3 ways private funding for arable environmental schemes work

As public funding disappears and the future of environmental schemes remains uncertain, growers looking to plug the hole in farm finances are being tempted by private funding initiatives.

Farmers want schemes that offer fair and timely payment, reward a wide range of actions for a limited length of time and have a streamlined administration requirement.

This is according to Louise Rezler, director of commercial partnerships with Soil Association Exchange, who stresses that programmes must address these expectations.

See also: SFI26: What options are open to arable farmers?

“Suspicion and distrust are often rife with new markets, especially where there is a lot of information to communicate,” she says.

“The other main barrier among farmers is the expectation about the level of financial offering available.”

Louise says that private funding schemes fall into three main categories:

1. Industry schemes (price premium)

These are usually operated by processors, who pay an environmental premium on top of the price for items purchased such as grain and milk.

The premium may be linked to yield or quality and the processor passes on the cost of this premium to their customer.

In most cases, the scheme is limited to specific enterprises on the farm such as the Warburtons milling wheat contract through Fronter Agriculture.

2. Offsets/credits

These tend to be operated by third-party vendors or brokers, who pay farmers for environmental outcomes.

The ownership of these outcomes is then transferred to the buyer.

Payments are not linked to the product and agreements may cover specific enterprises or the whole farm, such as the Agreena soil carbon programme

3. Insetting

Operated by third-party scheme managers, farms receive payments from their value chain in exchange for reporting on environmental outcomes.

There is no transfer of ownership. Again, payments are not linked to any product and agreements may cover specific enterprises or the whole farm, such as the Soil Association Exchange Market.

Retail and food businesses engaging with these programmes also have requirements, some of which may be different to those of participating farmers and must be reconciled, continues Louise.

“We know they need programmes that align with reporting regulations around carbon, motivate farmers to take part and are affordable at scale.

“This last point is where there can be trade-offs – there has to be supply chain cost sharing if possible.”

In contrast, farmers are incentivised by competitive payments that are aligned with costs, made either upfront or in a timely fashion, reveals Louise.

“They also want the flexibility that comes from support for a wide range of actions and a limited contract length rather than a long-term deal.

“Minimal auditing and paperwork is also essential; the administration must not be too onerous.”

Challenges that have been recognised and overcome as schemes have been unveiled are dealing with preconceptions, accepting that some administration is required and that impact measurement is constantly evolving.

“We’ve also seen the need for a holistic approach and wider scope.

“Many budgets have focused on carbon outcomes, but there are a limited number of individual regenerative actions with a net carbon benefit.”

Louise Rezler was speaking to Farmers Weekly at the recent Base-UK conference in Huntingdon, where the theme was growing without government support.