How farmers can maximise income from growing trees

The UK is planting trees at what is probably the fastest rate ever, but supply is struggling to keep up with that demand.

Defra is trying to address the shortfall through the incentive of grants in an effort to build nursery capacity and develop long-term tree seed and sapling supply.

As part of its Nature for Climate Fund, the government made £5.1m available to growers through the Tree Production Capital Grant, administered by the Forestry Commission, to help new entrants and tree and seed suppliers of all sizes and from any sector to expand and modernise.

Applicants can command up to £175,000 in grant funding to cover up to 50% of the cost of a whole range of items, from transplanting systems and grading machines to improvements to polytunnel infrastructure and irrigation systems, or even seed trays.

With the England Trees Action Plan alone committed to trebling tree planting rates in England by the end of this parliament, the market for saplings seems to be a strong one.

Niche market

Seed and sapling production is a niche business opportunity, but Ashley Lilley, director in the food and farming team at Savills Rural, says if it is done well, with the right soils, infrastructure and grower knowledge, it can work.

However, he advises that, as is true for any new venture, it is essential for new entrants to understand the market.

“If you are going into something different, go in with your eyes open. Do your research, understand what you are letting yourself in for and drill down into the specifics of growing trees.’’

Tree Production Capital Grant

This is the second application window, but with one major change this time around – the minimum grant awarded has been halved to £5,000, which will broaden its reach to smaller growers.

There are two funding streams: Stream A for projects worth between £10,000 and £100,000 and Stream B for projects valued at more than £100,000.

This is to prevent the grant being “hoovered up” by big projects, says Jack Clough, the Forestry Commission’s grant manager for this scheme.

Defra says the grant will enable suppliers to boost production rates “at pace” and has been designed to complement the Tree Production Innovation Fund, which provides support for research projects that enhance UK tree production methods.

The grant is intended to provide a supply of tree seed and saplings for planting projects in England, but growers from other UK regions can also apply if they can demonstrate that their project is intended to supply that market, says Mr Clough.

Applicants can apply for two-year projects, ending in March 2025, but can only make one bid for funding.

More information and how to apply

Growing the right sort of trees to the right size is an important consideration.

Things do go wrong, so Mr Lilley recommends factoring into the business plan a percentage for cancelled orders, dissatisfied customers and bad debt.

Also, growing saplings comes with a considerable lead-in time between the placement and delivery of an order, which can, in itself, be risky.

“A customer might place a big order and there will be a lead time of one or two seasons to grow the sapling that will need to be factored in, but you won’t always be aware of what is going on in the background,” says Mr Lilley.

“For instance, the customer might be applying for a grant, but doesn’t get approval, therefore no longer wants the trees and cancels the order.

“At face value everything might look fine, and it probably is, but these are the things that can go wrong. There are unknowns, and those need to be considered.”

Business plan

A business plan is essential, whether one is needed for presenting to the bank or not, and it will need to be completed to the standard of an application to a bank for a loan.

“Do it to the same discipline, because ultimately it is your money that is at stake,” Mr Lilley says.

He also points out that the grant system for trees, from producing seeds to planting, is tricky to negotiate. “If you take it at face value, there are lots of grants around and lots of talk about tree planting,” he says.

“It makes it sound very straightforward, but you should do your homework before applying to avoid disappointment later.”

Whether or not an application is successful can boil down to the basics of the grant-awarding body itself – such as how well staffed and resourced it is, or even whether or not the adviser assigned to the application has a good understanding of how farming operates.

Some applicants suggest that grants administered by the Rural Payments Agency, in particular, can at times be “hit and miss”.

Mr Lilley says although Savills has a good track record of securing grants for clients from different organisations, there is no guarantee of success, so effort put into producing a strong application will pay dividends.

“I always say to people who ask me about applying for a grant to think long and hard,” he says.

“By the time they jump through the hoops, maybe pay someone to help them with that process if they need it, and factor in a time delay cost, they can be better off doing it without a grant, especially if it is for a relatively small one.

“I couldn’t put an absolute figure on it, but if it is a grant at 40% of the cost of the project, it is probably worth nearer to 25-30% net by the time all of that is factored in.” 

If it is a “sensible chunk of money”, he believes it is probably worth the time and effort, but adds: “Think about it in the broader sense, how much effort you are going to have to put in and the net return and benefit you will get from it.”

Changes to tree health scheme

Changes have been made to Defra’s tree health pilot for 2023 to remove the need for applicants to get multiple quotes for felling operations for trees infected by disease or pests.

They can now claim for costs up to a maximum funding cap to fell and chemically kill trees that are considered to be uneconomical without additional support, such as larch and sweet chestnut with Phytophthora ramorum or oak trees with oak processionary moth.

The NFU says this will result in payments being made faster, and will allow swifter action to be taken to halt the spread of tree pests and diseases.

This grant is only open to people who manage trees or woodlands in the north-west and south-east of England, West Midlands and London.

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