AD on Farm Bid

GREEN FOOD PROJECT

HOW TO INCREASE THE PRODUCTION OF

WHEAT IN THE UK

THE ANDERSONS CENTRE

Report by: Project Leader: The Andersons Centre Graham Redman Old Bell House Partner 2 Nottingham Street Direct: 01664 503 207 Melton Mowbray Mobile: 07968 762 390 Leicestershire Office: 01664 503 200 LE13 1NW E-mail: [email protected]

星期二, 03 四月 2018 7:17:14 PM The Andersons Centre The Green Food Project

We have taken all reasonable steps to ensure the information in this report is correct. However, we shall not be liable or responsible for any kind of loss or damage that may occur as a result of use of this report. The Andersons Centre The Green Food Project

CONTENTS

1 INTRODUCTION 1

1.1 PURPOSE: 1 1.2 METHODOLOGY 1 2 BACKGROUND 2

2.1 AGRICULTURE’S SUCCESS 2 2.2 ENVIRONMENTAL LIMITATIONS 3 2.3 SIMPLE COMPARISONS ARE NOT ALWAYS BEST 4 2.4 SUSTAINABLE AGRICULTURE 6 2.5 GLOBAL AGENDA 6 2.6 TOTAL FACTOR PRODUCTIVITY 6 3 SUSTAINABLE WHEAT PRODUCTION 9

3.1 WHY WHEAT? 9 3.2 DIFFERENT TYPES OF WHEAT 10 3.3 WHEAT; A COMMODITY WITH A VOLATILE PRICE 10 3.4 OTHER CROP OPTIONS 11 3.5 THE WHOLE FARM 12 3.6 PRODUCTION AND PRODUCTIVITY 14 3.7 USING POLICY TO CHANGE PRODUCTION 15 3.8 LIMITING RESOURCES AND LAWS OF DIMINISHING RETURNS 15 3.9 REDUCING INPUTS PER TONNE OR PER HECTARE? 17 3.10 INTENSIVE FARMING WITH FEWER RESOURCES 18 3.11 BEST ALLOCATION OF RESOURCES ~ EXPORTING EXPERTISE 19 3.11.1 Competition for Land and Other Non-Renewable Resources. 20 4 ARABLE FARMING PERFORMANCE 22

4.1 INTENTIONAL FACTORS AFFECTING THE YIELD OF WHEAT 22 4.2 RANGE OF FARM PERFORMANCE 22 4.3 RANGE OF WHEAT GROWING PERFORMANCE 23 4.4 DO HIGHER INPUTS MEAN HIGHER YIELD? 24 5 BARRIERS TO IMPROVEMENT 28

5.1 INTRODUCTION 28 5.2 LIFESTYLE FARMERS 29 5.3 BALANCE SHEET 30 5.4 POLICY CONSTRAINTS 31 5.5 THE SINGLE PAYMENT 31 5.6 CROSS COMPLIANCE 34 5.7 OTHER POLICIES THAT DISCOURAGE OPTIMAL ALLOCATION OF RESOURCES 35 5.7.1 Ecological Focus Areas (EFA) 35 5.7.2 EC 91/414 35 5.7.3 Genetically Modified Crops 35 5.7.4 Pesticide and Fertiliser Tax 36 5.7.5 The Policy Process 36 5.7.6 Policy Policing 36 5.7.7 Global Trade Deals 37 5.8 SKILLS, TRAINING AND KNOWLEDGE TRANSFER 37 5.9 AGRICULTURAL COLLEGES AND LEARNING 37 5.10 THE INDUSTRY SUPPLY CHAIN 38 5.11 DRIVING CHANGE THROUGH THE CONSUMER 38

Contents The Andersons Centre The Green Food Project

6 RAISING SUSTAINABLE INTENSIFICATION OF COMBINABLE CROP FARMING 40

6.1 THE MANAGEMENT PERFORMANCE QUARTILES. 40 6.1.1 Lower Quartile 40 6.1.2 The Upper Three Quartiles 41 6.2 MANAGEMENT AND TECHNICAL IMPROVEMENTS 42 6.2.1 Irrigation 42 6.2.2 Use of Straw 42 6.2.3 Tillage Practices 42 6.2.4 Agronomical Innovation 43 6.2.5 Personal On-farm Research and Development 43 6.2.6 Understanding Efficiencies and Using Technology to Pinpoint Optima 43 6.2.7 Improved Management Practices 43 6.2.8 Stimulating Additional Cooperation44 6.2.9 Other Ideas 44 6.3 IDEAS TO ACCELERATE CHANGE 44 6.3.1 Professional Farming 44 6.3.2 Assurance Schemes 45 6.3.3 The Fertiliser Manual 45 6.3.4 The Agronomy Manual 46 6.3.5 The Recommended List 46 6.4 RESEARCH AND DEVELOPMENT 46 6.5 PROTECTING PRIVATE RESEARCH SPEND 47 6.6 DEMONSTRATING GREAT PRACTICE 48 6.7 KNOWING THE ENVIRONMENTAL COSTS OF INPUTS 48 6.7.1 Non-Renewable Resources48 6.7.2 The Input ‘Exchange Rate’ 49 7 CONCLUSIONS ~ WHAT CAN BE DONE? 51

7.1 BY NON-GOVERNMENT 52 7.2 BY NATIONAL GOVERNMENT 54 8 APPENDIX ~ HOW THE ENVIRONMENTAL CURRENCY MIGHT WORK 57

8.1 OVERLY COMPLEX? 57 8.2 EMPOWERING FARMERS TO USE THIS FIGURE 58 8.2.1 Cross Compliance or Legislative Compliance 58 8.2.2 Linking the Environment with the Market 58

Contents The Andersons Centre The Green Food Project

1 INTRODUCTION

1.1 PURPOSE:

This report is part of the work-stream feeding into the Green Food Project. Its purpose is to identify what sensible changes through policy and economics (farm scale and industry-wide) can be made to raise production of arable farming (wheat) in England without increasing the total level of (non-renewable) inputs per tonne by 2050. The report then briefly considers how this should be encouraged and implemented. For reasons that are discussed, this report considers all combinable crops within the context of the farm system whilst keeping its primary attention on the wheat crop.

1.2 METHODOLOGY

The compilation of this brief study did not allow time to consider the enormous range of publications and contributions already available offering suggestions or evidence to solve the challenge we face of raising outputs without increasing inputs. For example the list of publications published as evidence simply in support of the Foresight report in 2011 amounted to over 100, all listed on the Foresight Report links page. Other organisations such as the Royal Society have also compiled large amounts of work to discuss the issues in hand. Opinions from all sectors and all parts of the globe are helpfully contributing to the challenge we face but out of the huge amount of research, we have tried to focus on the most relevant to arable farming in England.

This study is a compilation of actions that can be considered or explored in more detail, it is beyond this project brief to explore each one in detail but each should be aired for further debate.

The debate and range of possible solutions is so enormous, that any report could not mention all of them. This is the same here but hopefully provides a flavour of the contribution the UK cereals sector could make to raising combinable crop yields by 2050 without increasing the level of inputs for each tonne.

DRAFT 03 April 2018 7:17 PM 1 The Andersons Centre The Green Food Project

2 BACKGROUND

2.1 AGRICULTURE’S SUCCESS

Food security has been on the political agenda ever since the first time two growing communities’ borders converged as far back as 2000BC. It is nothing new. It was arguably even one of the driving factors that led to the start of agriculture rather than hunting and gathering about that time. Thus the issues are well rehearsed and agriculture has always responded with results. However, this is not to say that it is not an important subject today.

The demands on agriculture rise every year. Population growth coupled with increasingly sophisticated food consumption patterns mean that every year, the combinable crop harvest (as well as other sectors of the industry) has to be greater than the previous year, simply to meet the needs of the consumer. A record global crop is necessary annually. Agriculture has never yet failed society large-scale on this charge.

The demands on agriculture are rising at an accelerating speed because other resources are becoming increasingly limited and costly, in particular oil. Governments of the grain exporting nations of the world have turned to agriculture to supply a minimum amount of fuel for transport and other uses. (Agricultural goods have become increasingly affordable compared with oil.) This has strained the abilities of the industry but it has responded and so far met the expectations placed upon it.

For 200 years, forecasters, academics, sociologists and others have predicted a collapse of the farming industry, becoming unable to supply enough food to feed the population. This is yet to happen. The first sentence of the report by the Commission on Sustainable Agriculture and Climate Change states that there is sufficient food produced in the world to feed everybody. Food security is therefore a political problem in distributing it around the world to reduce overeating on one hand and reduce hunger on the other.

In terms of simply meeting the needs of the consumer, agriculture can be celebrated as having been

highly effective.

For over a generation in the UK, food prices have fallen year after year in real terms until the last four years. Food has become more and more affordable. At the same time, the proportion of household expenditure on food has fallen from over 15 per cent (in 1990) to 10.5 percent in 2007 as demonstrated in Chart 1. This cheapness has become a problem as consumers now place a low value on food in this country. Consumers and policy makers in the West have learnt to take food and agricultural produce for granted. However, being of fundamental importance to all voters, when its cost rises, it becomes a political issue.

Food production and supply has continued to drive increasing efficiencies throughout the supply chain, and has rewarded the consumer handsomely in the UK over the years. This trend pf falling food prices in real terms has stopped for the first time in a generation and has caused consternation. Food now accounts for nearly 12 per cent of household income.

Chart 1 ~ The Proportion of Household Income Spent on Food Each Year RPI Weighting of Food 180

160 d n a

s 150 u o h T 140 r e P

s t 130 r a P 120

100 7 0 2 5 8 1 3 6 9 8 9 9 9 9 0 0 0 1 9 9 0 0 0 0 9 9 9

ONS 1 1 1 1 1 2 2 2 2

As the demand for food has increased, the world has responded in the past by opening up new land around the world. This has included turning the New World such as Canada, Australia and South America into major agricultural producers. Also, the intensification of agricultural land has meant the greater use of fossil fuels, fertiliser and agrochemicals. These changes have all put considerable pressure on the world environment.

2.2 ENVIRONMENTAL LIMITATIONS

Human activity releases green house gasses (GHGs) into the atmosphere. The level of green house gasses in the atmosphere changes the climate. Thus, man’s activities are contributing towards climate change. The UK Government’s Low Carbon Transition Plan (2009) laid out plans for all sectors of the UK economy to reduce its emissions. Agriculture, which accounts for only 7 per cent of GHG emissions in the UK is tasked with reducing them by 6 per cent by 2020, this is considerably lower than most business sectors. Government realises that not only does it want the industry to grow but also will provide the resources for many renewable opportunities and also already stores vast amounts of carbon in soils and woodlands.

At the same time, the key finite resources that are used in agriculture are also becoming limited or more expensive to access. These are:

 Land

 Carbon (oil)

 Water

 Minerals

It is not possible to farm without them but the rising use of these resources needs to be curbed. The conclusions of the Foresight Report suggest that whilst farming has to continue to raise its production levels, the amount of these non-renewable resources available should either increase no further or even reduce. This is new to agriculture. This is new to humanity.

Whilst the agricultural industry has demonstrated it is sufficiently organised to be able to continue raising output, there now needs to be a limit on the finite inputs available to farming. Agriculture needs to become more intensive (raising the output per unit of input) and in a sustainable manner (reducing the inputs per unit of output). Intensification is normally only measured against one input at a time in any sector. In farming it is normally land, largely because it is often considered a limiting resource on a farm. However sustainability considers all non-renewable inputs and it is with this approach that we should tackle the new attitude to food production.

Land is one of the limiting resources to consider in this work-stream which means inputs should be measured against outputs (inputs per tonne) rather than against other inputs (inputs per hectare). It is for this reason that throughout the rest of the report, inputs are measured in this way.

Sustainable Intensification:

It follows that if (i) there is relatively little new land for agriculture, (ii) more food needs to be

produced and (iii) achieving sustainability is critical, then sustainable intensification is a priority.

Sustainable intensification means simultaneously raising yields, increasing the efficiency with

which inputs are used and reducing the negative environmental effects of food production. It

requires economic and social changes to recognise the multiple outputs required of land managers,

farmers and other food producers,

Foresight Report p35

2.3 SIMPLE COMPARISONS ARE NOT ALWAYS BEST

According to figures quoted in a report by Chatham House 1 it takes the equivalent of 160 litres of oil to produce one tonne of maize in the US whereas in Mexico it takes a mere 4.8 litres equivalent2. The report does not comment on yield comparison, crop quality, soil and farm type or other inputs involved. This data is now 12 years old and could be outdated now but the likelihood is that more labour is used in Mexico whereas more machinery is used in the US. The two farming systems are being compared using only one (incomplete) measure. The costs of the other inputs have not been included in this figure and the stark headline catching comparison is therefore of limited practical use. We have no idea which other resources are included in the calculation and how much output was achieved by each system. But this should serve to

1 Food Futures, Rethinking a UK Strategy (2009)

2 http://siteresources.worldbank.org/INTWDR2008/Resources/WDR_00_book.pdf (p66) World Bank World development report 2008 from FAO (2000) DRAFT 03 April 2018 7:17 PM 4 The Andersons Centre The Green Food Project demonstrate that comparing single inputs without taking account of the others and the amount of output produced is dangerous.

Case Study in Chinese Sustainable Intensification

There is a target to increase production by 540 million tonnes by 2017, 8% more than the annual 2006-07 target. China has over 60 different agricultural research organisations, with the government increasing investment aiming to use molecular markers to improve conventional and genetically modified varieties of wheat, rice and corn. This genetic technology has specifically looked at improving water and fertiliser use efficiency, improving yield under reduced irrigation, and efficient use of fungicides to generally improve crop management opportunities. Major research has also been conducted in the disciplines of soil management, agronomy and continued genetic improvement and has been joined with the teaching that the best results are achieved when these notions are combined. Research is also being directed at the improvement of yield potential through genetically modified (GM) plants. In 2008 a US$4 billion research programme was launched by the Chinese government with an aim to have new GM arable varieties which can be grown largely on small farms that can feed the nation available by 2020. It is reported that China has spent more money researching into GM than the US. As some members of Chinas government are sceptical of the trade implications surrounding GM crops large amounts of research is also being concentrated in intensification of cropping, increased fertiliser and agrochemical applications, and conventional breeding technologies to increase yields and productivity.

