CAP uncertainty and land use change

In my many discussions with clients and their agents, the uncertainty around future funding streams in the Post Brexit and CAP world is very much on their minds, writes Graham Taylor of Pryor & Rickett Silviculture. Making decisions in any land-based business in uncertain times is hard; seeing into the future is exceptionally hard.

An absence of clarity on what will follow with the long-awaited ELMS support is sadly creating inertia and indecision for many. The impact of the major changes to Basic Payment arrangements will be huge on certain parts of the farming sector but it remains unclear in all of this as to which direction to go for many farm businesses. For the first time in my 30-year career, our clients are asking deep questions about land use:

  • What balance of arable/pasture and/or woodland will be right for my farm business?
  • What natural capital provision will I be paid for?
  • How will I make it work?

My instinctive response to all clients with that question is not to look at grant support but to take a long hard look at what the land itself is doing for you, with subsidies removed.

As foresters we have long been used to utilising and growing forestry stands on the most difficult land (wet/steep/heavy and or thin/lean soil types). In fact, UK forestry has built a highly successful and profitable industry out of it.

In many cases the land which is least useful for a farming operation will offer good yields from traditional forestry crops, with the benefit of requiring few ‘inputs’ and early establishment costs covered mainly by taxpayer support. Those landholders with good foresight are already making significant and strategic changes on the balance of their holding based on weaker agriculture and shifting such areas to new productive carbon woodlands.

The long-term yields on offer are very good for those who make the right species choices. While forestry is long term in nature, the accruing crop values do offer very healthy and currently tax-free returns for landowners willing to take a generational view of wealth creation, while the prospects for increasing value of timber as a commodity (already at an all-time high) are making the prospects for significant long term accrual of value even more real. Carbon payments also neatly fill the loss of agricultural income from the land.

New woodland creation not only offers a whole host of natural capital benefits, it also offers the farmer some distinct farming benefits:

  • Shelter – trees and woodland have been shown to enhance the growth of crops in adjacent fields by reducing transpiration and also significantly reduce exposure for livestock
  • Diffuse pollution mitigation – buffering watercourses against fertiliser and pesticide outflow
  • Enhanced property amenity – adding value to the capital value of the farm
  • Sporting benefits – providing additional game cover and increasing drive options.

While land use change does cost money, this is recognised within the current support mechanism, which encourages the planting of new woodland for a whole range of natural capital and income production gains.

Current new forestry planting support mechanisms

Countryside Stewardship

Opportunities to support tree planting are available through Countryside Stewardship, where grants of up to £6,800/ha are currently available to help pay for the planting of a woodland. In addition, a maintenance grant of £200/ha/per annum is also payable for 10 years to help establish the woodland through careful weeding and maintenance. Existing basic payment scheme arrangements are unaffected by choosing the woodland option.

Carbon sales

For several years, the voluntary carbon offsetting markets have been slightly opaque. In a bid to create greater clarity for carbon buyers, the UK Government, through the Forestry Commission, has launched the Woodland Carbon Auction Guarantee scheme (WCAG).

This twice-yearly auction allows applicants to propose projects which are assessed under the Woodland Carbon Code (WCC). Using the WCC assessment tool, an applicant works out how much carbon (Provisional Issuance Units – PIUs) the project is likely to offset over the first 30 years of a planting’s life. An applicant may then submit the project into the WCAG via the auction platform.

The platform allows applicants to bid competitively into the auction for a government contract that provides a guarantee on future carbon that would be delivered from the planting over time. The payments are paid on successful verification of Woodland Carbon Units (WCUs).

The auction is a reverse auction, much like the UK Government bond auctions, and lowest bidders secure the contracts. While prices have varied depending on carbon profile delivery of projects, the WCAG mechanism provides the crucial income gap while a young forest is developing. This income gap between planting and the start of thinning income from 20 to 30 years into a crop’s life has always been the Achilles heel of forestry.

WCAG is one of several ways of selling carbon to the market currently. While successful applicants have the guarantee of a government-backed contract, all project holders are able to sell their carbon to third parties at any stage through the lifetime of the contract.

Woodland management – chalara and timber markets

Since Chalara (ash dieback) arrived in the South East in 2012, it was always likely that it would wreak unfortunate impacts on ash trees in the countryside. From an increase in roadside tree risk to wholesale decline of ash stands in forests, the evidence was available for those who wanted to find out. Initially many people ‘watched and waited’ in slight disbelief that their ash trees were going to succumb to the disease.

For many, sadly, their optimism has been shown to be misplaced as increasingly large numbers of trees have shown themselves prone to infection and have suffered increasing levels of dieback. Sadly, as ash is not a durable timber species, once trees become infected many then succumb to secondary fungal infection such as Armillaria (honey fungus), leaving the trees weakened and prone to uncontrollable collapse and breakdown. While in a field corner well away from the public this is less of a problem, on a road edge or adjacent to property this creates a significant public liability risk and requires mitigation.

Meanwhile with much of the forestry harvesting infrastructure now busily harvesting infected ash, the long-anticipated glut of firewood and ash biomass is beginning to shape up. Market conditions are changing in response to oversupply, with firewood buyers becoming more selective on specification and pricing and a greater volume heading for biomass facilities across the region.

While it is not too late, the biological decline caused by the disease is accelerating a market decline for the product. Woodland owners with ash to deal with need to ‘get a move on’ if further losses are to be avoided.

STOP PRESS

DEFRA has just released the Path to Sustainable Farming: An Agricultural Transition Plan 2021-2024.

This outlines reductions of between 50% and 70% of BPS payments between 2021 and 2024. The Government support saved will be re-directed into a Sustainable Farming Incentive and a range of targeted support mechanisms including landscape-scale woodland and forestry creation.

There is an ancient Chinese proverb which says the best time to plant a tree (or forest) is 10 years ago. The second-best time to plant a tree is now.

<a href=”https://issuu.com/kelseygroup/docs/sef13xmas20/20>Click here to read the full feature on Forestry in the South East

Including:

Sawn and shorn
Nigel Akehurst visits Copford Farm and Sawmill on the outskirts of Waldron, East Sussex, to meet farmer-turned timber sawmiller Alex Gingell.

Turning trees into timber
South East Forestry can often see an opportunity to put the timber of overhanging trees to good use and pay the owner for the privilege.

Gain income from your woodland carbon
The financial benefits of planting trees could help you prosper.

Finding new niches
Woodmancote Agricultural Contractors has excelled in maximising new opportunities and has built up a thriving venture supplying woodchip for biomass boilers.