Wheat Sub Group Report 2

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					                       GREEN FOOD PROJECT

           HOW TO INCREASE THE PRODUCTION OF

                         WHEAT IN THE UK




                                BY




                       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: gredman@theandersonscentre.co.uk

WEDNESDAY, 12 SEPTEMBER 2012                                     12:20:57 AM
The Andersons Centre                                                                           The Green Food Project




Note:

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
6       RAISING SUSTAINABLE INTENSIFICATION OF COMBINABLE CROP FARMING ....... 40


                                                                                                                                                  Contents
The Andersons Centre                                                                                                         The Green Food Project


    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 Cooperation ...................................................................................... 44
       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 Resources..................................................................................................... 48
       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.




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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.




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The Andersons Centre                                                                            The Green Food Project


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


                                   RPI Weighting of Food
                           180

                           170

                           160
      Parts Per Thousand




                           150

                           140

                           130

                           120

                           110

                           100
                                 1987

                                        1990

                                               1993

                                                      1996

                                                             1999

                                                                    2002

                                                                           2005

                                                                                  2008

                                                                                         2011
      ONS

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




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The Andersons Centre                                                                              The Green Food Project


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




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)


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The Andersons Centre                                                                The Green Food Project


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
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.




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The Andersons Centre                                                                      The Green Food Project


        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




3
    Such as the Chatham House Report



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The Andersons Centre                                                                                        The Green Food Project


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.

Chart 2 ~ GB Wheat Yield

                         9.0

                         8.0

                         7.0
    Tonnes per Hectare




                         6.0

                         5.0

                         4.0

                         3.0

                         2.0

                         1.0

                         0.0
                                      1895

                                             1905

                                                    1915

                                                           1925

                                                                  1935

                                                                         1945




                                                                                                     1985

                                                                                                              1995

                                                                                                                     2005
                               1885




                                                                                1955

                                                                                       1965

                                                                                              1975




                         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



DRAFT 12 September 2012 12:20 AM                                                                                               7
The Andersons Centre                                                                                                                  The Green Food Project


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
 Index - 1973 = 100




                      120
                      110
                      100
                      90
                                                 Final Output at Market Prices
                      80
                                                 All Inputs
                      70                         Total Factor Productivity
                      60
                            1973
                                   1975
                                          1977
                                                  1979
                                                         1981




                                                                                     1989
                                                                                            1991
                                                                                                   1993
                                                                                                          1995
                                                                                                                 1997
                                                                                                                        1999
                                                                                                                               2001




                                                                                                                                                           2009
                                                                1983
                                                                       1985
                                                                              1987




                                                                                                                                      2003
                                                                                                                                             2005
                                                                                                                                                    2007


                                                                                                                                                                  2011
               Source: DEFRA




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The Andersons Centre                                                                                          The Green Food Project




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



              2,500



              2,000



              1,500
    '000 ha




              1,000



               500



                 0
                      1976


                             1979


                                     1982


                                               1985


                                                        1988


                                                                   1991


                                                                           1994


                                                                                         1997


                                                                                                2000


                                                                                                       2003


                                                                                                                2006


                                                                                                                       2009


                                                                                                                                2012




          HGCA & PGRO                   Wheat                  Barley             Oats          Oilseed Rape           Pulses




4
    Broadacre is the production of grains oilseeds and protein crops on a large scale.



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The Andersons Centre                                                                                     The Green Food Project


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
wheat that comes predominantly from North America 5. 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




5
 Dark 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.



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The Andersons Centre                                                                     The Green Food Project


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.

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.




8
    Coceral



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The Andersons Centre                                                                   The Green Food Project


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.

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       MJ/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       MJ/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                             MJ/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



DRAFT 12 September 2012 12:20 AM                                                                               12
The Andersons Centre                                                                                        The Green Food Project


         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.




9
    The potential to increase productivity of wheat and oilseed rape in the UK’ Spink, Street, Sylvester-Bradley and Berry 2009,


DRAFT 12 September 2012 12:20 AM                                                                                                   13
The Andersons Centre                                                                      The Green Food Project


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.
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.