2008 was the year China became a net food importer. Self-sufficiency is a major component of China’s national sovereignty, so that year proved the turning point in agricultural policy. Annual documents are now produced giving a strong policy backbone and driving forward preservation farming methods, starting with basic farmland construction support and farmland protection zones to defend against urban sprawl. All land was categorised systematically to allow better management of larger areas, including the introduction of large ‘livestock districts’ – areas of wasteland, barren hills and other unused land that was not suitable for the production of grain but could support livestock. China also started working with other countries to cooperate on food security and share practices to help further develop agriculture; for example the High Level Action Plan (October 2009) for the UK and China to co-operate on issues surrounding food security including joint investments in agricultural research technology.

The Chinese Government plans to rapidly improve grain logistics by 2015, rolling out major inter-provincial transportation upgrades to improve grain movement from the north to south. Their grain storage capacity will grow by 20 million tonnes and

investments have been made into a real-time grain monitoring and early warning system to tackle challenges of food security. Stabilising grain prices is seen as the foundation of steady economic growth.

2.4 SUSTAINABLE AGRICULTURE

Some reports3 and commentators consider farming a failing industry, unsustainable, and not meeting the needs of the consumer. Any farmer who has been farming the same land for five generations (and there are several) can demonstrate a form of sustainability that few other businesspeople can. Sustainability has a different meaning to whoever you ask. Farms are businesses. The first definition of sustainability to a businessperson is the ability to stay in business from one year to the next which means ensuring a profit is made for reinvestment. To do this, resources such as land available to the farmer need to be protected and maintained.

The sole failing of agriculture (along with almost all other industries) is that it consumes non-renewable natural resources and has contributed towards climate change. This is the problem that everybody needs to tackle. Climate change is a new twist to the longstanding concerns of food security. The Foresight Report highlights the change in mindset required in agriculture to adopt practices that take account of climate change and the depleting non-renewable resources.

2.5 GLOBAL AGENDA

The opportunities for agriculture in raising its productivity, especially of arable crops, holds the potential, if managed by strong political drive, to make major contributions to feeding the hungry throughout the world, halting the removal of rainforests and making some contribution towards tackling climate change. This all sounds very grand, and without strong leadership, this will simply lower the cost of food in the West, open up the chance the raise biofuel production even further by the exporting nations, and allow us the chance to ignore the immoral levels of food waste taking place around the world. The strength of leadership required to see these transitions through to the benefit of everybody is immense.

2.6 TOTAL FACTOR PRODUCTIVITY

It has been documented that the rise in overall outputs of agriculture in the UK has stalled (summarised in Chart 3 ~ Total Factor Productivity), and in the arable sector we can see that in the yield data of most combinable crops. Wheat Yield for example has stopped rising as demonstrated in Chart 2. However, Chart 3 describes an interesting phenomenon that shows that UK agriculture does continue to become increasingly efficient year on year. The chart covers a dataset from 1973 to 2011 showing the Total Factor Productivity of UK farming. This is the way in which inputs have been allocated and turned into outputs; a measure of efficiency of farming. It values the inputs and outputs at the previous year’s values per unit and then calculates the total cost changes. Therefore, the changes in the lines are accounting solely for changes in the total physical amounts of the inputs and outputs rather than any impact of change in prices.

3 Such as the Chatham House Report DRAFT 03 April 2018 7:17 PM 6 The Andersons Centre The Green Food Project

Chart 2 ~ GB Wheat Yield

7.0 e r

a 6.0 t c e H

5.0 r e p

s 4.0 e n n

o 3.0 T 2.0

0.0 5 5 5 5 5 5 5 5 5 5 5 5 5 8 9 0 1 2 3 4 5 6 7 8 9 0 9 9 9 9 9 0 8 8 9 9 9 9 9 1 1 1 1 1 1 1 1 1 1 1 1 2

Source DEFRA

Looking firstly at the double blue line, the total outputs rose steadily in the 1970’s and early 1980’s. Since then total output has not increased, a pattern that fits neatly with wheat yield. The second line to consider is the dotted green line. This demonstrates that in the period when output was rising, inputs were steady, not really changing from one year to the next. This means that farming was turning inputs into outputs in a steadily more efficient manner; productivity was rising. We can also see that in the second half of the chart, when output had stopped rising, inputs actually fell. In other words, although total production did not rise, productivity has continued to increase. The solid red line brings both inputs and outputs together to calculate the Total Factor Productivity. We can see a long term increase of about 50 per cent since 1973 but only about 1.5 per cent per year.

In summary, the first half of this chart could be referred to as Sustainable Intensification, whilst the second half could be Sustainable Extensification. In simple terms though, the major factor that has accounted for the decline in inputs as outputs have remained steady is labour. This is not considered a non-renewable resource. The challenge of agriculture is to achieve a rising red line through efficiency grain s from the non- renewable natural resources and a rise in output. This should be the measure of success, bringing all together in a single chart including water, carbon, minerals and land. Carbon is not directly measured on farm of course, but it is the ultimate finite resource of several inputs such as oil based agrochemicals. There is also a series of conversion factors to measure other greenhouse gases as carbon equivalents, so the nitrous oxides emitted in the manufacture and use of fertiliser can also be measured in this way.

Chart 3 ~ Total Factor Productivity

160 150 140 130 0 0 1 120 =

7 110 9 1 - 100 x e d

n 90 I Final Output at Market Prices 80 All Inputs

70 Total Factor Productivity 60 5 7 9 3 5 1 3 9 1 7 9 3 1 7 9 5 7 3 5 1 1 7 7 7 8 8 9 9 9 0 0 0 7 8 8 8 9 9 0 0 0 9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 Source: DEFRA

3 SUSTAINABLE WHEAT PRODUCTION

3.1 WHY WHEAT?

Wheat covers a greater area of arable land than any other crop in the UK and, at least until recently, has been considered the highest gross margin of all the ‘broadacre’4 combinable crops. There are some combinable crops with higher gross margins but these have small markets so are grown chiefly on contract on restricted areas. In recent years, oilseed rape has, on many farms, generated a higher gross margin than many wheats in the light of rising demand globally for vegetable oils and meals because of changing eating habits and biofuel policies encouraging the use of rapeseed oil in the production of biodiesel. However, Chart 4 demonstrates that whilst the oilseed rape area has risen dramatically since the 1980’s and nearly matches total barley area, the wheat cultivated area is still clearly dominant in the UK and remains steady at slightly below 2 million hectares. So if output of any UK crop can be increased, the impact from wheat would, at least in the short term, be the greatest. If only one crop is to be considered, at the moment it should be wheat, although it is impossible to single out one crop from a rotation as they are so closely linked.

Chart 4 ~ UK Combinable Crop Area Change

1,500 a h

0 0 0 ' 1,000

0 6 9 2 5 8 1 4 7 0 3 6 9 2 7 7 8 8 8 9 9 9 0 0 0 0 1 9 9 9 9 9 9 9 9 0 0 0 0 0 1 1 1 1 1 1 1 1 2 2 2 2 2

HGCA & PGRO Wheat Barley Oats Oilseed Rape Pulses

3.2 DIFFERENT TYPES OF WHEAT

Combinable crop farming in the UK is an exporting industry, with net exports of all major crops on a consistent basis. However, the UK still imports as much as 900,000 tonnes of wheat for milling into bread flour every year, regardless of UK harvest size or quality. This is essentially ‘hard wheat’ and high protein

4 Broadacre is the production of grains oilseeds and protein crops on a large scale. DRAFT 03 April 2018 7:17 PM 9 The Andersons Centre The Green Food Project wheat that comes predominantly from North America5. It has a higher specification than the NABIM6 Group 17 milling wheat. In the last 3 years, the UK has been cultivating limited amounts of hard spring wheat under contract to a miller (Hovis). This might decrease the absolute minimum import requirement. However, the bulk of the UK crop should be considered as a different crop to the imported hard wheat and so imports will remain unless this very specific contract grows to replace the import requirement. It is thought this is unlikely in the short term.

The market has made room for the supply of such ‘novel’ crops and other crops. As the miller who sources all his wheat from the UK gains a unique selling point and subsequent margin and this should be encouraged. However, the UK is not yet as well suited to producing such crops as other parts of the world on a large scale. If the market decides it has an opportunity, then it will explore it. Encouraging the cultivation of other crops should not be fuelled by high levels of policy support because, it is more important for the UK to grow what it is good at and import what it is poorer at. This does not mean excluding all novel crops in the future especially if it simply involves importing expertise on a crop, but it does mean letting the market decide which crops are more suited to be grown at home.

3.3 WHEAT; A COMMODITY WITH A VOLATILE PRICE

Wheat is a commodity. This is an item where each unit is valued according to availability and specification, with no regard of its origin or producer. Changes in demand or supply anywhere in the world affect price. Selling grain from a region of surplus to one of shortage is easy, and levels supply with demand. This therefore brings prices of all regions closer together. Thus a world market operates and prices are global. Cereal farmers are therefore exposed to the vagaries of a fast moving and often unpredictable market. Wheat farmers have minimal scope to add value to their crop other than to be well presented to the market and meeting their merchant’s storage and specification requirements.

If prices did not move, the producer would have no clear indicator of what the market demanded and how badly. Indeed vice versa, the consumer can also tell from price what is available and in surplus. This keeps supply and demand in balance. These price movements attract investors to speculate on these markets. Speculators’ interest is solely to trade because they consider the price will move and will then square their position again later. Speculation can be considered short term supply and demand changes. It can therefore move market prices considerably and suddenly.

Volatility is sometimes considered dangerous to productivity because the unpredictability of price changes, coupled with the enormous variations is understood to prevent farmers from investing. However the arable farmer receives annual subsidies which hugely reduce the effect of price volatility and raise overall profitability.

5Dark Northern Spring (DNS) wheat and Hard Red Winter(HRW)wheat

6 National Association of British and Irish Millers

7 NABIM categorises wheat into 4 groups; Group 1 is the highest specification bread making wheat, Group 4 is feed wheat. DRAFT 03 April 2018 7:17 PM 10 The Andersons Centre The Green Food Project

Should Volatility be Kerbed?

Some have called for government(s) to curb price volatility in order to provide farmers with greater price reliability to plan his business and raise productivity. Suggestions to kerb speculators freedom with futures contracts (paper based derivatives linked to and affecting the price of the physical wheat), for example by only being able to ‘go long’ (own grain before you sell it) rather than ‘sell short’ (sell grain before owning it then buy it before delivery date). Agricultural prices tend to be higher on average because of the additional volatility so the arable farmer would be more inclined to lose out in the long term. Furthermore, a trading restriction in the UK would not affect speculative trades on other markets in other countries. Indeed, only a small proportion of grain trades are undertaken on the UK (LIFFE) market and overseas markets affect price volatility globally.

In summary, imposing restrictions on speculators from investing in agricultural commodities in the UK will have no impact other than to draw investors away from the UK market, losing the City trade.

3.4 OTHER CROP OPTIONS

In many other countries, maize is the main combinable crop. This is not the case in the UK. Maize is not well suited to production in the UK climate and so yields are relatively low (about 5 tonnes per hectare of grain). Indeed, in terms of energy harvested per hectare, wheat outstrips maize (refer to Table 1). In many other countries maize yields are at least double what is regularly achieved here (demonstrating why maize is so critical on a global stage). Changing varieties and improving technology means the potential for increasing maize yield appears greater than wheat over the long term. Indeed, In 2011, the Netherlands harvested an average yield of 12.2 tonnes per hectare, France 10.4 tonnes per hectare and Belgium 10.0 tonnes per hectare8. At this yield, the energy (and crude protein) harvested per hectare of maize exceeds that of wheat at average UK yields. This suggests that by 2050 the dominance of wheat in the English combinable crop rotation might have been usurped by maize, especially if the demand for food becomes as urgent as some forecasts have been suggesting.

It is noteworthy that the global consumption of wheat per head is falling annually, currently at just below 100kg per person per year whereas for maize it has now risen to 124kg per head.

The above total wheat and maize consumption figures include all their uses including for animal feed and bioethanol production. The uses of grains vary slightly from one country to another depending on which crops are most suited to grow in each country. For example, as the greatest amount of energy that can be harvest from a field in the UK is currently by growing wheat (refer to Table 1 below), the dominant combinable crop cultivated is wheat. Wheat can of course be used for human consumption for making into bread etc but also as animal feed. The grain maize crop grown in the UK for combining is very small as it cannot be used for making bread (having no gluten). The production of coarse grains, maize in particular, throughout the world is greater than wheat, having a higher yield it is more efficient at harvesting energy. Whilst it is consumed as food for humans (tacos etc), this can be considered a secondary use.

8 Coceral DRAFT 03 April 2018 7:17 PM 11 The Andersons Centre The Green Food Project

Table 1 ~ Energy Harvestable per Hectare from Wheat and Maize

Yield DM ME DM ME UK t/Ha g/Kg MJ/kg DM t/Ha M J/Ha Wheat 8.0 860 13.6 6.9 93,568 Maize 5.0 880 13.8 4.4 60,720

Yield DM ME DM ME US t/Ha g/Kg MJ/kg DM t/Ha M J/Ha Wheat 2.9 860 13.6 2.5 33,860 Maize 9.6 880 13.8 8.5 116,684

Yield per ME MJ/kg ME World DM g/Kg DM t/Ha Ha DM M J/Ha Wheat 2.9 860 13.6 2.5 34,464 Maize 5.0 880 13.8 4.4 60,963

(USDA/John Nix Farm Management Pocketbook)

3.5 THE WHOLE FARM

We also need to bear in mind that the UK arable farmer, is not able to grow simply wheat. Even if the sole requirement was to raise wheat production, other crops could not be simply replaced with a greater wheat area. The farm rotation is fundamental for the farmer to increase his returns and yields, and at the same time minimise the levels of inputs and therefore costs. Sustainable intensification can only be achieved when taking the other (arable) crops into consideration. These are demanded by the marketplace, and if they were not cropped would push their prices up to very high levels (which would be of no benefit to English farmers), whilst depressing wheat prices (albeit by substantially less). Also the food supply chain that has developed from sourcing a variety of home grown combinable crops would also be severely compromised.

As far as the farm is concerned, the combination of crops that makes up a rotation is important because:

 The rotation offers agronomic benefits, higher yields for each crop through minimising disease levels without excessive levels of fungicides. The key example affecting wheat is Takeall which is almost solely responsible for the lower yield of second and third crop wheats. Other crops such as oilseed rape also need a period between crops to allow the land to ‘clean’, adding nitrogen back into soil by using pulse crops thereby raising the yield potential of following crops and reducing the need for as much manufactured nitrogen fertiliser.

 Rotation allows farmer to manage (grass) weed infestations, especially those resistant to herbicides.

 A combination of crops spreads the farm workload for labour and machinery. For example it lengthens the possible harvest period meaning a combine harvester can cover a greater area of crops each season, keeping the farmer’s capital expenditure down.

