Stacking options for SFI 2026: Dairy

Updated 14 August 2026

What is the economic impact of the Sustainable Farming Incentive (SFI) on farm businesses? We calculated the likely effect on dairy farm profit levels of stacking SFI actions over a three-year period.

We have also examined the impact of stacking on two other sectors:

• Arable stacking analysis
• Beef and lamb stacking analysis

• The SFI alone is not going to be enough to mitigate the loss of direct payments – this is an intentional feature of the scheme
• The right combination of actions could make up a considerable amount of the shortfall
• Taking part in the SFI can provide extra income for dairy farm businesses
• If farmers select SFI actions that are right for their farm, they can considerably boost the farm’s net profit level
• The farm’s net profit will benefit more if SFI actions requiring land are carried out on less productive or unproductive areas of grassland
• It is likely that actions carried out on unproductive grassland will regenerate the land and make it more productive in the long term
• Dairy farmers need to maximise the potential of every hectare of land on their farm
• The SFI has a greater impact on farms with low gross profit margins compared with those that have high gross profit margins
• The financial benefit of taking part in the SFI is most likely to be felt in years where milk prices are average or below average, or when costs such as feed and fertiliser are higher than average
• Looking ahead, the SFI can play a role in stabilising farm business incomes

Table 1 shows which actions were included along with payment rate and the area of the virtual farm selected for each action.

Table 1. SFI actions with payment rates and area of land in 105 ha dairy farm

Source: Defra, AHDB

In SFI26 there are fewer actions to choose from – SFI26 has 71 actions available, compared with 102 for SFI24 (actions that had low uptake, or were considered to be low value for money, were removed).

Actions such as soil assessment plans, integrated pest management plans and nutrient management plans are no longer available. The SFI management payment, which paid farmers £2,000 in year 1 of an SFI agreement and £1,000 in years 2 and 3, has been removed.

Our analysis of the SFI24 offer showed that the 105 ha dairy virtual farm received:

• Around £4,200 from the management payment and management plans in year 1 of the SFI agreement
• Around £3,200 in years 2 and year 3 (a total of £11,200 over the three-year agreement)

SFI26 agreements are capped at £100,000 per year. There was no cap on agreements for previous iterations of the SFI.

Each farm business can only have one SFI26 agreement (in previous iterations multiple agreements were possible).

The maximum area of land that can be added to rotational action cannot exceed the area of land entered in the first year of the agreement. Under SFI24, it was possible to increase the area on an annual basis or to decrease it by no more than 50% of the area entered in the first year.

There are still 10 limited area actions, but AHW1 bumble bird mix is replaced with AHW7 enhanced overwinter stubble.

Figure 1 shows that the net profit (total revenue minus total cost) of the farm increases by 3–4% over the three-year duration of the SFI agreement.

Figure 1. Effect on 105 ha dairy farm’s net profit level

The gross profit of the 105 ha dairy farm in Figure 1 is £4,061/ha. If we look at a lower gross profit of £2,630/ha, the farm’s net profit would increase by 7% in year 1 of the SFI agreement, 10% in year 2 and 9% in year 3.

The positive impact of SFI funding is therefore greater on farm businesses with low gross profit margins than those with high gross profit margins. Its impact is also greater in market conditions that reduce profit margins, such as periods of high input prices or low output prices.

Figure 2 shows the income that would be received by AHDB’s 105 ha dairy virtual farm after participating in SFI26.

Figure 2. Three-year projection of income received by a 105 ha dairy farm from direct payments and SFI actions

Breakdown of SFI payments for 105 ha dairy farm

As a result of taking part in SFI26, the farm receives £7,400 on average per year over the three-year duration of the SFI agreement. The total income the farm receives from the SFI over the three years is £22,225.

To make the most of SFI, it’s important to maximise the potential of every hectare of the farm and seeing which actions offer the most return.

For example, if the area of the farm that was entered in CIGL1 and CIGL3 had been allocated to CIGL2, the farm would have received a higher income, of £8,000 per year (total of £24,000 over the three-year agreement).

Use our SFI cost benefit tool to see which actions provide the most economic benefit for your farm.

In this analysis, the 105 ha dairy virtual farm benefited from taking part in the SFI to the tune of £7,400 per year in additional income for three years.

Actions on grassland are best done on less productive areas, as this minimises the opportunity cost (income foregone) associated with the loss of grazing potential.   

When applying for an SFI agreement, it is worth considering what motivates you as a farmer: some actions may not give a good financial return straight away but may provide benefits in future if it increases the productivity of your grassland.

Each farm is different – careful planning and selection will help businesses to maximise their economic and environmental potential from the SFI.

From an economic perspective, the SFI cost benefit tool allows farmers to examine the net benefit of actions for their own farms, including assessing the opportunity cost involved.

The SFI is not designed to mitigate the loss of direct payments, but it is a source of stabilisation for farm business incomes. It will have a greater impact for farms with relative lower profitability and in years when there are low milk prices and/or high input costs.

It is in farmers’ interest to investigate which options work for their farm to make the best-informed decision about their business.