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The Andersons Centre                                                                       The Green Food Project


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
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



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The Andersons Centre                                                                     The Green Food Project


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

                         8

                         6
   Cost and Return (£)




                         4                                                     Response to Input
                         2
                                                                               Cost of Input
                         0
                              0   1    2      3        4    5         6        Income per marginal Unit
                         -2
                                      Units of Input
                         -4

                         -6


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 48.

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.




DRAFT 12 September 2012 12:20 AM                                                                                 16
The Andersons Centre                                                                                                                                   The Green Food Project


Chart 6 ~ Price Relationship Between Nitrogen (Fertiliser) and Feed Wheat
                                          14


                                          12
      number of kg wheat pays for 1kg N




                                          10


                                          8


                                          6


                                          4


                                          2


                                          0




                                                                                                                                                                    Apr-11
                                               Apr-98


                                                        Apr-99


                                                                 Apr-00


                                                                          Apr-01


                                                                                   Apr-02


                                                                                            Apr-03


                                                                                                     Apr-04


                                                                                                              Apr-05


                                                                                                                       Apr-06


                                                                                                                                Apr-07


                                                                                                                                         Apr-08


                                                                                                                                                  Apr-09


                                                                                                                                                           Apr-10
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)




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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 12 September 2012 12:20 AM                                                                                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.




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The Andersons Centre                                                                                                                                                                                                                                                                 The Green Food Project


Charts 7 ~ Comparison of Land available and its Yield Potential

                                                                                                                                  Hectares per Person Arable Land
                                         2.50

                                         2.00
   Million Hectares




                                         1.50

                                         1.00

                                         0.50

                                         0.00
                                                            Kazakhstan




                                                                                                                                                                          European Union
                                                                                                                                                 Afghanistan




                                                                                                                                                                                                                                                                                             United Kingdom
                                                                                                                                                                                                                Euro area
                                                                                                        North America


                                                                                                                                        Brazil




                                                                                                                                                                                           World




                                                                                                                                                                                                                                                         Pakistan




                                                                                                                                                                                                                                                                                                              Nepal
                                                                                                                                                                                                                                       Germany
                                                                                                                                                                                                   Mozambique
                                                                                  Argentina




                                                                                                                                                                                                                                                                                                                                Vietnam
                                                                                                                                                                                                                                                                    Rwanda




                                                                                                                                                                                                                                                                                                                      Belgium
                                                Australia




                                                                                              Ukraine




                                                                                                                                                                                                                                                                                                                                          Colombia
                                                                                                                        United States




                                                                                                                                                                                                                                                 India




                                                                                                                                                                                                                                                                             Italy
                                                                                                                                                               Cambodia




                                                                                                                                                                                                                            Ethiopia
                                                                         Russia




                                                                                                                                                                                                                                                                                     China
        World Bank


                                                                                                                                        Average Yield of Arable Land
                                         10.0
   Tonnes / Ha average Wheat and Maize




                                          9.0
                                          8.0
                                          7.0
                                          6.0
                                          5.0
                                          4.0
                                          3.0
                                          2.0
                                          1.0
                                          0.0
                                                                                                                                                 Afghanistan
                                                            Kazakhstan




                                                                                                                                                                          European Union




                                                                                                                                                                                                                                                                                                                                Vietnam
                                                                                                                                                                                                                                                                                                                      Belgium
                                                                                                                                                                                                                                                                                             United Kingdom
                                                Australia




                                                                                              Ukraine
                                                                                                        North America




                                                                                                                                                                                                                Euro area




                                                                                                                                                                                                                                                                                                                                          Colombia
                                                                                                                                        Brazil




                                                                                                                                                                                           World




                                                                                                                                                                                                                                                         Pakistan
                                                                                                                        United States




                                                                                                                                                               Cambodia




                                                                                                                                                                                                                                                                             Italy




                                                                                                                                                                                                                                                                                                              Nepal
                                                                                                                                                                                                                                       Germany
                                                                                                                                                                                                                            Ethiopia
                                                                                  Argentina
                                                                         Russia




                                                                                                                                                                                                   Mozambique




                                                                                                                                                                                                                                                                    Rwanda


                                                                                                                                                                                                                                                                                     China
                                                                                                                                                                                                                                                 India




             USDA/COCERAL


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




DRAFT 12 September 2012 12:20 AM                                                                                                                                                                                                                                                                                                              20
The Andersons Centre                                                                     The Green Food Project


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
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.