 Having crops that mature at different times means the critical time period when rain is damaging will spread, lowering the damage level of unwelcome rain at harvest time.

 It lowers the farmer’s marketing risks. For example if one crop price plummets, the others might not.

 Lastly of course, a rotation has clear environmental benefits as has been identified by the CAP reform proposals

This might not be an exhaustive list but demonstrates the dangers of focussing on solely on wheat production would be counterproductive.

Several reports have been written in the recent past identifying the total possible amount of a crop that could be produced in the UK or other defined regions. This exercise has also been undertaken specifically for wheat9. Such an analysis is useful to identify the extremities of what is technically feasible, but it is critical to recognise that these academic extremes will not occur. For example, to achieve the maximum possible wheat tonnage, fallow land (as according to the DEFRA June Census) would have to be cultivated. This land is fallow for a whole host of reasons:

 It might be fallow only for a few days either side of 1 June when the survey is struck and is actually in a productive rotation

 It might have been fallowed following soil damage such as water logging

 It might have been in a rotation with a late harvest such as sugar beet and not been re-drilled with something

 It might be the fallow year in an organic rotation.

 It might be exceptionally infertile land, should never have become arable land in the first place

 Financial problems with the farm

 Other practical issues regarding the farm such as farm sale or probate etc.

 It might be about to be developed.

There will be a proportion of fallow land that could potentially be cropped although this area is decreasing every year with arable fallow land falling year upon year (for both political and economic reasons; both rational). Also, of that land that could be cropped, it would necessarily go into a rotation rather than all be used in wheat production. In fact fallow and set aside land is often taken out of the break crop part of the rotation

The market indicates to the industry which crops are in demand by changing price and farmers manage their agronomic rotational requirements accordingly. This keeps the balance of crops in accord with both their rotational contraints and the market and so an efficient operation is achieved. If the government genuinely does want to raise wheat production at the expense of another crop such as oilseed rape or barley, a very detailed analysis should be undertaken to be thoroughly clear about the impacts it would have on total farm productivity and trade. The policy implemented to make this change would have to be carefully selected.

9 The potential to increase productivity of wheat and oilseed rape in the UK’ Spink, Street, Sylvester-Bradley and Berry 2009, DRAFT 03 April 2018 7:17 PM 13 The Andersons Centre The Green Food Project

Consumption habits would probably not be impacted, simply more wheat would be exported, probably depressing the UK wheat price (making the UK farmer less competitive) and other commodities would be imported, probably increasing their costs. Freight routes would become busier wasting shipping fuel.

We can conclude that for the reasons discussed above, simply focussing on producing more wheat is probably not the most viable option for the UK arable farm, and therefore not the most profitable or sustainable for the UK.

3.6 PRODUCTION AND PRODUCTIVITY

Production is the total quantity (tonnes) of a crop (wheat) that is produced (each year). Productivity is the ability to produce any particular quantity from a limited set of resources.

In looking to raise the level of production in agriculture, it is important to ensure productivity is not compromised. The easiest example to illustrate is from the livestock sector: It is easy to raise production of meat in one year by slaughtering the breeding stock, but productivity is then severely damaged in subsequent years. The Golden Goose in Aesop’s fable represents productivity and the golden eggs represent production. Push production too hard and you will damage productivity (kill the goose to reach the gold and you will have no more eggs).

This sounds simplistic and obvious, but it is worth reflecting on the expectations being placed on the industry. The key thrust of this part of the work-stream is to raise production of wheat. It can be achieved at the expense of a sensible long-term rotation, or at the cost of maintaining soil quality that fifth generation farmers have achieved. It is technically possible according to Spink et al to achieve up to 19 tonnes per hectare of wheat in laboratory conditions and therefore substantially more than 10 tonnes per hectare in field conditions. However, if the soil is then left ‘exhausted’ and unable to return a commercially viable yield the following year, the overall productivity of the farm will have fallen. Thus, raising the proportion of land to wheat, and pushing the potential of crops beyond a sustainable level in terms of the farm’s ability to achieve this yield each year should not be targeted.

Having made these comments, it is clear that there is substantial progress that can be made towards Sustainable Intensification without reaching such compromises to productivity as long as the inputs are managed correctly.

Spink et al (2009) makes reference that “in almost every case, improvement in productivity also reduced GHG emissions in production leading to large falls of GHG costs per unit of production”. This identifies that if a farmer is making good use of inputs for financial purposes (including land), then he will be allocating them only when there is likely to be a return to his farm business. His focus has been to raise profit (financial sustainability), but at the same time, as the input generated a response (for example in yield), the amount of input per unit of output also falls (environmental sustainability) and the yield per inputs goes up (intensification).

3.7 USING POLICY TO CHANGE PRODUCTION

It is clear that producing grain and plants uses less non-renewable resources and emits lower levels of GHGs than producing meat products. If more sustainable farms are to be encouraged, it would appear that

DRAFT 03 April 2018 7:17 PM 14 The Andersons Centre The Green Food Project supporting arable farms at the expense of livestock farms might be the way forward. Incentives to encourage arable farming, for example by providing support payments for wheat farmers and not for livestock systems would lower the non-renewable inputs and GHG emissions from the industry quickly. The key fault in this theory though which would make this policy valueless is simply that this would only serve to export the sustainability problem and meat would simply be imported in greater amount from elsewhere. It would also waste a large area of UK farmland as much livestock farmland is not suitable for the arable farming systems because of soil type, terrain or climate introducing resource inefficiencies throughout the industry. This is clearly not an answer.

3.8 LIMITING RESOURCES AND LAWS OF DIMINISHING RETURNS

The most limiting resource is the one that would make the greatest improvement on output if it was increased or improved. It would raise yield more than any other, thereby making the yield over all other inputs greater. Identifying which resources would have this impact on crops would be a most effective route to sustainable intensification. Effectively it is the key to raising technical farm performance. Adding more of another input might have a yield impact but its effect would be lower. For example, using a well timed fungicide in a wet, humid crop which is stressed from disease exposure could increase yields by maybe 2 tonnes (per hectare) and therefore the output per unit of all other inputs (such as land) would go up by 2 tonnes. However, in a year in drought conditions, when the crop is highly dehydrated, a fungicide might have a yield response (maybe a few hundred kg), but it is most in need of water. Irrigation would offer that large (2 tonne per hectare) yield response.

There will then come a point, where any more of that input will make little or no difference. This is because the plant’s needs for it are being met. This reduction of response to marginal units of input is the Law of Diminishing returns. Before the point where no additional yield response is reached, there is a point at which the value of additional yield is equal to the additional input cost. This is the economic breakeven point; any more input will cost more than the return generated from it. Whilst the efficiency of the use of the input has been falling, it has, up to this point remained economical to apply more. Chart 5 demonstrates the first unit of input is most efficiently utilised, but additional inputs continue to add to the overall profitability until the value of the response is as low as the cost of the input. The point at which this economic breakeven point (or economic optimum) is reached depends on the cost of the inputs, the yield impact and the value of the crop so will vary continuously. Refer to page 23 of RB209, the Fertiliser Manual for a more in-depth discussion with regards the response to nitrogen fertiliser.

Chart 5 ~ Marginal Returns; Efficiency versus Profit 10

6 ) £ (

r 4 Response to Input u t e R

d Cost of Input n a

o 0 1 2 3 4 5 6 Income per marginal Unit C -2 Units of Input -4

In this context, it is not always the most efficient operators that are the most profitable because whilst the first unit of resource generates the greatest return, and can therefore be considered a most efficient use of inputs, subsequent applications will still generate a response, albeit smaller. In Chart 5 the solid blue line curves round to demonstrate a declining impact of each successive unit of input applied. However, overall efficiency is measured as the response from all the inputs and adding more of the most limiting resource would raise overall efficiency. If the point at which the environmental breakeven point is met at a different part of the line, the farmer currently has no idea how to measure this. He can measure the financial returns and inputs. If this responsibility is to be passed to the producer, he will require a means of measuring the environmental costs of inputs and outputs. This line of thought is continued in section 6.6 on page 46.

Theoretically, it is possible to continue refining the inputs until the genetic potential maximum yield is achieved. At this point, the genetics becomes the limiting factor. However in field conditions, the weather, soil depth and other ‘uncontrollable’ factors become the limiting long before this point. Furthermore, this is way beyond the economical optimum point.

Chart 6 ~ Price Relationship Between Nitrogen (Fertiliser) and Feed Wheat

g k 1 10 r o f

s y a p

8 t a e h w

r e b 4 m u n

0 9 2 4 6 8 0 1 8 0 1 3 5 7 9 1 9 9 0 0 0 0 0 0 0 0 0 0 1 ------r r r r r r r r r r r r r r p p p p p p p p p p p p p p A A A A A A A A A A A A A A

Another way of considering the return required from the input is to identify the total cost of a unit of input, then calculate the amount of additional output that input should generate in order to ensure it pays for itself. The example in Chart 6 demonstrates this with Nitrogen fertiliser and also how sharply it changes over time. It tells us that in 1998, for a single kilogramme of nitrogen (2.89kg of 34.5%N fertiliser), the field had to increase wheat production by 4 kilograms. This figure has moved between 3 and 13 since then but is currently between 6 and 7. This means that a farmer has to generate 7kg wheat from every kilogramme nitrogen used.

3.9 REDUCING INPUTS PER TONNE OR PER HECTARE?

Emissions must be reduced on a per unit of output basis. Land is one of the (non-renewable) resources, that the Foresight Report has pointed out is not possibly to increase, at least in the UK. This means that reducing inputs per farm would be a foolish approach if it leads to a reduction in overall yield.

It seems easy to tackle the GHG ‘hotspots’ in combinable crop farming, the greatest apparently being nitrogen fertiliser production. But without it, the total yield of wheat (and other crops) would fall substantially. Work is currently being undertaken to continually reduce the emissions released at the point of its manufacture and use, but to impose heavy taxes or constraints on the use of nitrogen fertiliser would not achieve the required outcome of sustainable intensification. Indeed, by using nitrogen fertiliser (or indeed other mineral fertilisers) correctly, the impact on yield is so dramatic, that the other inputs are reduced per tonne of grain. Indeed, as the yield of a crop rises per hectare, the level of inputs per tonne tend to fall, particularly those that are applied on a per farm or per hectare basis. These would include:

 Seed, agrochemicals and other direct sundry items (those applied per hectare)

 Most overheads such as machinery, fuel and labour (those normally applied per farm)

Some inputs would tend to keep rising as yield increases but are substantially fewer and arguably less important:

 Fuel and other machinery costs required for running the grain cart or other tasks that increase as the tonnes increase such as grain drying.

 Mineral (phosphorus and potassium) fertilisers should be replaced for whatever crop is removed.

The Spink report comments that intensification increases the impact on biodiversity as fewer other organisms are likely to survive on that patch of land, but it also notes it would have a lower demand on other land elsewhere meaning biodiversity is probably raised. The impact of biodiversity on the field boundaries should not be impacted at all if managed properly. The fact that a field is being farmed intensively is therefore not necessarily environmentally damaging, simply shifts the biodiversity benefits elsewhere. Greenhouse gas emissions and the use of finite resources fall per unit of grain as the crop yield per hectare is increased. Intensive farming also requires less land on which to produce the crop meaning that other land can be spared from agriculture. By including the fallowing of this land ‘released’ from cropping, (the indirect land use change) the greenhouse gas balance and level of use of finite resources improves substantially more.

The summary of this section is that if it takes additional inputs to raise the yield of wheat and other combinable crops throughout the UK, then this should be encouraged as long as total outputs are greater than the total inputs because, the amount of all inputs per unit of output (per tonne of crop) will decrease. In this situation, more is less.

3.10 INTENSIVE FARMING WITH FEWER RESOURCES

The concept of reducing the amount of non-renewable resources whilst raising the production of agriculture implies that the use of renewable resources should increase. There are several examples where a renewable resource could be better utilised in farming including for examples anaerobic digestate and sewage sludge, manure instead of nitrogen, natural pest management processes such as delayed drilling, seed rates and varietal selection rather than agrochemical inputs and arguably even biofuels in place of fuels. There are also ‘renewable’ resources that, could increase the costs of farming such as increasing labour.

We should take note though, that in order to raise yields from the system of no inputs achieving say 5 tonnes per hectare to the current level of 8 tonnes per hectare then up to the aspirations of a national average yield of 10 tonnes per hectare or even higher, then non-renewable inputs will be necessary as grain intrinsically contains carbon, minerals and water. If we reduced the input levels of agriculture severely and still achieved high yields, the quality of the soil would plummet, making agriculture unsustainable. The focus should be more on the waste of inputs such as the run-off of nutrient, the locking up of minerals, and the release of GHG emissions to the atmosphere rather than the overall level of use. This way, the maintenance of the land quality and therefore the competitiveness of the industry will be maintained.

For example, simply rationing the use of phosphate fertiliser would swiftly damage the ability of the soil to achieve yield. It would raise the availability of the mineral to agriculture in other countries, indirectly subsidising them at our penalty. However, if through technology or innovative management practices, the

DRAFT 03 April 2018 7:17 PM 18 The Andersons Centre The Green Food Project effectiveness of the mineral could be doubled, then not only do we save on cost and raise domestic yield, but we also have an innovation to export. Whilst rationing could indirectly be a way to prompt innovative management practices, they also bear great risks.

3.11 BEST ALLOCATION OF RESOURCES ~ EXPORTING EXPERTISE

The previous discussion identifies the highest yields possible on a farm and the most efficient use of (non- renewable) resources for both farm profitability and the environment requires bringing all resources together in the optimum amounts. This is easily written in a report but difficult to execute. Example of how to calculate these optimal levels are discussed later. Looking at this situation globally, we note that several countries have many times more land than the UK, but lack other resources to achieve high yield on that land. These include water, minerals, soil fertility, logistics to reach and supply inputs etc, and in many cases management expertise. This is demonstrated in Charts 7. Some regions have very large areas of arable land per capita, but do not manage to generate high yields because of the lack of other resources. For example if Australia had a climate and therefore a soil quality as suitable as in the UK, it could generate another 170 million tonnes of grain every year!

The UK is a small island with limited land but achieves amongst the highest yields in the world, largely because the high rainfall climate is conducive to yield (instead of quality). However, we also have some fine farm managers. Some have pondered whether the best use of the management skills in UK farms would be to export them and encourage more farm managers to operate in countries where the environment is good for farming, where there is more space to farm yet there is room for improved management expertise.

