Why farmers are at loggerheads over value of AD
©Tim Scrivener Supporters of AD plants say they are an economic and environment boon for UK farmers, but opposers believe they are hiking up rents and pricing livestock farmers out of the market for crop and grazing land.
There are currently 139 operational agricultural plants in the UK, according to figures from Biogas Info UK.
In Herefordshire – an arable-rich county – 14 AD plants have been approved for planning – all of which are on-farm units – and a further three are awaiting approval, according to figures from Herefordshire Council.
See also: Strong anaerobic digestion growth, but uncertain times ahead
But one Herefordshire beef farmer, who wished to remain anonymous, isn’t very happy about the rise of AD. He says the increasing number of farm plants in the county has already pushed up the price of rent considerably.
“We used to say that 1t of wheat should pay the rent. That’s what it always used to be for years. Now it has gone up to more than 2t of wheat or £200/acre,” he said.
But his biggest bone of contention is that AD farmers are claiming two government subsidies.
AD has its place in farming
The Anaerobic Digestion and Bioresources Association disagrees that AD is taking valuable land out of livestock production.
It refers to Defra figures up to November 2014 that show the total maize area in England accounts for 0.5% of country’s total arable area and just 17% of this total – 0.085% – is grown for AD.
According to its database, slightly fewer than 40 farms use maize as part of their mix to feed digestors.
In fact, rather than compete, it believes AD can complement farming operations.
A spokesman for the association said: “Rather than reducing the amount of agricultural land in production, AD crops can form a crucial component of a sustainable agricultural rotation, by making break and cover crops economic, while maintaining and enhancing biodiversity.
“By generating renewable energy and biofertiliser from existing farm wastes and break or cover crops, AD enables farmers to diversify their revenue streams and reduce input costs.
“Farmers benefit from government support for the green energy, while the biofertiliser can be used in place of expensive chemical-based alternatives, improving soil quality, crop yields and availability of nutrients.”
Greenhouse gases
The spokesman added: “In terms of wider benefits, AD has the potential to generate about 30% of the UK’s domestic gas demand (reducing greenhouse gas emissions by 4% in the process), recycle nutrients essential to food production and create about 35,000 jobs.
“The Committee on Climate Change has clearly stated that the UK will not reach renewable energy targets without a substantial contribution from bio-energy, and AD can deliver that in a sustainable way.”
NFU chief renewable energy adviser Jonathan Scurlock said it would “nonsensical and impracticable” to remove SPF for those producing crops for AD.
“Basic farm payment is a field subsidy for all farmers, it is not about coupled support. The NFU is supportive of the idea that farmers should be able to choose how they farm and what to grow – non-feed produce or feed produce.
“In many cases farmers put a crop in the ground without knowing what the end use will be.”
He added: “The NFU also recognises that renewable energy incentives are designed to support capital investment in renewables.
“They are not expected to artificially subsidise feedstock costs, causing market distortions. Feedstocks such as wholecrop maize are expected to be sourced at prevailing market prices.”
AD plant numbers correct as of January 2015
“They’re getting paid Feed-in Tariffs [Fits], but they are also getting single farm payment, which is really meant for producing food. That’s the biggest sticking point. It is not farming in my view. Farming is and should be producing food.”
Gwyn Williams, partner and land agent at RG and RB Williams, Ross-on-Wye, said ferocious competition from AD plant owners is having a considerable effect on rental values.
“There have been instances of rents that I’m told have been over £350/acre. It is pushing the rents up appreciably, especially where there are AD plants not far away.”
But Mr Williams said there hasn’t been an appreciable increase in capital values, with land in the county already selling for anywhere between £10,000/acre and £15,000/acre.
He added: “We are dealing with some of the best land in the country, so it is very dear here anyway.”
Recently, a sizeable chunk of land in Herefordshire was rumoured to have sold for £17,000/acre to an AD plant owner.
He added: “There’s a big scarcity of land around Ross, big farms grab everything that’s going and there’s generally very little that’s changing hands.”
