2021; Planting Miscanthus versus holding off to consider other ELM options

18th August 2020

Lincolnshire farmer and Terravesta chairman, William Cracroft-Eley, looks at why it’s worth considering planting Miscanthus, rather than holding off to wait for the Environmental Land Management (ELM) scheme to arrive in 2024.

“2021 is set to be the first year where UK agriculture policy will be managed outside the framework of the EU CAP. The enabling legislation for a new UK agriculture framework is to be laid down in the Agriculture Bill, currently in passage through parliament.

This Bill, or Act once it passes through Parliament, is an enabling framework around which detailed policy will emerge. The Act, in itself, will contain no operational detail.

What it does set out, however, is the framework for a different type of financial incentive, doing away with the Basic Payments that farmers currently receive under the CAP. It also sets out the principle of no subsidy for food production. Subsidy will be paid for the provision of public and environmental goods and services.

The Public and Environmental Goods and Services are proposed to be incentivised under a single Environmental Land Management (ELM) scheme, administered through Defra. This is at outline discussion stage, and the details to date can be seen in a Policy Discussion Document dated February 2020, which can be downloaded from Gov.UK. While the document lacks detail of any grants, the timetable on the last page, is of interest for planning, and is shown below.

 

The key dates to this chart are:

2021-2027 Phased reduction to zero in direct payments (BPS).

2024 ELM scheme rollout.

How much will ELMs be worth?

No-one knows the answer to this yet, and it will depend on the level of commitment and options chosen. However, as the table above shows, we are likely to have already lost at least half of our BPS style direct payments by the start of ELM rollout, so it would be prudent to assume that it is unlikely to be intended to fully replace direct payments.

Additionally, based on the principle of “no direct payments,” ELM is unlikely to be paid directly on crops which demonstrate a commercial return, including perennial biomass crops, however it might be payable on a whole or part farm basis where these crops form part of a larger scheme, for example flood management, public access or low inputs etc.

It is probably also fair to say that the “Big ticket items” are likely to be those that policy sees as highly desirable, but would otherwise be financially unviable. e.g. afforestation, while the easier options (Tier 1) that almost everyone might participate in are likely to carry the lowest reward.

So, where does Miscanthus fit?

Within ELMs, as yet, we just don’t know. However, it does deliver environmental goods that ELM is intended to support, so it should be no detriment to future ELM applications.

What we do know, is that most intensive cereal and grass enterprises are going to look increasingly marginal/unprofitable in the absence of BPS, or even at half level BPS, in particular because of the volatility risks both to yield and markets caused by the increasing occurrence of extreme weather events.

With this in mind, many farmers will find themselves needing to radically review their business options, in order to survive, before the arrival of ELM in 2024.

Those who are asking themselves whether or not to hold off planting Miscanthus to see what other options are in the pipeline are, of course, already starting this process, and to them, I would highlight the following;

  1. We are unlikely to have any detailed ELM scheme grant details until 2023.
  2. A Terravesta Miscanthus contract taken out now is an opportunity to lock in price, cost and (depending on yield) likely return for 12 years (up to 2033).
  3. These contracts are underwritten by power generation, for which there is increasing demand as other fuel streams are decarbonised.
  4. Miscanthus will offer the potential, from the day of planting, to rationalise and reduce whole farm power and labour costs and working capital requirement
  5. Miscanthus, from the day of planting, will reduce whole farm emissions, and store carbon below ground, both improving the business carbon footprint, and building a carbon store which is likely to be able to attain monetary value in the future.
  6. Miscanthus can grow well on the most difficult or expensive land to farm, enabling management focus and greater productivity from the easier or better land.
  7. Planting Miscanthus now will still enable participation in ELMs, and may actually widen selection options because the business might be more robust and less in desperate need of cash.

To summarise, planting Miscanthus in 2021 is only likely to restrict future options in the rare circumstance of a farmer planting 100% of the farm. For others, there will always be choices as and when the time comes. However, Miscanthus planted in 2021 is likely to be delivering a first harvest by 2023, and will have already saved overhead and delivered business resilience, enabling the growers to make future choices, or not, on their terms.”

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