Charts 7 ~ Comparison of Land available and its Yield Potential

Hectares per Person Arable Land 2.50

s 2.00 e r a t

c 1.50 e H

o 1.00 i l l i

M 0.50

0.00 l l s e n e a a a y i n a a n n d a a y a a a a i l m a i i i l i i m m e c e z u a n n n o d l a a n i t s r i i i p t o b d a d p a i u t t r a q a n a t s i r t s a i s o s e a n d o n o n h a r r i i I t a m n e u i g t h r I b m t g b l N U n k e S B C o o h e

s k W k r w R e m n l i t m a a r g i m e n u a d o U R B r a h u A E V P a z e a

K A G z t g C e a E A h i C f o d t p n K e r A o t M U o i r n u N E World Bank U

Average Yield of Arable Land

e 10.0 z i

a 9.0 M

d 8.0 n a

7.0 t a

e 6.0 h 5.0 W

g 4.0 a

r 3.0 e v a

s 0.0 e l l s e e a n n a a a a a a y y a n a i a d n a n i i i i i l m m a l m i e c e n u z a l a n n o d n a s t i i n r d b i a p u a i t i p o t d t r q a a s a n i t t r a s s a i o o s e o o n n h d n a r r i I t i m u i g a

e n t r h I b t b m l g T n N S U C k o e h e B o s k

W k R r e w l i m n t a m a m r g i u d e n a o U B R h r E V a u A a P e z a

A K t G z g C

e a E A i h C f o d t p n K A e r o t M U o i r n u N E USDA/COCERAL U

Of course, a proportion of successful farmers are already taking on land in either Mediterranean regions (to increase their opportunities with perishable crops), Eastern European countries (largely to benefit from the opportunity to farm a larger area with the same capital). This also applies to other regions such as South America for much the same reasons. There are also UK-based consultants who are supporting this sector of entrepreneurs, bringing good farm managers, financiers and land owners together to make these things happen.

3.11.1 Competition for Land and Other Non-Renewable Resources.

Competition for limited resources is very healthy; it encourages the user to make more valuable use of it, it pushes the price of the resources up so only those most able to make it pay will be able to afford it Some reports10 talk of the competition between arable and pastoral sectors for land as if this is a bad thing. The fact that there is demand for a commodity means it has a value, and therefore means it is used seriously, and

10 The Royal Society Mitigation report DRAFT 03 April 2018 7:17 PM 20 The Andersons Centre The Green Food Project therefore also means it is used more efficiently. Competition for other resources in the same way not only means that fewer will use them, but those who do will make better use of them.

4 ARABLE FARMING PERFORMANCE

4.1 INTENTIONAL FACTORS AFFECTING THE YIELD OF WHEAT

It is pertinent to note that simply because one farmer is returning a lower yield than another and therefore his level of non-renewable inputs per tonne are higher, does not mean he is a poorer farmer. There are several reasons why one farmer’s yield might differ from another’s. These include:

 The wheat is following another wheat crop. Second wheat are normally about 10 per cent lower yield because of Take-all, a wheat virus.

 The wheat might be a different variety, being grown for the bread or biscuit market. bread wheat normally yields about 10 per cent lower than feed wheat but requires more inputs to keep it clean and high in protein. The farmer receives a premium to compensate for these additional costs.

Table 2 describes how the average national crop yield varies according to both of these points.

Table 2 ~ Wheat Yield Variation Amongst Wheat Types and in Rotation

NABIM Proportion of RL Yields National Area Crop T/ Ha Yield T/ Ha Division Tonnage First Feed Wheat 11.25 39.2 41% 8.45 Second Feed Wheat 9.71 16.8 15% 7.29 First Bread Wheat 10.73 10.5 11% 8.06 Second Bread Wheat 9.31 4.5 4% 6.99 First Biscuit Wheat 11.01 20.3 21% 8.28 Second Biscuit Wheat 9.47 8.7 8% 7.12 All Wheat 100 100% 8.00 Data from The John Nix Farm Management Pocketbook

 Other environmental factors are also clearly relevant including the annual rainfall, hours of sunlight, soil quality and depth, and so on.

This is not an exhaustive list but serves to point out that the yield of a crop and the inputs per tonne of crop are not entirely attributable to management ability but also correct management decisions and the quality of resources available to the manager.

Whist the Foresight report identified that more land is not an option to raising cereal production in the UK, it is noteworthy that almost all the best land in the UK for growing crop is probably already growing crops. In other words, the raising of wheat production by finding more land on which to grow it would lower its yield per hectare and therefore probably lead to a rise in the inputs per tonne generated as yield would fall and inputs to achieve the yield might need to be higher.

4.2 RANGE OF FARM PERFORMANCE

Having said that, the range of performance throughout a sector is immense. The variation of ‘Farm Business Income’ (FBI), the measure used by the Rural Business Research group of universities in their annual farm

DRAFT 03 April 2018 7:17 PM 22 The Andersons Centre The Green Food Project business research, is demonstrated in Chart 8. It demonstrates that cereal farm FBI (profit) ranged from a loss of £240 per hectare for the weakest quartile of farm businesses to a profit of £150 per hectare for the strongest. Clearly this will vary according to the quality of resources and the way in which they are allocated. It is easy to dismiss this variation to soil quality, but a recent publication11 identifies about 60 per cent of the variation is probably down to non-land quality variation, the biggest of these being management ability. The report does not specify exactly how much can be attributed to management ability, but from this report, and from the evidence of range of farm performances seen within a single soil type and within similar character areas, two farms of comparable resources can achieve massively different yields and profits. We make the deduction here that of that 60 per cent variation in performance, the lions-share is because of different management abilities.

Chart 8 ~ FBI Performance, Cereals Farms, 2009/2010

4.3 RANGE OF WHEAT GROWING PERFORMANCE

The DEFRA Cereal Production Survey analyses yield data for all kinds of farms nationally. Chart 9 demonstrates the range of farm yields of wheat in England. The lowest yields will be either written off crops or those harvested for whole crop silage. this is when a crop is harvested with a forage harvester whilst it is still green and leafy. The grain has not hardened and could not be passed through a combine harvester. It is ensiled for the use as an animal feed in the winter months. This means that in June, the area registers in the land use survey, but does not have a grain tonnage to calculate into a grain yield. Beyond those, the range of yield is still immense. The challenge of this piece of work and others like it is to move the entire bell-shape curve to the right. This will involve focussed support throughout the industry with a central push from Government too with policies changing to encourage greater output, not less.

11 Steve Langton (2011) DRAFT 03 April 2018 7:17 PM 23 The Andersons Centre The Green Food Project

Chart 9 ~ Yield Range of Wheat in England

250 Average Yield

200 s g n i

d 150 l o h

r e b 100 m u N

0 0 0 0 5 0 0 0 0 0 0 0 ...... 0 1 2 0 3 4 5 6 7 8 9 ------1 1 1 - - - 0 5 5 5 5 5 5 5 ...... 5 5 5 . . . 2 3 4 5 6 7 8 9 0 1 1 1 Source: DEFRA Cereal Production Survey Yield (tonnes per hectare)

4.4 DO HIGHER INPUTS MEAN HIGHER YIELD?

If we were to assume that all farmers had the same resources and the same land quality available to them, some farmers would manage to generate a considerably higher yield than others. We would also find that those capable of achieving the highest yields are not necessarily using a greater amount of inputs per hectare than lower yielding areas. This is very clearly demonstrated by Chart 10 which demonstrates the total spend on the wheat gross margin in 2010 of all arable farmers advised by Procam, a national agronomy company. The number of hectares is not included for commercial reasons but being one of the 4 largest agronomy companies in the UK, and with a full national coverage, it will be a statistically significant sample. Their results are divided into the top, and bottom 25 per cent by gross margin and the middle 50 per cent. The chart clearly demonstrates that the difference between spend per hectare of all seed, fertiliser and sprays is negligible, indeed with the bottom 25 per cent spending more on some costs that any other grouping. The chart also highlights the yields achieved by each group.

Chart 10 ~ The Variation of Yield and Inputs Between Performance Sectors 250 10 9 200 8 7 s d t l s

150 6 e i o Y C 5 a a H H /

/ 100 4 £ 3 T 50 2 1 0 0 Bottom 25% Average Top 25% Seed Fertiliser Sprays Yield

Data from Procam

It is clear therefore that the higher the grain yield of the crop, the lower the total use of inputs per tonne of grain (inputs per unit output). This is demonstrated in Chart 11 which uses the same data in Chart 10. It can be clearly seen that the ‘bottom 25%’ group spends more on inputs per tonne of output than any other sector, whilst the ‘top 25%’ group, with the highest yield creates grain with the lowest inputs per tonne. Clearly therefore, generating a high yield of grain is not only to the benefit of the environment, but also to the financial gain of the farmer who will be able to produce each tonne at less cost.

Chart 11 ~ The Variation Inputs per Tonne Between Performance Sectors

35 10 30 8 25 d l s t 6 e i s 20 o Y

15 H /

£ 4 T 10 2 5 0 0 Bottom 25% Average Top 25% Seed Fertiliser Sprays Yield

Data from Procam

Clearly, increasing yield makes wheat production more sustainable where ‘standard’ farming systems are used in terms of input use. But would very low input systems in the style of organic farming show a different picture? Organic wheat tend to yield about the same as the ‘very low’ conventional yields and is quoted in the organic farm management handbook as 5 tonnes per hectare. The costs would be far lower, thereby suggesting the amounts of inputs per tonne might be even lower than the high yielding farm systems. This is possible unless the value of the land is included in the calculations. As we have seen that land is a non- renewable resource, it should be included at the current market rate i.e. the rental value (in the absence of an environmental financial figure). All land has been valued equally despite land with organic status potentially commanding a different rent. The resulting charts might look like those in Chart 12. This clearly does not take other inputs such as overheads, machinery and labour into account, but is a useful exercise to compare inputs per tonne of output. It does not demonstrate a clear solution to the organic/conventional conundrum under this analysis. It boils down to the importance of each input and how they can be reallocated to offset each other.

Chart 12 ~ Input comparison per tonne Organic and Conventional

100 9 90 8 80 7 70 6 d l s t 60 e i s 5 o Y 50 C a

t 4 / H /

£ 40 30 3 T 20 2 10 1 0 0 Organic Conventional Seed Fertiliser Sprays Land Yield

Data from Organic Farm Management Handbook, Procam and the John Nix Pocketbook

5 BARRIERS TO IMPROVEMENT

5.1 INTRODUCTION

In the last chapter it was identified that there is a financial as well as an environmental / greenhouse gas gain from improving yields. Higher yields do not necessarily involve higher input usage per hectare (or in many cases land quality), as we have seen, a large amount of the variation is down to management. The obvious question is, ‘if higher yields are in farmers self interest, why do rational farmers not adopt management practices to increase them?

The simplistic answers are firstly, they don’t have to and secondly many think they cannot. These barriers in terms of farm economics and business skills are looked at in more detail in this section. Together they produce the wide range of business performances seen.

Another way to demonstrate the variation of performance between farms is shown in Chart 13. It shows agricultural productivity as a value of outputs per £100 inputs12. The farms that generate a return of greater than £100 are clearly making a profit (including subsidies). It demonstrates that the bulk of farms are indeed profitable but that a substantial amount are not. It also shows that a considerable number of farms are making a huge return on their inputs.

We have already categorised farming in terms of the bottom quartile, top quartile and middle half. We assume the top quartile would tend to be those eager to improve their production techniques and strategy, bottom quartile those that are clearly coasting or regressing.

Chart 13 ~ Use of Inputs to Generate Outputs

14% 2009/10

0% 30 50 70 90 110 130 150 170 190 210 230 250 270 290 310 £ output per £100 of input

12 Note this does not take financial account of unpaid labour or land costs DRAFT 03 April 2018 7:17 PM 28 The Andersons Centre The Green Food Project

It is the experience of those organisations who try to communicate with the farming community (such as the HGCA) for example with information, that as a generalisation, the top and middle performers are more accessible and therefore receptive to new information and ideas. It is also likely that these will be in control of a greater amount of agricultural resources (including land), and that they will account for a majority share of output. Thus the top quartile of farmers probably account for about 40 per cent of arable land, the middle half about 50 per cent and therefore the bottom quartile of farmers have about 10 per cent13.

If the industry was incentivised to be more efficient, it would become more efficient. Efficiency of resources is not only good financially but environmentally.

5.2 LIFESTYLE FARMERS

‘Farming’ is a very attractive pastime for those who are in a financially stable situation. There are several people who have small and occasionally medium size ‘farms’ and operate them primarily for their pleasure and not as businesses. These categories are generally referred to as ‘lifestyle farmers’.

The primary purpose of this group of operators is not to make a living, but for personal enjoyment. Thus, the drive towards efficient agricultural production is not foremost in the operators’ minds. This category has limited commercial drive so will challenge some definitions of ‘farmers’ because farming is a business, which means undertaking land based operations for a profit.

If a profit is not the primary focus of this category, then they will not be operating with efficiency at the forefront of their minds. They will spend more resources than absolutely necessary such as select machinery of preference rather than suitability, or land parcels and enterprises that are maybe not ideal. For this reason, their inefficiencies will impact not only on their profitability but also on the amounts of inputs per unit of output. To demonstrate, DEFRA data shows that out of the 100,000 farmers that claim the Single Payment in England, over half account for only 10 per cent of the land, and produce 4 per cent of the output. It can probably be demonstrated that these farms are consuming high levels of non-renewable resources per unit of output. This section of farming should ideally be separated to identify the true environmental costs of commercial agriculture.

Such separation is not easy; some very small farms are highly commercial operations. Furthermore, some ‘hobby farms’ can be relatively large. The other complication is that many (if not most) farmers have multiple objectives. These include business objectives (such as profit maximisation, stronger balance sheet or repaying debt), professional objectives (such as highest yields in the region, winning cattle in a show) and personal ones (such as lifestyle requirements). This category of farmer is motivated by profit but knowingly allocates resources sub-optimally.

In conclusion, it is probably not possible to separate this category of farms, but it is useful to remember that it will account for high levels of input per unit of output.

13 This is an estimate based on the DEFRA assessment of size and output. DRAFT 03 April 2018 7:17 PM 29 The Andersons Centre The Green Food Project

5.3 BALANCE SHEET

The farming industry is arguably a stronger business sector than almost any others. This is because it has such strong balance sheet figures as Table 3 demonstrates.