For tenant farmers in the county the increase of AD is only exacerbating the problem.
George Dunn, chief executive of the Tenant Farmers Association (TFA) said he is receiving complaints from tenants “all the time” and the situation is only getting worse.
“It is a bit of a cancer that’s spreading quite fast.
“We had big problems in the West Midlands, such as Shropshire and Herefordshire to begin with, where we were seeing individuals bidding around £300/acre for land to grow maize for AD production.”
But Mr Dunn said plants in the South East and South West are already waiting for the go ahead.
“We are going to see it spread and the problem is getting worse, not better,” he predicted.
Mr Dunn said farmers and new entrants complain they can no longer secure land for growing crops to feed livestock, because they are “consistently” bid out of the market by AD owners.
Mr Dunn said that in rent reviews landlords are asking for more money because rental values on the open market are being inflated by AD rents.
He added: “Our solution is quite simple. You remove the Fits for crop-fed systems.”
Mr Dunn said AD plants were never intended for crop use. Instead he said it was designed to solve two problems: to produce energy and deal with waste.
“They don’t need the subsidy because they are profitable in their own right.”
The reason AD plant owners shouldn’t receive Fits instead of SFP is clear-cut, said Mr Dunn. “Removing the SFP would be a drop in a bucket,” he added.
Shropshire
Travel north across the border into Shropshire and you’ll find a similar story.
Shropshire council says it has seen a huge spike in the number of applications for AD in the past five years.
Altogether there are 12 AD plants in the county – nine are on-farm and a further two are awaiting approval.
Robert Paul of Shrewsbury-based land agent Strutt & Parker says AD plants here are also having a noticeable effect on land values.
“We have seen increases in land values, principally rental values for forage land.
While I do not envy small to medium-sized dairy farmers looking for additional forage, this does represent an opportunity for landowners as there are contracts out there at £250-£300/acre or more to allow AD plant operators to come in and grow a crop of maize,” he said.
‘We do not see the AD as a long-term home for our crops’
Mark Gethin and his son Matthew from Cardeston, near Shrewsbury, have a 500kW AD plant that is fed with a combination of food waste from their composting business Agripost and agricultural waste from their broiler units.
They decided to build an AD plant to safeguard their compost business when the rules changed for green waste collection to include food.
Matthew said: “We have been making compost for more than 10 years and this was an option to safeguard and complement it.
“It gives us greater flexibility over what waste streams we can accept.”
Electricity is used to feed the poultry and composting units first and any excess electricity is exported to the grid.
“We are using some maize, however, this is not the long-term plan. It is our aim to feeding it on 100% waste in the future and it has been designed and built with this in mind.
“We do not see the AD as a long-term home for our crops – we would rather grow our own wheat for the poultry enterprise,” added Matthew.
Despite this, Mark believes farmers should reserve the right to grow crops for AD because it can help remove market volatility.
“Wheat has fallen from £200/t to £125/t. If you are selling it at £135/t and you’re not making a profit then why wouldn’t you put it into an AD plant if you can guarantee yourself a margin?”
Subsidies
However, he says that farmers should not get two subsidies if they are growing crops to feed their own AD plant because it makes it difficult to compete.
“There are more commercial waste AD units than there is material, so we’re having to purchase feed stocks and you’ve got to compete with someone who’s getting Fits and SFP. It is not a level playing field.”
He suspects nothing has been done to remove SFP because since subsidies were decoupled it has become more difficult to know how much maize or other crops are being grown or what their end-use is.
As ex-dairy farmers, the Gethin family say they are sympathetic towards dairy farmers, especially with the drop in milk prices. However, they say the view that AD plants are pushing up rents is too “simplistic”.
Matthew explained: “There is a feeling that farming has for a long time not reacted well enough to market forces. It is a little simplistic to say that ADs are the only things putting up rental values.
“There are a whole load of reasons for it, including the increasingly larger dairy units themselves.”