What the rapid take-up of SFI Window 2 tells us about farm business planning

The Sustainable Farming Incentive (SFI) has generated extensive coverage and questions from farm businesses in recent days. We recognise the disappointment and uncertainty for businesses that were unable to submit an application before the latest window closed, particularly where SFI formed part of their forward planning. 

Our role as an independent, impartial body is to bring together evidence, insight and analysis, explain what developments mean in practice and help farmers and growers make informed business decisions. We have therefore examined what the figures and timing mean for farm business planning, and how we can help businesses assess options.

The SFI 2026 application Window 2 was open for approximately six hours before the full £253 million budget was allocated. With some minor exceptions, farmers who missed the window will now need to wait until 2027 to apply for a new SFI agreement.

Those that started but did not submit their SFI applications will be contacted by the Rural Payments Agency (RPA) directly as some may still be able to complete their application.

The £253 million pot available included the original £180 million allocated, an additional £50 million announced by the Prime Minister in August, £20 million added by Ministers in anticipation of high demand, plus £3 million unallocated from SFI 2026 Window 1.

The rapid take-up of SFI 2026 indicates the significance many farm businesses attach to the scheme as part of their income and environmental planning.

More than 70% of the 12,200 agreements submitted on Tuesday came from applicants with an existing ELM agreement expiring on or before 28 February 2027. This was the first opportunity for those businesses to apply for a new agreement before their existing agreement ended.

Our analysis continues to show a challenging and volatile operating environment for many farming businesses. International conflict, animal disease and extreme weather can affect input costs, output prices and production risk.

After two difficult years, squeezed margins and losses have also created cash-flow pressures for many businesses heading into 2027. Although Environmental Land Management (ELM) schemes were not designed to replace direct payments, their multi-year payments can form an important part of farm business income planning.

Feed, fertiliser and fuel costs remain important considerations for farm businesses, alongside growing climate-related risks. In this context, SFI payments may be one factor in business planning, cash-flow forecasting and investment decisions over a multi-year period.

AHDB’s role is to help farmers assess these interactions alongside market returns, production costs and the requirements attached to environmental delivery.

Ministers have publicly committed to maintaining the main scheme design for the remainder of this Parliament, with SFI planned to reopen for applications in 2027.

The 25-year Farming Roadmap, published earlier this year, sets out the Government’s ambition for a sector that produces food with fewer inputs, lower emissions and reduced environmental impact. ELM schemes, including SFI, are identified in the Roadmap as part of the Government’s approach to that ambition.

Looking forward, further changes to the ELM offer are expected for 2027. The Farming Roadmap makes clear that funded actions through the ELM scheme will become increasingly targeted for impact, including spatial targeting; for example, removing actions which become established practice or tweaks to actions/payments to deliver value for money.

For farm businesses, the timing and detail of future funding and application guidance will affect planning for subsequent rounds.

Defra has said it will explore alternatives to a first come, first served application process for SFI in 2027. We will explain and analyse further information as it becomes available and explain the potential implications for different farm business circumstances.

We will continue to provide independent evidence and analysis on SFI and wider ELM schemes, including their potential financial implications for different farm businesses.

Our assessments of SFI payment-stacking options and newly published SFI cost-benefit tool can help farmers compare options, test how payments and delivery costs could affect their business, and identify questions to consider before the 2027 application round.

For those unable to apply before the SFI 2026 window closed, we will explain new scheme information as it emerges, update our analysis and tools, and set out the practical implications for different farm circumstances.