Table 3 ~ UK Farming Aggregate Balance Sheet

£ Million 2006 2007 2008 2009 Land & Buildings 131,869 150,892 187,394 176,379 Other Fixed Assets 11,470 13,406 14,952 19,020 Current Assets 11,916 12,938 11,447 11,391 Total Assets 155,254 177,237 213,794 206,790 Total Liabilities 11,127 10,911 11,768 12,040 Net Worth 144,127 166,326 202,026 194,750 Net asset Ownership 93% 94% 94% 94% Tenant's Net Asset Ownership 59% 62% 59% 64%

Information from DEFRA

The figures show that the assets owned by the industry far outweigh the liabilities that it carries with net assets (the proportion of total assets owned by the farmer) at well over 90 per cent. The figure for land and buildings only includes the assets used in the farm business rather than total assets owned by the farmer, so many cottages and other assets might also be owned by the entrepreneur. This has two implications; firstly, having a very low level of borrowing, means that the farmers’ finance costs are exceptionally low, compared with most other industry sectors and securing finance on new investments or even working capital is rarely a problem, if only because the collateral is available to secure the loan.

Secondly, as the farm has such a strong balance sheet, it lowers the business exposure to financial risk (such as selling some wheat at a poor price or having to write off other costs), putting the farm in a safe operating position. If farms fall into financial difficulty, they might be able to sell parcels of their balance sheet such as outlying fields or cottages, or even use the land as collateral to borrow money against it. The fact that land and buildings have been rising so rapidly in recent years (doubling in value in 12 years according to the DEFRA data) has in some cases provided a greater ‘profit’ on paper to the farmer than farming itself.

This exceptionally strong balance sheet is clearly not the case for tenant farmers who do not own land. In these cases, the tenants net asset ownership of around 60 per cent more closely represents their farm balance sheets. Again this is an average figure, so some farms will have weaker balance sheets than this. It is arguable that when a business’s chance of failure rises, the manager becomes more focussed on the task in hand. This is demonstrated by Farm Business Survey data. The Farm Business Survey 2009/2010 Crop Production in England report explains that ‘the owner occupied farms were the least intensive’ and ‘fixed costs were lowest on the tenanted farms’.

Here we can conclude that the strength of the industries balance sheet might be affording it the ability to be less efficient than if it was in danger of financial failure. This section on the balance sheet is merely an observation and makes no suggestion that policy should make changes to it.

5.4 POLICY CONSTRAINTS

The previous parts of this chapter discussed the differences in performance between farms (e.g. shape of the bell-curve). We have demonstrated that it is clearly in the farmers’ financial interest to minimise inputs per unit of output because in financial terms, this is minimising the cost of production and therefore raising the opportunity for profit. It is clear though that for Government to refocus its policy for agriculture on raising productivity, it has to provide the industry with the resources it needs and the incentives to refocus on productivity. There are some substantial policy barriers holding this process back which will need to be tackled.

5.5 THE SINGLE PAYMENT

The purpose of the Common Agricultural Policy (CAP) is multiple. It has evolved since its first implementation in 1962 and morphed from a vehicle initially designed to encourage food production (regardless of cost). It now encompasses income protection, food safety, the environment, biodiversity, animal welfare, rural development, and much more. Some of the objectives already listed are not compatible with the concept of sustainable intensification in agriculture.

Chart 14 demonstrates where farm businesses make their profit14. The chart separates the revenues from farming, the Single Payment, Environmental Scheme income and other diversified income streams. This chart only demonstrates 3 years of data because the dataset changed in 2008/09 making earlier figures less comparable, but other earlier data from similar datasets demonstrate that pre-2008, there was a loss from farming before the Single Payment (or previous coupled support scheme) in eight of the previous ten years.

14 This is measured as the return to the farmer for his resources including time and capital. DRAFT 03 April 2018 7:17 PM 31 The Andersons Centre The Green Food Project

Chart 14 ~ Farm Business Income in England

Sources of Farm Income 3,500

3,000 300 380 2,500 280 295 30 360 20 2,000 280 30 1320 1,500 1500

1,000 1520

500 980 785

£ 0 2008/09 2009/10 2010/11 Agricultural Income Single Payment Direct Subsidies Agri-environment Diversification

Farm Business Survey

There are two important points to take from Chart 14. Firstly, note the volatility of profit from farming, particularly as this includes all farm types and all performances. The variation from one year to the next is considerable and, solely from farming, profit varies almost 5-fold in the brief 3-year period. Note in comparison how little the Single Payment varies. This moves almost only because of exchange rate fluctuations between the pound and euro. It is simple to receive, low in cost to meet the conditions and is an ‘as of right’ payment rather than through competitive application. Farmers can rely on the Single Payment.

Note also, that the Single Payment accounts for the largest component of agriculture’s annual profit each year. For those farms that are working efficiently and making high profits, this will account for a smaller component of overall profit, whilst for inefficient farms or those that do not make full use of their resources, it will be substantially higher. In other words, the Single Payment is a more important part of farm profitability for the less efficient farms as it is a fixed payment per unit of a single resource; land (a payment per hectare).

On the farms that make no profit from farming, the Single Payment will represent their profit meaning it keeps them in business. This is good on a personal basis for that farmer. However, if more farm businesses failed (bankruptcy), more resources would be released to be better utilised by the better farm managers. Farming as an industry is not under pressure to raise its efficiency as a result meaning that the industry can support inefficient farm practices.

There are currently very few forced land and farm sales that take place in the UK. Profitability in (arable) farming in England is currently reasonable and even the poor quality farmers are making a return once all

DRAFT 03 April 2018 7:17 PM 32 The Andersons Centre The Green Food Project the subsidies are accounted for. The farmer is therefore not being encouraged by the Single Payment to raise technical efficiency or take action on growing their business into suitably sized units that make fuller use of ‘chunky’ resources or to be correctly structured. For example, as you cannot buy ‘half a combine’ it makes sense to have the right amount of land to justify one. But, there are several very small farms that justify a piece of machinery whilst some very large ones find other, cheaper, methods of getting the job done and therefore probably making more money, expending fewer resources and therefore also contributing towards sustainable intensification. Indeed, there is currently an incentive to encourage farmers to remain small because the first €5,000 of Single Payment is not modulated (taxed). This is a form of capping policy to favour small scale farming. The income protection role of the CAP does not support the need for sustainable intensification and offers greater support to weaker farmers.

We have demonstrated that income support slows the rate of structural reform and detracts from the need to be technically progressive.

Success is meaningless if there is no chance of failure.

Robert H. Schuller

This means that the Single Payment hampers the ability of the industry to raise yield and lower inputs per tonne. Its removal would encourage the entire farming industry (especially the lower quartile) to look to improve its technical and strategic performance. It would lead to business failures, forced land sales, farm sales and the release of other valuable agricultural resources back to the industry. It would be a personal trauma to those businesses that fail but would be a move to a better structured industry within a short period of time.

Any removal of the SP or subsequent policies would have to be undertaken on a pan-EU policy change so as not to make the UK farming sector uncompetitive. This policy, if undertaken without necessary prior thought would also scour parts of the UK and EU of a large proportion of farms leading to land abandonment. In the UK this would be particularly in the uplands. Defra, other Devolved Administrations and Member States would need to plan for this and devise carefully thought through initiatives to account for it and offset the effects in fragile areas if this was considered socially and environmentally desirable.

Sustainable intensification is not, at the moment, what EU politicians (or tax payers, interested parties or stakeholders) seem to want from agriculture. Policies focussed on greater input efficiency and higher yield farming would probably lead to fewer, bigger farms with larger, squarer fields. It could mean the number of people working in agriculture would fall faster than the trendsof recent years, and might also mean that hedgerows and so on are (re)moved without thoughtful policy construction. Careful impact assessments on the effects of substantial changes to the local natural and economic environment would again be required with policies to protect what was deemed valuable whilst not holding back the passage of progress.

If the Single Payment was removed, the urgency for farmers to reorganise would increase. Collaborative business with neighbours would become necessary rather than simply more profitable. The territorial nature of land-based farming means that independence is endemic in the industry. The opportunities for businesses to remove costs (and therefore inputs per tonne) and access better resources and knowledge transfer/ skills

DRAFT 03 April 2018 7:17 PM 33 The Andersons Centre The Green Food Project are considerable throughout the sector. It is worth noting that, being land based, farm businesses cannot relocate like most other industries. This means that maximum efficiencies are difficult to achieve and allocation of resources will often be imperfect. We also note that surplus resources are also built into farm businesses to reduce exposures to risk. For example larger than necessary harvesting and tractor power is common on arable farms in case weather conditions shorten the harvesting period.

5.6 CROSS COMPLIANCE

On the assumption that the Single Payment (or its proposed successor the Basic Payment) is here to say for the foreseeable future, the alternative lever available to policy-makers is to increase the cross compliance requirements with sustainable intensification initiatives in arable farming. (Note this report is only focussed on combinable farms. Other sectors may achieve better returns per unit of output in less intensive systems.) As before, changes of substance should be taken across all Member States to prevent the fall of competitiveness in the UK, even if implementation policies varied according to local requirements.

Cross compliance is the best way to reach all farmers especially those who are not ‘engaging’ with the debate. It is easily enforceable and relatively simple to police as the infrastructure is already in place. examples might be

 Ensure attendance to a minimum amount of hours of Farm Advisory Service events to meet the practical implications of lower GHG emissions per tonne.

 Make attendance at a FAS event compulsory each year

 Maintaining an annual resource inventory, including machinery,

 Keeping a table of inputs per unit of outputs.

Many of these ideas do not in themselves lower the inputs per tonne of outputs, but only once they are monitored with such focus, will any actions be implementable to challenge current practice.

5.7 OTHER POLICIES THAT DISCOURAGE OPTIMAL ALLOCATION OF RESOURCES

When agricultural policy changes, the industry adapts well, but we are entering a change in overall philosophy from holding back production to looking at ways to increase it. This has been stated in political rhetoric which suggests a considerable ‘U’ turn in policy. However, there are several specific policies, both current and proposed that are holding the farmer back from fully efficient sustainable intensification and look likely to continue. Withholding resources from a farmer is bound to reduce the efficiency with which he can bring them together to generate an output. Examples include the former set-aside. Nothing is more blatantly a policy to reduce output on a farm than to withhold arguably the most limiting input on most farms other than capital. It was designed as a production control.

5.7.1 Ecological Focus Areas (EFA)

The proposed Ecological Focus Areas (EFA) are not designed to be a production control but will act as one if implemented in its proposed state. Removing 7 per cent of arable land from all farms (except organic) will indirectly have the same effect. The RSPB has noted that set aside had very little environmental benefit as it was not managed as such, and the same would be the case here. Far better, they say, would be the benefit to the birdlife and other wild life to have one per cent of un-cropped arable land, managed intensively for the benefit of the birds and other biodiversity. This would encourage more bird and wildlife and also release more resources for greater agricultural outputs.

5.7.2 EC 91/414

The next policy that holds valuable resources back is 91/414/EEC, the restriction of use of agrochemicals in the EU. This policy has effectively removed as many as 20 active ingredients from use in the UK, 15 of which are used in the production of combinable crops. The reason for their removal concerned the uncertainty of health impact of the users. These products are being removed from circulation as their registrations expire.

The policy has been contentious from the start and many claimed at the time (and continue to) that they did not exhibit any threats to operators when used correctly. It is not the place of this report to make judgement on the science, but to point out that it has effectively removed several products from the farmers selection of resources to choose from. Other products are available but at either higher cost or lower efficacy. The Efficiency of the farmer to do his job has been impacted and yields have consequently been held back.

5.7.3 Genetically Modified Crops

The EU’s policy on GM crops is clearly now an issue of personal morality rather than health or environmental concern. Some veer towards the ethics of whether crops should have ever been manipulated in such a way to create new traits, preferring the traditional but now very modern methods of non-GM genetic manipulation. Others consider that GM technology offers a method to reduce famine in developing countries to facilitate farming practices with fewer inputs and agrochemicals by reducing inputs such as herbicides and insectcides. This is not the place to start such a moral debate. However, there is no doubt that the hesitancy with which the EU manages the GM policy holds back a powerful route to sustainable intensification, food security and feeding a billion hungry people. The asynchronous authorisation process of GM varieties for clearance for cultivation or use in the EU is slow and holds back the consumption and trading of GM varieties, but it is the EU’s Council of Ministers that have remained unable to allow the cultivation of new varieties will probably be holding the EU productivity back now. Sustainable intensification would probably be substantially facilitated if the EU had access to cultivate crop developed using this technology.

5.7.4 Pesticide and Fertiliser Tax

Other policies that have been considered might also be accused of disturbing the best resource allocation. The pesticides tax that was discussed at one point would be another form of policy that hampers yield

DRAFT 03 April 2018 7:17 PM 35 The Andersons Centre The Green Food Project optimisation. This policy has been shelved but would have challenged yields just as those that have been implemented have.

5.7.5 The Policy Process

The whole policy and regulatory environment has become an increasingly complex network of directives, plans, conventions, reforms and reviews. The process of reaching agreement on changes to policy are now highly bureaucratic, especially following the Lisbon Treaty, whereupon the European Parliament has gained authority to negotiate the CAP. It is therefore expected that few changes will be made to the CAP proposals, despite much of it being unsuitable to UK agriculture, and definitely not designed to support raised output, food security or on-farm efficiency. One example, the complexities of completing the on-farm IACS form has prevented some farmers from submitting claims, caused thousands of disputes by others and costs farmers large amounts of professional fees each year. The recent reform proposals will add to this greatly demanding extra time for farm completions and implementing new rules of questionable benefit.

5.7.6 Policy Policing

Cross Compliance should not hold the sustainable intensification of the industry back. Producers need a stable, consistent, logical and simple political system. Farmers are not against rules per se, recognising that they operate in a system that in of interest and wellbeing to everybody. However it is clear that some of the regulations have sufficiently loose interpretations, that when their policing changed from the Environment Agency to the Rural Payments Agency in January 2012, their interpretations also changed. For example the use of biosolids in agriculture is deemed the environmentally best method of disposing of sewage waste, and is also a fabulous input to provide fertiliser for arable crops without the environmental cost of sourcing mineral fertiliser. It is a win: win product. However, biosolids should not be spread on land where any surplus mineral might cause environmental damage. The regulations concerning the application of biosolids when the soild phosphorus index is above a certain level is ambiguous. It appears the RPA has a stricter interpretation of the regulations than the EA and might cause some farmers to avoid the ‘environmentally free’ resource. This would clearly impact on Sustainable Intensification

5.7.7 Global Trade Deals

On a far larger, global basis, the emphasis should still be on cooperation. Throughout the world, various regions hold different resources, valuable to agriculture. There is little point the English industry trying to produce something at high financial or environmental cost which we are not well suited to producing. Trade is largely responsible for the success of humanity, having provided a means for equitable cooperation between counterparts in the first place. Greater competition should not be seen as a threat to agriculture but an opportunity. The World Trade Organisation is dysfunctional but the role it was trying to achieve in freeing trade throughout the global marketplace is necessary for world intensification of crops in an efficient way.

