carta project, caught my eye. It is worth a read and rightly calls for more support and new funding models to help farmers make the transition towards regenerative agriculture, agreement on common metrics for environmental outcomes and government policies that better reward farmers for making the transition.

However, cynics point to the names on the bottom of the report that include food companies like Pepsico, Mars and McDonalds. Even though the message is spot on, a significant amount of global carbon emissions is generated by the massive amounts of food waste and overconsumption of calories. Should there not be more focus at that end of the food chain?

Borrowing costs – Interest rates settling down

Although the Bank of England hiked borrowing rates to the highest levels seen since 2008 last week, some stability is returning to the mortgage market, says my colleague Bradley Smith, a rural lending specialist at Knight Frank Finance. “Banks have started to reduce their cost of funds, with one lender now offering 1.25% above base. With predictions for future base rate rises having reduced over the course of the past month, variable rates are now starting to overtake fixed rates in terms of interest from clients feeling that they will ride the storm and hope that rates will then look to reduce over the medium term.”

Bird flu – Lockdown deepens

All poultry and captive birds in England must be moved indoors from today (7 November) after a decision by the UK’s Chief Veterinary Officer following the increased prevalence of avian flu cases. The order applies to all flocks regardless of size. My land management colleagues have been helping a number of estates and shoots to put in place strategies to limit the spread of the disease. Find out more.

Environmental schemes – Farmers still lukewarm on Elms

Barely 1,000 farmers have so far applied to join the Sustainable Farming Initiative, the first tier of the Environmental Land Management Scheme (Elms) which lies at the heart of the government’s post-Brexit agricultural strategy. Uninspiring payment rates and ongoing uncertainty about the future of the scheme seem behind the slow take up. Meanwhile, the government has just appointed preferred fund managers for its Big Nature Impact Fund, a new public-private impact fund to invest in restoring nature.

For more information on public and private grant funding opportunities for rural businesses please contact Henry Clemons.

The Farmland market – Video and podcast update 

As mentioned previously, our Q3 Farmland Market update, which reveals a sharp annual increase in average farmland values, is out now. If reading research reports is not your thing, I’ve packed the key findings into a 60-second video that you may find interesting. You can also listen to my colleague Jessica Waddington and me discuss the farmland market with Knight Frank’s Global Head of Research Liam Bailey in the latest edition of our Intelligence Talks podcast.

Staff salaries – Last chance to win wine

In an inflationary world setting the right salaries is crucial to retain and motivate staff. If you are a rural business, taking part in the 2022 instalment of the Knight Frank Estate Staff Salary Survey will not only allow you to benchmark your staff’s wages, but you’ll also have the chance to win two cases of Chapel Down English wine.

International news – Agri-solar around the world 

The antipathy of some Conservative politicians to ground-mounted solar farms has been noted in this update. Indeed, it has been widely reported that the government is planning to extend the definition of farmland that it considers inappropriate for such developments, a move that would render most of England off limits. The current argument is the food security card – farmland should be used for producing things we can eat. Not withstanding the fact that it would take a huge number of solar farms to make a dent in the UK’s agricultural productivity, the more forward-thinking approach would be to work out how farmland can deliver both – energy and food.

There is lots of research going into this all around the world. For example, on holiday recently I came across an interesting “Agripv” project under development in Barbados that looks like it may use panels to create a shaded growing environment for horticultural crops. At the opposite end of the climate spectrum, researchers in Sweden are reporting encouraging results from research into the potential of using solar panels in arable systems.

Photo by Jan Kopřiva on Unsplash