Does the SFI provide a good economic alternative to break crops? Grain market daily

• Nov-24 UK feed wheat futures climbed a further £6.40/t yesterday to settle at £225.00/t
• Global markets continued to rise on worries about Russian wheat crops and buying by speculative traders (LSEG). Russian forecaster IKAR yesterday cut its 2024 crop estimate from 91.0 Mt to 86.0 Mt
• In the latest US crop progress report, as of 12 May, spring wheat planting continues to race ahead of average (USDA). Winter wheat conditions were relatively stable with 57% of the crop having ears emerged
• However, the pace for maize planting has slipped further behind the five-year average. Soyabean planting has also slowed compared to average. Last week, USDA reported progress four percentage points ahead of average at 25% complete, while this week it was one percentage point ahead at 35% complete
• Nov-24 Paris rapeseed futures gained €3.00/t to €492.00/t, supported by stronger soyabean and soyabean oil prices. Soyabean markets continue to assess the impact of flooding in Brazil, along with worries about US planting – read more in yesterday’s Market Report

Finding a reliable break crop in the arable rotation is an ongoing challenge. Could Sustainable Farming Incentive (SFI) actions, such as herbal leys or legume fallows, act as a favourable alternative? AHDB’s latest analysis examines scenarios where winter oilseed rape and winter beans are replaced with SFI actions of a herbal ley or a legume fallow.

AHDB carried out analysis looking at how much money farms could receive by stacking various SFI actions. While the SFI will not replace the income received from direct payments, if planned carefully it can provide considerable income for farm businesses. Improvement in net profit (total revenue minus total costs) of the farm business is most likely when land is not taken out of production.

However, this may not always be the case. Poor prices, coupled with the challenges farmers face in growing break crops such as winter oilseed rape, have led to the question: would it be worth establishing a herbal ley or legume fallow in the rotation instead?

The key findings of this analysis are:

• From a financial perspective, it is only worth replacing break crops with an SFI action of planting a herbal ley or legume fallow if they are prone to consistent crop failure
• Only replace break crops with herbal leys or legume fallows when they can be established fairly easily and have a positive effect on the wider farm
• Do not make decisions based on circumstances in one isolated year: an SFI agreement is for three years, so it is important to take a multi-year approach
• Price volatility is an inherent feature of agricultural commodity markets – the SFI can act as a stable component of farm business income and will be especially important under challenging market conditions.

Get the full details of the analysis and findings here.

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