5.8 SKILLS, TRAINING AND KNOWLEDGE TRANSFER

We have already identified the considerable range in farming ability throughout agriculture, and that this leads to very different results. There are several reasons why farming might have a greater range of skills than other business sectors. These include;

 the higher average age of farmers,

 the practice of inheriting business practice through generations. These non-competitive recruitments that do not necessarily appoint the most able person for the job but the family member next in line. Whilst many of these young people do attend college, their eagerness might be lower, knowing they have a safe business to inherit on gradiation.

 young farm managers often gains their posts through inheritance rather than competitive appointment

 farmers often live and work on the farm thereby not having much necessity to leave the farm, speak with others and learn from them

 farmers historically have not spent high on learning and retraining

 there is no ongoing professional development scheme for farmers.

 having small numbers of staff on farm, there is often insufficient time to release workers to attend training courses.

This is an area where, whilst large amounts of knowledge is available in the industry, many farms do not receive it or consider it worthy of adoption.

5.9 AGRICULTURAL COLLEGES AND LEARNING

No detailed research has been undertaken in preparation for this section of the report but some comments have suggested that the curriculums of several agricultural college courses do not have a sufficiently detailed focus on the business side of agriculture. There have been several students interviewed by this office who have failed to answer simple questions about business management, financial schedules or commerce.

The healthy range of husbandry and operators courses that are available throughout agriculture is very useful. However, some could build in an additional focus to the impacts of these to the commercial aspects of the business.

5.10 THE INDUSTRY SUPPLY CHAIN

The combinable crop supply chain is dominated by some very large multinational, vertically integrated, well connected companies. They have large amounts of market power and can appear somewhat threatening against a farming community of probably 20-25,000 relatively miniscule arable farmers in England. These concerns were aired at the Oxford Farming Conference in January 2012. Yet, these organisations play a critical role in the smooth operation of almost all combinable crop farms and also wield considerable influence with rolling out new policy measures and incentives.

It would be foolish to ignore these organisations and deal solely with the farming community. The supply chain organisations, be they input suppliers or crop agronomy organisations have the greatest contact with the industry and so have the ability to pass new ideas and innovative approaches to all farmers growing combinable crops.

5.11 DRIVING CHANGE THROUGH THE CONSUMER

The important pint on the last section is that the most successful Assurance Schemes are led by demand from the consumer. The likes of LEAF and Red Tractor are not sought in the supermarket. This is a fundamental point. The consumer is not prepared to voluntarily pay for food that takes the GHG emissions and non-renewable resources into account. Not only are the conclusions of the Foresight multiple and therefore confusing to the consumer, but a shopper wants to see instant gratification from the money they spend.

Yet the consumption habits of the consumer need to change. It is fine to encourage the farming community to become more efficient and raise yield, but if the consumer continues to demand more and more environmentally expensive foods, the industry will simply end up producing the wrong products and other overseas industries will collect the business from our domestic consumer; the environmental problem will simply be exported, along with our business. This is not acceptable.

It would be exceptionally difficult politically to tax the environmentally expensive foods but to promote the consumption of low environmental cost foods such as pulses might have multiple benefits including; helping to reduce the environmental pressure of the food industry, supporting a healthy national diet, building the environmentally sustainable model into the UK (arable) farming industry.

This section is not explored in any more detail as it is not central to the brief of the study, but it is important to flag for further investigation as it potentially has such enormous consequences.

Changing Consumption Patterns

The Government has taken some (small) steps to address advertising of high fat/sugar/salt food products during children’s television time. This has not been well targeted as a generic ban on any ingredient or foodstuff with high sugar/fat/salt discriminates individual ingredients rather than particular meals. For example it banned the advertising of Marmite, a healthy mineral rich spread (when used in the correct quantities), banned adverts for honey, a very healthy food that contains high levels of natural sugars but allowed several ready meals with all sorts of adjusted ingredients designed to squeeze under the advertising standards regulations. The French have adopted a similar policy and the success from there should also be explored to identify which method is more successful.

6 RAISING SUSTAINABLE INTENSIFICATION OF COMBINABLE CROP FARMING

The maximum genetic yield potential of the highest yielding wheat variety is apparently 19.2 tonnes per hectare. This is clearly under intensive laboratory conditions and is never going to happen in the field because of constraints to growth such as limiting soil depth etc. However, it implies that the opportunity for all farmers to look to raise yield on their farms is present. The practical yield potential is something that all farmers should be focussing on so as to lift the aspirations of the industry. Those who remain satisfied that yield is as it is because of the land or whatever, are holding themselves back.

6.1 THE MANAGEMENT PERFORMANCE QUARTILES.

6.1.1 Lower Quartile

We have demonstrated that improving the management ability of farmers will often provide opportunity to raise the production of farms without increasing the total inputs. Earlier in the report we discussed the performance of UK agriculture in quartiles (bottom quartile, top quartile and the middle half). We recognised that there was greatest potential to raise the performance of the bottom quartile but they had fewest assets (estimated only 15 per cent of land), might present the greatest resistance to change and might be difficult to reach. There are a number of farmers who have been successfully operating the same systems for several years without problem and see not incentive to change. They operate a low risk, tried and tested system and have minimal ambition or need to grow or improve. Their farm system coupled with the subsidies has and continues to provide them with a satisfactory income each year and so there is no need to change. This is not a criticism but empowering change at this level will require a strong lever.

The Single Payment is paid to farmers on two simple conditions; land occupation and cross compliance. For a farmer, neither is difficult. The Single Payment and therefore cross compliance affects effectively all land- based farmers and so is a powerful tool to reach and empower change to the arable sector. However, cross compliance regulations need to be measurable and implementable on all farms.

Whilst the opportunity for the greatest rise in performance per hectare of land might be demonstrable in this sector, the overall effect of change here might be limited for the substantial effort required. The lower farmer expectations over a smaller proportion of output might mean that impact would be small.

Yet if Government is genuinely committed that the UK should play its part in tackling climate change, it will involve everybody making substantial changes rather than simply a few ‘doing their bit’ because ‘bits’ will not be enough.

“Have no illusions. To achieve our goal of getting off fossil fuels, these reductions in demand and

increases in supply must be big. Don’t be distracted by the myth that “every little helps.” If

everyone does a little, we’ll achieve only a little. We must do a lot. What’s required

are big changes in demand and in supply”15

15David MacKay Sustainable Energy – Without the Hot Air http://www.inference.phy.cam.ac.uk/withouthotair/c19/page_114.shtml DRAFT 03 April 2018 7:17 PM 39 The Andersons Centre The Green Food Project

David MacKay ~ Sustainable Energy – Without the Hot Air

In order to engage with many of this group of farmers, it would probably require farm visits rather than printed or electronically delivered material etc. However, to raise the performance of this sector we have identified would require a focus on management performance. Examples would include:

 Input choice and timing,

 Rotational decisions

 Varietal differences

 Cooperation opportunities (not only would this grow the business but also lead to knowledge transfer).

 Farm structure including overheads

6.1.2 The Upper Three Quartiles

The top quartile (and middle half to some extent) one would expect, should be easier to engage with, generally being more eager to source new information for themselves. (We recognise there will be huge variation here between a producer ranked at 35 per cent of the ability scale and one at 95 per cent.) As a generalisation, the higher a farm yields, the better the farmer is and the more they are eager to learn new techniques, grasp opportunities and also ‘engage with the debate’. Whilst the opportunities to improve performance in these sectors is smaller per hectare (simply because their operations are technically and strategically better already), because they cover the lion’s share of combinable crop area in England, they would have a noticeable impact. The focus on technological and practical innovation could drive this sector forward. Innovative thinking and experiment will foster inventive minds and creativity to lead to a greater output in the industry. Examples might include:

 Identifying the true benefits of precision farming, and how best to allocate inputs to raise yields across the farm,

 More closely managed input control, per field or land area; the ‘customisation of inputs’ towards yield and profit.

 Encouraging farmers to understand the implication of new techniques and practices on their own farm.

 Identifying simpler methods to help farmers identify opportunities to collaborate with other nearby farm businesses ensuring the right farm and enterprise sizes

 Preparation for change. e.g. accepting techniques like min-till/high yield where relevant

 Sharper consideration of machinery purchases as well as variable costs.

 More calculated use of straw and other ‘wastes’

 Better use of technology and machinery, both in terms of what benefits it can offer but also in terms of ensuring it covers the right area of land each year.

 Calculating (rather than simply identifying) the farm exposure to various risks and balancing them together to create a manageable ‘portfolio’ of exposures.

This is a brief and incomplete list. Indeed there is no such thing as a complete list because as minds engage new ideas and thoughts will continue to emerge.

6.2 MANAGEMENT AND TECHNICAL IMPROVEMENTS

6.2.1 Irrigation

The use of water in cereal farming in the UK is minimal. The UK has one of the highest yields of wheat in the world because it has a maritime climate which means it receives lots of rain compared with other places. The necessity for additional irrigated water on most combinable crops most years is small and, using current techniques, would usually represent a small return (additional yield) for the cost of applying the water. However, this does not mean that irrigation and water storage techniques should be completely ignored, because with smarter use of the resource, a greater take-up of the water by the plant could be achieved which means less need to be applied and therefore the cost (financially and environmental) could become more easily justified on more crops, even in the UK. In some years, like for example 2011 harvest year, this could have raised the yield of wheat and other crops substantially.

6.2.2 Use of Straw

Straw is a valuable mineral fertiliser when it is chopped and returned to arable land, indeed it is when it is removed, fed to livestock or used as bedding then returned to arable land. Some consider straw as an arable waste product. This should be measured more carefully to remove all confusion so that farmers can clearly recognise the economic benefits and cost of chopping against baling straw.

6.2.3 Tillage Practices

Many farmers tend to undertake tillage practices as a matter of routine. There are specialists in low and non-tillage farming techniques who claim that yield and grass weeds can be managed without deep ploughing. These techniques might offer real savings if yields remain high, but the research and extension work need to be undertaken.

6.2.4 Agronomical Innovation

Agronomy is one of the areas of agriculture that receives arguably the greatest amount of research and development spent on it. New types of fungicides are being introduced to the market place, partly as diseases become immune to other fungicides. With the new products comes new methods of applications and other practical ideas of how to manage the crop without using high levels of agrochemicals. For example, at a recent meeting with a field salesman from Syngenta, his list of recommendations of what can be done to reduce the impact of resistant Blackgrass amounted to 6 actions before spraying with Atlantis (a herbicide).

This is welcome from the sector with a clear interest in the sale of the chemical but demonstrates how other activities can be learnt. A clear understanding of what each agrochemical application onto the crop is designed to do and the effect the process will have on the crop (as well as its cost) will help the farm manager to raise yields further.

6.2.5 Personal On-farm Research and Development

Practices like the above are specific to each farm and location. The concept of research and development has been isolated to large agribusinesses and government funded projects (often through universities). But the concept of each farm undertaking its own on-farm research and development in a more formal manner than trying new varieties might help individual farm businesses understand what works for them. Indeed, this concept of localised research and development might work for small groups of farmers in areas of similar soil and climate type, it could have other benefits of improved communication channels.

6.2.6 Understanding Efficiencies and Using Technology to Pinpoint Optima

The more efficiently something operates, the more difficult it becomes to identify additional efficiency gains. A science and industry has evolved over the years to strive to identify ever greater benefits through doing things differently. Logicians have increasingly sophisticated computer software to develop ever cheaper or better or faster routes to achieving tasks whether that is distributing lorries, constructing very large buildings, or redesigning business practices. Linear programming mathematical models using calculus are supporting these processes identifying the most efficient methodology according to the criteria entered into the model. This also means that the operators of these tools need to be skilled. However the opportunity to develop such tools into the agricultural and agricultural supply industries is probably considerable. Examples might include identification of most limiting resources, assessments of how much of each resource will achieve optimal returns and how to maximise outputs.

6.2.7 Improved Management Practices

New techniques of farm management need to be tackled in a manner to treat inputs with greater value in terms of their opportunity to generate yield. Whether this be through greater understanding of topics like nutrient cycles, energy balances and life-cycle costings will depend on the way research is targeted and how the costs of failing to focus on them will be managed.

For example, how broadly the polluter pays principle is enforced will add to the cost of losing minerals through leaching will impact on human activity. Under this principle, whoever is the pollutant is the one who is responsible the cost of cleaning it up. This would mean severe taxes across all sectors of society and across every nation in the world. No consumer will want to pay for it if they don't have to.

We recognise that all activities and all consumption has an environmental footprint. The unavoidable component of that footprint would be shared by all parts of the industry, the cost of which would find itself being passed onto the end-consumer.

6.2.8 Stimulating Additional Cooperation

Creating the environment where farmers actively seek to cooperate more fully is difficult, especially whilst their profitability is relatively good. It is a recorded fact that farms raise their levels of operational efficiency in times of financial hardship more than financial bounty. However, we have already recognised that farmers are rarely if ever exactly the right size for all their overheads, especially the ‘chunky’ ones like machinery and labour and at different times of the year, requirements in each farm also vary. So it follows that even on the large and best farms, greater cooperation might help to raise the output of the farm at lower use of inputs.

Also, through cooperation, one could expect more knowledge exchange between farms, especially pulling the poorer operator upwards. Considerable amounts of development work are currently being undertaken by the Welsh Government to encourage agricultural cooperation, particularly in the dairy sector, and lessons could be learnt from them on the effectiveness of the programmes being undertaken. Other wexamples include the Share to Farm and Share to Grow schemes.

6.2.9 Other Ideas

This is far from an exhaustive list; the opportunity for the industry to embark on a focussed programme of making far better use of some of the limited resources available to it, coupled with sound research using science, economics and industry together could assist the development and wide-scale commercialisation in combinable farming of technologies such as controlled release fertiliser, drip irrigation and green fertilisers. The development of high efficiency farm vehicles and the greater adoption of communication technology could change the way the entire agricultural industry thinks about its resources.

Several actions would reach all sectors of arable farming. The next section is not a list of recommendations, but explores the extreme situation which would compel farmers to undertake activities that promote sustainable intensification.

6.3 IDEAS TO ACCELERATE CHANGE

6.3.1 Professional Farming

The Government has tasked the AHDB to implement a professional farming body. The aim of this is to raise the level of knowledge transfer to all farmers, through professional bodies, universities and other private institutions to help implement the best practices and technologies more quickly and effectively. This should be grasped by the industry as an opportunity to develop a professional sector. It can help steer innovation and continually better management. It should help instil a culture of sustainable intensification and demonstrate the UK farming industry is taking a lead in tackling the relevant issues.

