Environmental premiums are set to escalate

Opportunities for growers to secure premiums for mainstream combinable crops grown to higher environmental standards are set to increase in the near future, as consumers, suppliers and retailers seek out products with good environmental credentials.

Conservation Grade oats are a good example of where growers secure a premium for undertaking extra environmental measures. And at Cereals 2012, Frontier Agriculture was offering a £12-14/t premium over conventional milling wheat.

Conservation Grade CEO Tim Nevard is seeing this acceleration taking place with a significant upsurge in interest in the idea of sustainable growing from large tonnage brands looking to source grain. It’s a step up from the smaller tonnage commitments from existing licensees Jordans, Burgen bread and Allinson Flour.

“The whole area of sustainable growing is something that the major food brands are looking out for in their future supply chain and they want to make sure they are robust.”

The message from these brands is that consumers are going to understand this in two to three years’ time and they need to be ready and waiting.

“All of our potential licensees are aware that there is going to have to be a premium involved. It is important for everyone to realise that the market is going to be the place that all of us are going to be looking for to sustain what environmental measures we have in the UK. Our environmental measures are excellent at the moment, but they are paid for by the taxpayer. In future, the taxpayer is not going to be the main source – it will have to be the market. For that to happen, you’ll have to engage consumers.”

And with recognition of environmental measures still very low among consumers, there is much work to be done to raise those levels. “We’ll see some of the supermarkets begin to emerge championing an environmental position, which will mean consumers will then understand it and seek out products that are environmentally robust and, therefore, the capacity for them to pay a premium to farmers will also rise.”

It is a complex issue, says Mr Nevard, but he is optimistic that this an area that is beginning to accelerate. “Notwithstanding the recession there is a definite clear interest in it and growers need to be thinking now about doing this. It is an investment in order to meet a future market.”

There will be contracts coming up during the course of 2013 for 2014 planting with interest currently in grains and moving into less specialised wheat such as Group 3 wheats.

Growers who are committed to improving their farm environment need to prepare now. Conservation Grade grower base is increasing with membership doubling in the past 12 months and total accredited acreage is 40,500ha. However, if these bigger tonnages come to fruition there is no way we will achieve them unless word of mouth begins to spread the message, adds Mr Nevard. Membership is dependent on the availability of these future contracts.

Potential members are all vetted and it depends what habitats they currently have on farm and whether they can increase the habitat within the Conservation Grade, explains the company’s Shelley Abbott. “Growers in Higher Level Stewardship need a bit of tweaking and they can fit in quite easily. Growers in the Entry Level Stewardship will take quite a bit more work.”

Membership costs £60 to join then growers will pay an annual audit of £180 and must hold a full membership of an approved Assured Food Standards assurance scheme as well as pass an independent NSF-CMi assessment of the Protocol. Growers need to have a whole farm environment plan and leave 10% of the farmed area to a range of managed wildlife habitats. A two-year probationary period exists with checks made beforehand to ascertain if Conservation Grade standard will be met within the two years. Growers are able to receive premiums in this time, she adds.

Commitment to sustainability

There is an opportunity for oilseed rape growers to extract additional premium as a result of Unilever’s plans to source 100% of its agricultural raw materials sustainably by 2020 under its Sustainable Agriculture Code. This has led to collaboration between the company, ADM and LEAF offering growers a premium over standard oilseed rape.

The contract, offered through ADM is a five-year rolling contract with Unilever increasing the volumes year on year, explains ADM’s Stuart Carpenter. “We are looking for growers for 2014.”

Growers will need to decide if the premium, which Mr Carpenter believes is attractive, is worth it. “Particularly growers in ELS or HLS schemes are finding it pretty straightforward and it is not an onerous thing to fulfil.

“There are likely to be more types of contracts in the pipeline. We will now have within our customer base of famers growing LEAF oilseed rape an amount of LEAF wheat that we can talk to our flour customers about as well and see if we can get some interest from bakers.”

Unilever offering

Existing LEAF Marque growers automatically have access to the contract, but for other farmers they must join LEAF after registering their interest with ADM.

The cost of joining is £72-288 for annual membership depending on farm size and this gives growers access to the online LEAF audit, a self-assessment environmental management tool. The aim of which is to enable them to adopt more sustainable farming practices and to benchmark against other users of the LEAF audit.

Embedded within the leaf audit is the LEAF Marque Standard, 90 control points upon which growers will be inspected, either as a standalone assessment or at the same time as their Red Tractor assessment by NSF-CMi. Red Tractor Farm Assurance is a prerequisite for LEAF.

Growers will need to have a whole farm conservation plan and a water management plan and they will have to measure key things like energy use, nitrogen efficiency per tonne of product and water efficiency.

Growers will not be able to participate in the supply chain until they have passed the inspection, and hold the LEAF Marque certification, explains LEAF’s Jeremy Boxall. “It is possible to get through certification in three months, but I think you need to give yourself six if you are not currently a LEAF member.”

LEAF provides support through training courses, technical guidance and membership seminars to help growers improve their environmental management. Attaining the LEAF Marque standard commands a level of commitment and there will be growers who won’t achieve certification, says Mr Boxall.

In addition to the premium, there are opportunities to improve profitability, says Mr Boxall. “But it is all down to the time and effort they want to put in in terms of analysing their business and changing what they do. We did a survey two years ago and 64% of our members had seen a financial benefit and 86% an environmental benefit.”

This market will develop, says Mr Boxall, and the there is potential for growers to secure contracts for other crops in the future.

“The combinable crop sector has been slow and difficult. This year illustrates the challenge of the commodity market in terms of delivering quality consistently.”

However, decomditising a commodity, making a commodity such as oilseed rape into a sustainable product is the future and the way business is going, he adds.