A farmer CPD card could be used to prove attendance at sufficient events to raise the professionalism of farming. It could be enforceable through cross compliance but the industry needs the opportunity to demonstrate it can lead without the stick of policy intervention.

6.3.2 Assurance Schemes

When farm assurance schemes first became relatively widespread across UK farming, they gradually added a small value to the commodities that each farm was selling. It was a small margin per unit but the marketplace came to recognise that outputs from these farms were slightly preferable than those that weren’t. This slowly added value to the products and therefore slowly generated value to the farmers. At which point, most farmers and processors adopted them.

The parallel being drawn here is that if a similar comparable is introduced in the grain market for an assurance scheme measuring the level of inputs per unit of output (tonnes for the grain sector), a small value might be generated. If the actual environmental cost from each farm each year is printed on the crop passports, then the grain produced and stored in the lowest cost way, might, after a while become preferred to that of high environmental cost. For example a high yield farmer using low levels of inputs would produce a tonne of grain at a lower environmental cost than a low yielding farm on peat. This will also lower the agricultural value of the peat-land farm, thereby discouraging production in that area. It will only be when grain prices are unusually high that it will be more economic to cultivate these areas. In this way, the market itself will dictate which farms are the most successful. It might be possible to bring such assurance schemes into the cross compliance regulations although if the marketplace adopts the principles, then this would lead to a less expensive way to monitor and police the supply chain changes.

Another Farm Assurance scheme introduced into the market would be likely to confuse the shopper, especially when it is for an issue that they have almost no interest in. It would be futile trying. However, the existing farm assurance brands are developing a brand awareness for themselves and might be in the positions to broaden their scope to encompass the concepts of environmental input cost per unit of output. This becomes complex because the processing of the agricultural commodity into a product is likely to incur the greatest environmental cost. It might be an opportunity to explore though.

6.3.3 The Fertiliser Manual

Nitrogen is arguably the most environmentally expensive input in arable cropping although the returns it generates means that per tonne, the greenhouse gas emissions compared with the increase in yields it accounts for might be deemed acceptably low or essential in today’s farming systems. The Fertiliser Manual RB209 is a useful basis for the safe use of fertiliser. It has been claimed that whilst the manual has a role to play, it can be limiting to yield growth without risking the environment to leakage. Examples of more detail and guidance might include specific nitrogen needs per variety, soil type and weather conditions, more in depth timing of applications and so on. Some have suggested an electronic RB209, where users can put their own data including soil type, slope, yield potential and so on into a tool to generate specific fertiliser recommendations but is dangerous expecting a computer to provide individual cropping or agronomy advice per farm. Others have suggested that a separate manual designed to focus on the opportunity to maximise yield. This is a subject where more research would be welcome.

6.3.4 The Agronomy Manual

Raising yields is a concept that most farmers are familiar with. If a farmer is growing wheat on a highly fertile soil, he will be more inclined to put a higher rate of fungicide onto the crop to protect it from infection and lever the greater yield out of the soil. This involves more input on a per hectare basis but less per tonne.

The agronomy on different soils varies in the same way as the agronomy in different weed or disease exposure. Whilst the agronomist provides the necessary support to the arable farmer, an industry report or tool to help demonstrate the research and expertise in agronomy might help farmers move their own thinking on agronomy forwards.

6.3.5 The Recommended List

If the farmer is to take the production of higher yields whilst lowering inputs seriously, then a publication of the performances of each variety will be required. If some varieties are more hungry in terms of inputs, then the industry needs to know which ones. The HGCA might consider how the concept of output per unit of input could be measured, tabulated and demonstrated to the industry. the Recommended List approach might be the way forward.

6.4 RESEARCH AND DEVELOPMENT

“Science can enhance our culture and our civilisation. Science can improve our quality of life, help

solve the world’s biggest problems like food security, climate change and support sustainability. It

influences nearly everything we do.”

Sir Paul Nurse on the Richard Dimbleby Lecture 28 February 201216

The decline in the number of agricultural research institutions in the UK since the 1970’s has been well documented for example in a recent paper by Professor Ian Crute, chief scientist to the AHDB17. In the paper, he identifies the number of public research organisations on crop farming has fallen from eighteen to three since 1976. In a similar way, Dr Pat Ryan of Syngenta18 also recently illustrated the fall of private organisations funding research into agrichemical science since the early 1990’s has gone from sixteen to six.

It is thought the amount of funding invested into agricultural research has also been falling over the years although the figures to substantiate this are not easy to calculate as much of the spending is by commercial organisations which do not release their detailed figures. The report by Holding and Thirtle19 describes the number of patents pertaining to agriculture from various countries including the UK. The report

16 http://www.bbc.co.uk/iplayer/episode/b01cx7x0/The_Richard_Dimbleby_Lecture_28_02_2012/

17 Use of Science and Technology to Increase Sustainable Production (14 November 2011)

18 A Review of the challenges facing UK agriculture in the next 5 years, East Midlands Farm Management Association Conference 2012. 19 Productivity of UK Agriculture Causes And Constraints (2003) DRAFT 03 April 2018 7:17 PM 45 The Andersons Centre The Green Food Project demonstrates how the number of UK patents was in the range of 250 to 350 per year between 1969 and 1984, then swiftly fell to about 100 per year since then. The report states;

“The lower number (of patents) coincides with the decline in public R&D, but the patent series

declines first, suggesting that the UK was becoming a less attractive market before the R&D cuts

began.”

This implies a ‘chicken and egg’ scenario but clearly, R&D funding and number of patents were related.

It is not only a priority to ensure that the total R&D budget is maintained throughout agriculture, but the way it is spent and the findings translated are also critical. This report is not the occasion to identify where and how much public money should be invested in the industry, but to identify that it has been falling in recent years and this has been felt on farm at a practical and business level.

6.5 PROTECTING PRIVATE RESEARCH SPEND

Some of the finest brains in the agricultural industry are working on developing agricultural inputs. Whether through genetic improvement of seed, agrochemical products (either to apply to the field or to attach to seed pre-planting), or fertilisers, these inputs are simply fundamental to increasing the amount of wheat or any other output with lower inputs per tonne.

Those sectors of the agricultural supply chain that spend a comparatively high level of money on research and development for their own products might feel that they have not been suitably supported over the last decade. This is an opportunity for more investigative research but with the departure of several companies on the grounds of their products and techniques being unwelcome throughout Europe, we are losing not only the competitive edge at farm level but also the industries that are pioneering them. This includes the plant breeders who are seeing barriers to their GM products and agrochemical manufacturers who are experiencing excessive delays and costs in their technology being accepted for use throughout the EU. The private research resources of these companies are clearly focussed at generating products to generate them a profit, but in doing so, raise the level of excellence throughout the region they are located. There are some agrochemical companies that in recent months have decided they would be more profitable based elsewhere and both BASF and Monsanto have relocated to other continents away from Europe.

6.6 DEMONSTRATING GREAT PRACTICE

Most concepts of generating greater yields without making additional applications are probably unknown. In order to move beyond conventional farming practices, a series of demonstration farms need to be established to visually show the farming community exactly what Government means by farming with fewer inputs. This will give policy makers the ability to lead from the front, as long as the farms achieve what they set out to do. There are already farms in the UK that could be used as such. For example the new NIAB Innovation Farm20 could be used. A network of farms would probably be even more fruitful, not only because ot would enable more experimentation to be undertaken, but also as it would allow more (all) farms to identify a

20 http://www.innovationfarm.co.uk/ DRAFT 03 April 2018 7:17 PM 46 The Andersons Centre The Green Food Project correlation with their own. It would leave the demonstrators able to show what is possible on a range of soil types, climates and so on.

Leading is easiest from the front and so these farms would be intrinsic to illustrate exactly to farmers what is intended of them. Farming press would be interested to cover the progress.

6.7 KNOWING THE ENVIRONMENTAL COSTS OF INPUTS

We have demonstrated for combinable crop farming, in order to become increasingly sustainable and use fewer resources per tonne, it is important to ensure that yield is high (and inputs are low) by combining all resources appropriately and non-renewable inputs are not in surplus. This relies on good management. Thus, those farmers who are interested in maximising profitability will also be inherently better focussed at this. At the moment, the farmer has no way of measuring the non-renewable resources other than through their financial cost let alone having any incentives to reduce them.

6.7.1 Non-Renewable Resources

The non-renewable inputs that are intrinsically necessary in farming are; Carbon (including oil)21, Water, Land and Minerals. The farmer understands the importance of each resource to his business as they have a financial value, but does not know the relative importance of each one to the environment. It is simple to say they are all critical, but we have already explored the concept of switching resources to achieve the same end. In order to make farmers rearrange their resources to benefit the environment instead of just their business, they must know the environmental value of each one and then have an incentive (financial or legislative) to meet these changes.

6.7.2 The Input ‘Exchange Rate’

The manager of any business makes an assessment of the cost of one input compared with another and with the value of the output. Inputs are compared by monetary value so a farmer-businessman can decide how much of each to use in order to achieve a profit. If one input price or its performance changes compared with the rest, he can change the rate of that input he uses to remain efficient. For example, as labour prices have risen over the years and machinery has become comparatively cheaper overall (they are more productive), farmers have gradually reduced the amounts of staff they have used in favour of larger machinery.

This makes an efficient production manager. But how can a farmer have any knowledge on how to consider the non-renewable/finite inputs available to him on a farm with regards to the environment? Current monetary value does not coincide with environmental value. Whilst it could be aligned through a taxation and support system, but will involve government cost.

All the farmer currently knows is that it is better to use less non-renewable resource than more. However, he does not know whether it is better to use less land and compensate the loss of the resource by using more water or oil based products such as fungicides and fertilisers. This option sets a very high value on the land and lower on the other resources. Another option might be for a farmer to use as much land as possible, but

21 Other greenhouse gasses such as methane and nitrous oxide already have an exchange rate with carbon, methane being about 25 more potent than carbon dioxide and nitrous oxide about 300 times more. DRAFT 03 April 2018 7:17 PM 47 The Andersons Centre The Green Food Project reduce the amount of oil based products thereby giving the same output but using less carbon and water but more land. This would refer to what is normally referred to as extensification as it lowers the output per unit of land.

If farmers did not know the financial cost of inputs, they would have no way of knowing whether they had been correctly allocated or whether one was ‘worth’ using. Farmers as businesspeople only spend money when they see a greater return from that investment. They currently have no idea how to do this with the environment in mind, even if they wanted to.

In order that the farming community en mass can make a measured judgement on the environmental value of these resources, a set of relative values must be developed between them. This would create an ‘environmental currency’. The farmer could then be encouraged to keep an account of the total environmental cost of producing his products. This would be complex. However, a well rehearsed fact of management is that nothing can be managed if it cannot be measured.

Having an environmental ‘price tag’ on each input including variable costs and overheads such as machinery and land, in itself would not incentivise farmers to take any notice of it, however this is the first step in putting a value on the relative importance of these inputs. The farmer cannot take the concept of reducing inputs seriously if he does not know the ‘value’ of each. These figures need to be set by scientists and policy makers. The relationship between them can change as more knowledge is generated about them or as their availability changes, but this is true of any exchange rate.

The next information that a farmer will need is to understand how much of each non-renewable resource is bound up within each input. For example, from visual appearance, it would seem that the carbon, water and mineral in a litre of fungicide is very low, but nobody can tell whether it took 7 tonnes of carbon to produce that litre. The farmer will need to know. However, the amount of information that might be presented with every product could swiftly become excessive, for example if the amount of water and mineral was also listed on the side of the fungicide container. This is why a single figure, the ‘Environmental Currency Unit’ should be necessary.

If, as a result of changes in policy, UK farmers started using progressively less fertiliser, this would make farming in non-UK locations substantially easier because the cost of the fertiliser would fall. Meanwhile, the UK soil indices would be slipping and lowing the fertility and therefore productivity of the land. Sustainable intensification would be compromised. This highlights how carefully such policies need to be implemented.

Carbon accounting fraud will become a problem as soon as the amount of carbon used to produce something has a financial value, this will have to be considered by all industries and, just as accountants are required for financial books, there will need to be an industry of auditors for carbon accounting. More detail on this concept is available in Chapter 8, the Appendix ~ how the Environmental Currency Might Work (page 55).

7 CONCLUSIONS ~ WHAT CAN BE DONE?

We cannot see into the future and we cannot tell for sure what inventions and innovations, coupled with improvements in general arable farm practice will help solve or postpone the problem of sustainable intensification. However, we should offer ourselves some reassurance that Thomas Malthus, the preacher who in 1798 (when the world population was touching 1 billion people), proclaimed he could foresee mass famine within 50 years as a result of agriculture not being able to keep pace with the rise in birth rate. Clearly he was wrong and so far has been wrong for over 200 years. He missed the impact of the invention of agricultural machinery, improvements in the rotation, enclosure, the introduction of maize into Southern Europe and potatoes into the North. He missed the genetic improvements in livestock and plant breeding, and also more recently the invention of nitrogen fertilisers and the contribution the agrochemical industry was to offer, not to mention the opening up of additional land in the New World. The list goes on and will continue to go on. Necessity is the mother of invention and this will prevail, the changes the future heralds we do not yet know.

Factors affecting husbandry and management will always be on the agenda as there will always be stronger and weaker farmers yet at the same time, the results from moving all farmers to another level of expectation is thought to offer a comparative low cost and intermediate response whilst the issues of researching new genetic strains and scientific breakthroughs are more long-term goals. We need to be considering both to achieve the expectations of increased output from reduced inputs for the next 40 years.

It is the intention of Peter Kendall the president of the NFU that the industry should be able to empower itself to demonstrate improvements in the industry without Government having to impose policy change. This is admirable and is something the industry has in the past demonstrated it is capable of achieving (like the Voluntary Initiative). However, there are some big factors that can affect the Sustainable Intensification of the combinable cropping sector:

1. It is exceptionally difficult to be achieved with the CAP in its current form

2. It is severely slowed by the 91/414 removal of agrochemicals

3. The lack of support to Agro-science companies demonstrated by their exit from the EU will slow further progress

4. There will be a cost to the industry with some of the suggestions that have been explored and therefore some changes that are made unilaterally will damage the competitive edge of the UK industry because moving a business system from what they find economically optimal will raise their costs and lower their profit.

5. Other changes, generally those focussed on improving overall farm practice could be actually profitable.

6. Big decisions are required by brave people if this is genuinely going to be tackled.

It is also clear that there is no single answer to the issues that are being addressed in the Green Food Project work-stream. Below is a summary of the issues discussed in this report. It will require all sectors of the industry to work together with shared responsibilities, not a single section of the market or Government.

This chapter contains some points that would either incur significant cost or seem un-implementable because the consumer is not prepared (and probably never will willingly) to pay extra for the maintenance and repair of the global environment. Shoppers seek ‘instant gratification’ by taking home with them whatever they have spent their money on, improving the quality of the environment and achieving food security is not included in this. However, if the government is as committed to this as they claim then some measures that incur costs are necessary. It is sincerely urged that any changes are not unilateral to the UK.

Meanwhile, other parts are likely to raise profitability as well as help meet the aspirations of sustainable intensification. These could be implemented at any stage and should be the first to explore in more detail.

7.1 BY NON-GOVERNMENT

Focus on Management

There is a considerable opportunity to raise the yield of the industry through attention to detail, farm structure and correct allocation of the right inputs. This is all management expertise and it alone presents the greatest opportunity to raise yields, especially by the lower quartile performers financially. A greater drive for the industry to understand the benefits of clear financial management, well defined objectives and quantified targets for the future.

Focus on Technology

Technology is the way to progress the top quartile forward of farmers to achieving new high yields for their soil types and other environmental conditions. Whilst they should always remain focussed on good management, attention to detail and efficient use of resources, the opportunity for new innovations to move their yields up into new ranges. This would most probably have the effect of reducing the level of inputs per tonne. Examples will include green fertiliser, minimum tillage, precision farming and its applications and better use of existing renewable inputs.

Knowledge Transfer

Knowledge transfer is an area that the industry already grapples with and is continually trying to improve. This should continue with more efforts to reach the ‘unreachable’ farmers. if necessary, building this into cross compliance to enforce an annual farm visit might be the way forward. The amount of good research that is not extended sufficiently to the industry could be high, especially to the farms that would benefit most from it.

Farm Assurance Schemes

Supermarket consumers are not likely to be prepared to pay extra for products that have been produced with the environment in mind. There are already ample logos of farm standards stuck on the sides of food products and another would further confuse the shopper. However, if it is imperative that these changes are introduced, it is also imperative that the consumer recognises that the costs of agricultural goods (food) is

DRAFT 03 April 2018 7:17 PM 50 The Andersons Centre The Green Food Project likely to go up and to this extent, it would be worth explaining to them why. The farm assurance standards would be a useful vehicle to demonstrate some of these changes. These organisations should become fully engaged with the debate with a view to implementing the simplest and most reliable system to measure environmental costs.

Professional Farmer Accreditation and Continuing Professional Development

This is an opportunity for the sector to demonstrate its professionalism. There are some schemes for specific parts of the industry already (FACTS for fertiliser sector, BASIS for agro chemicals) usually achievable after pre-qualification. Most of these schemes have continuing professional development (CPD) points, achieved by attending events, reading farming press and undertaking other learning activities.

The process of sustainable intensification could be built into the new professional body. Either the market would decide whether it should become mandatory (by affecting the price of grain according to amount of resources required to produce them) or it could become a cross compliance regulation.

Grain Certification Scheme

The Professional Farmer Accreditation Scheme could be set up to demonstrate to buyers that the wheat/grain has been grown in a manner that minimises (or even quantifies) the carbon emissions of a farm. It could effectively be a certification scheme but might not need to pass right through the supply chain to the consumer, especially if the environmental choices are being made on their behalf by either policy requirements or choice editing (a process of the supermarket buyer and store manager selecting items for sale and reducing customer choice either because of ethical or environmental grounds). A measurement on the grain Passport could start to put a carbon value onto the crop.

Putting a Value on the Environment

There are several things that the industry can do to tackle the environmental issues of farming. However to go beyond tackling and make fundamental system changes, the farmers will need to understand the relative value of each input. The exchange rate mechanism, allowing a single figure to be calculated for each input and therefore output would make significant inroads into this and lead to other actions in the future with greater mitigation effects to greenhouse gas release and the use of finite resources.

Environmental Accounting

This would lead on from the above action. Farmers would be able to calculate their environmental cost per unit of output. Not only could financial implications be considered but also the carbon costs. this is an inevitability if the industry is to take the greenhouse gas issue seriously, there is no avoiding this. Environmental accounting would have to be an inexpensive method of cost calculations, possibly undertaken electronically with purchased goods or an annual audit. It would have to be auditable.

Environmental Thresholds

Once the above accounting mechanism has been established, In association with consumers, producers, environmentalists and also government, the industry could explore the concept of setting up environmental thresholds for grain production in a similar way that moisture is penalised of it is too high. This would provide a measurement of the amount of finite resources (including land) used per unit. It could become

DRAFT 03 April 2018 7:17 PM 51 The Andersons Centre The Green Food Project another measurement like protein or moisture in a grain specification. This would build on the agreed exchange rate, devised to assist the industry to identify the (Government’s) priorities regarding which inputs are most import. If this scheme was sufficiently well thought through and devised with all members of the industry, it would be adopted by processors and consumer organisations (supermarkets). It would indirectly add value to low input/ high output grain.

Re-examine the role of the Recommended List

The Recommended List has recently be challenged as not providing the grower with the correct information they need to make decisions on cropping varieties. This might be an opportunity to review the entire work programme and look to incorporate an assessment of environmental characteristics each variety has under certain conditions.

Joined Up Levy Bodies

There should be greater opportunity for the HGCA to collaborate with the PGRO in a manner that they have with the other levy bodies to encourage joined up thinking regarding the arable rotation. Now that the HGCA is part of the AHDB, the whole farm considerations can be facilitated. The organisation has a cross disciplinary team working on whole farm policies and economics, and the resources available to dedicate to pressing issues like carbon management are being taken seriously.

Access to Information to Raise Transparency

The Commission on Sustainable Agriculture and Climate Change, chaired by Professor Sir John Beddington, calls for a greater level of transparency in the global food market system with more inter- linkages in the information systems in the global food supply chain. The HGCA (and AHDB) have very limited resources and represent only the UK industry. However there could be an opportunity to work more closely with organisations of other countries to share information and generate a closer tie to parts of the industry.

7.2 BY NATIONAL GOVERNMENT

Some actions are only implementable by Government. We have discussed in detail how the current structure and focus of the CAP is not conducive to intensification or reduced inputs per unit of output. This needs to change. Other issues can only happen with the support of Government, these are in order, roughly in ease of implementation.

The Fertiliser Manual RB209

Explore opportunities to make the Fertiliser manual more sophisticated to support farmers to extend their input planning to push their yields substantially further upwards but identifying the point at which the risk of environmental pollution becomes too high to take and the point at which inputs become unaffordable.

Demonstration Farms

A series of demonstration farms should be established for Government to physically show the farming community how to move towards achieving the genetic potential of a crop whilst not increasing inputs. they

DRAFT 03 April 2018 7:17 PM 52 The Andersons Centre The Green Food Project could be used for research purposes but the main thrust should be to demonstrate how the Industry should be farming in 20 years time within the targets set by Government.

Redefine the Current Cross Compliance Regulations

Clarification on the regulations concerning some of the cross compliance rules. In particular, clarity on how the RPA interprets the biosolids rules to avoid confusion and therefore prevent farmers from avoiding an excellent resource for the industry.

Professional Thinkers

The Green Food Project has encouraged a large number of people from all parts of the food supply chain to spend a short while considering their interests in the food chain to identify how to raise outputs and reduce the environmental impacts. However, the issues listed in the Foresight Report are so multiple, interlinked and complex that this cannot be easily solved.

A team of experts should be empowered to dedicate their time for a sensible length to solely this issue. Setting up a think-tank/academy to drive these thoughts forward, coordinate publications, synthesise work from overseas and lead policy makers (and policy advisors who are busy considering all sorts of other issues too). This team would be multidisciplinary, with scientists, economists, sociologists, geographers, soil scientists, farmers and the like at their disposal. A regular publication or convention to keep disseminating expertise would demonstrate good value of money.

CAP Reform

In the current negotiations for CAP reform for implementation in 2014 or 2015, the Government should push hard for ecological focus areas to be restricted to 1 per cent of arable land but with a high level of focus as the RSPB has suggested. It is an opportunity to raise the benefit to every interested party in the CAP and land use, whilst also raising the production of crops.

Changing the Consumer

Government should consider changing the regulations regarding the advertising and education of foods at different target audiences. If low carbon food is the future, it has to be explained to the consumer. Without consumer buy-in, no change will be made. Any amount of input reduction to arable farming will have almost no impact on the environmental damage from the food chain if more ‘high environmental cost’ food is consumed, or through raising output, prices fall and food waste rises even higher. Food prices should be allowed to rise to encourage greater respect of food, and to reduce the immoral amount of food wastage.

Nurture Input Companies to Stay in the UK/EU

Encouraging input companies to remain or move into in the UK, undertake their trials here, and become increasingly familiar with the UK farming industry will allow great return on investment, indeed it may not require much Government investment necessarily, just an encouragement to trial new science in the UK/EU, and take a proactive role in accepting new technologies for commercial use within the territories.

Supply Chain Companies

Recognise that supply chain companies including the very large multinational grain and input traders are here to stay and have access to all combinable crop farmers in the country. Their influence can be used to great effect.

Recognise that Food will Become Dearer

Food is a highly political subject and its cheapness has been taken for granted. Its rise of price should be allowed to happen, encouraging consumers to consider their food waste policy, consumption patterns and volumes and also their choices of food. Greater respect and efficiency of food use would leave more for others.

8 APPENDIX ~ HOW THE ENVIRONMENTAL CURRENCY MIGHT WORK

Once the scientists have agreed the priorities of each non-renewable input, they can be used together. An exchange rate of non-renewable resources would allow a farmer to know what each input is ‘worth’, through only a single figure. Say 1 tonne of carbon is worth 5 tonnes water or 7 hectares of arable land or 5 tonnes of mineral for example making 1 ‘Enviro-unit’.

 1 Enviro-unit = 1t carbon, = 5 tonnes water, = 7 hectares of land.

 So 1 tonne water = 0.2 Enviro-unit

 Or 1 hectare = 0.14 Enviro-unit

 Or 1 tonne mineral = 0.2 Enviro-unit

This will explain to the industry which are most important by quantifying them. Armed with this information, the farmers can cut their environmentally expensive resources in the same way they do financial ones.

For example, one litre of a fungicide that adds 2 tonnes to yield might seem good (environmental) value and might be allocated to each 1-hectare of land. But if it takes 7 tonnes of carbon and 12 tonnes water to produce 1 litre, it might not represent such good environmental value. Environmentally, it might tutrn out to be better to add more land if the land is comparatively cheap (in environmental terms). So a farmer should know the environmental cost of an input in a single figure. The exchange rate between the key non- renewable resources can vary without the farmer involvement, just the label will alter. So the 1 litre of fungicide might cost £30 but also be 9.40 ‘Enviro-units’ as using the above example and the farmers will gain an idea of what constitutes good ‘environmental value’. In this particular set of figures, it would be environmentally cheaper to ‘add more land’ instead of fungicide but this is simply for demonstration. This exchange rate can change as science dictates or as resources are depleted.

8.1 OVERLY COMPLEX?

This sounds very complex. Indeed it would be in this format. Farmers and other businesspeople are all accustomed to keeping account of financial performance, now there would be a requirement to keep a second set of accounts. If the government is really keen to tackle the issues identified by Foresight (and the Nicholas Stern Report22 before it), then all businesses and consumers will have to start thinking in this way.

Once the priorities have been set, enabling a producer to identify the costs and benefits of an input, he still needs a financial or legislative motivation to change their practices.

It is necessary that if this concept was linked to financial costs, it should not be implemented unilaterally, but to be built in to CAP reform across the EU and ideally beyond the EU too. If this did not happen, UK farming would be penalised.

22 http://webarchive.nationalarchives.gov.uk/+/http://www.hm-treasury.gov.uk/stern_review_report.htm DRAFT 03 April 2018 7:17 PM 55 The Andersons Centre The Green Food Project

8.2 EMPOWERING FARMERS TO USE THIS FIGURE

Introducing such a novel (and for many a ridiculous sounding) scheme will be completely without impact if farmers see no incentive to make use of it. In other words to encourage any farmers to participate, it has to carry an economic advantage.

First we need to recognise that there is already a similar scheme operating in the UK. When farmers sell grain to the emerging bioethanol industry, they are obliged to complete a form that demonstrates their carbon usage to produce the crop. It is similar to the biofuel accounting. This needs to be done for all crop regardless of end use. Biofuel operators claim GHG benefit from the farmers improved cultivation techniques. This benefit should be given to the farmers.

Low cost, simple carbon accounting for all farms is necessary. It is tough and complicates farming but if the priority is to reduce the input use per tonne, then monitoring this is necessary.

8.2.1 Cross Compliance or Legislative Compliance

If Government is truly focussed on reducing emissions of greenhouse gasses from agriculture by 6 per cent by 2020 and more by 2050, then it needs to be tackled seriously by every farmer. The task of reducing greenhouse gasses is not a matter of everybody ‘doing their little bit’, but everybody making substantial changes to their modus operandi. This means that policy should be involved. the most straightforward and probably effective method of doing this is probably by introducing cross compliance regulation to monitor inputs per unit of output. This will not in itself reduce inputs or generate sustainable intensification, but it is necessary before any progress is made at all.

The future of the Single Payment is short. It looks likely that it will be replaced in 2015 by another policy, the ‘Basic’ Payment. This will still have cross compliance at the heart of it. However, it is highly likely that the payments per hectare will be reducing which, when coupled with inflation which will also be eroding its true value, will gradually encourage more farmers not to claim. This will also be accelerated if one of the conditions is to participate in collecting GHG or non-renewable input data. To ensure the process is undertaken by all farmers, it might have to become legislative at some point but that would be some way off.

8.2.2 Linking the Environment with the Market

The marketplace is efficient because it has a very clear focus on its purpose and the outcome it is there for ~ profit. However, efficiency in terms of maximising profit does not mean it is allocated evenly to all participants, on the contrary, it rewards the best. In this mode, competition between other organisations provides the drive to be as efficient as possible. The market therefore benefits the better performers and this is how industries improve. This also means that as the less efficient are not rewarded as generously, the market system differentiates abilities. Thus the only way to empower businesses to take the environment into financial consideration is to make it part of the market, in other words build in financial incentives.

All processes have environmental impacts that small business like farming have not to date, had to consider. This is where policy is required to control the actions of (commercial) organisations, either by placing a

DRAFT 03 April 2018 7:17 PM 56 The Andersons Centre The Green Food Project value on the up-till-now free costs such as air pollution etc or by placing regulatory control and therefore policing mechanisms in place.

DRAFT 03 April 2018 7:17 PM 57