10
     The Royal Society Mitigation report



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The Andersons Centre                                                                     The Green Food Project




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 12 September 2012 12:20 AM                                                                              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




11
     Steve Langton (2011)



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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.

Chart 9 ~ Yield Range of Wheat in England

                           250

                                                                                                               Average Yield

                           200
      Number of holdings




                           150



                           100



                            50



                             0


                                                                                                                    9.5-10.0


                                                                                                                                 10.5-11.0


                                                                                                                                             11.5-12.0
                                 0-0.5


                                         2.5-3.0




                                                             4.5-5.0


                                                                       5.5-6.0




                                                                                           7.5-8.0


                                                                                                     8.5-9.0
                                                   3.5-4.0




                                                                                 6.5-7.0




                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.




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Chart 10 ~ The Variation of Yield and Inputs Between Performance Sectors

                 250                                                                         10
                                                                                             9
                 200                                                                         8
                                                                                             7




                                                                                                   T/Ha Yield
    £/Ha Costs




                 150                                                                         6
                                                                                             5
                 100                                                                         4
                                                                                             3
                 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.




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The Andersons Centre                                                                    The Green Food Project


Chart 11 ~ The Variation Inputs per Tonne Between Performance Sectors


                  35                                                                       10
                  30
                                                                                           8
                  25




                                                                                                T/Ha Yield
      £/t Costs




                  20                                                                       6

                  15                                                                       4
                  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.




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The Andersons Centre                                                       The Green Food Project


Chart 12 ~ Input comparison per tonne Organic and Conventional

               100                                                           9
                90                                                           8
                80                                                           7
                70                                                           6




                                                                                 T/Ha Yield
   £/t Costs




                60
                                                                             5
                50
                                                                             4
                40
                30                                                           3
                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




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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 inputs 12. 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.




12
     Note this does not take financial account of unpaid labour or land costs



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Chart 13 ~ Use of Inputs to Generate Outputs


16%

14%                       2009/10

12%

10%

     8%

     6%

     4%

     2%

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

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 cent 13.

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.




13
     This is an estimate based on the DEFRA assessment of size and output.



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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.

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,


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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,




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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.

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                                                                      1500
 1,500

 1,000                                                               1520

      500                      980                                                                       785
     £m




          0                                                           220
                            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.




14
     This is measured as the return to the farmer for his resources including time and capital.



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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
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



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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
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.




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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



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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
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




DRAFT 12 September 2012 12:20 AM                                                                             36
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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.




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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



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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.




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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




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          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

                                                          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.




15
  David MacKay Sustainable Energy – Without the Hot Air http://www.inference.phy.cam.ac.uk/withouthotair/c19/page_114.shtml



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          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.




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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


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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.



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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




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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 Syngenta 18 also recently illustrated the fall of private
organisations funding research into agrichemical science since the early 1990’s has gone from sixteen to six.




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.



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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
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.




19
     Productivity of UK Agriculture Causes And Constraints (2003)


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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
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.




20
     http://www.innovationfarm.co.uk/

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.



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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
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


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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 57).




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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.




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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



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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


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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




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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.




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The Andersons Centre                                                                    The Green Food Project


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.




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The Andersons Centre                                                                                     The Green Food Project




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.




22
     http://webarchive.nationalarchives.gov.uk/+/http://www.hm-treasury.gov.uk/stern_review_report.htm



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The Andersons Centre                                                                       The Green Food Project


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.

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.


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The Andersons Centre                                                                   The Green Food Project


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
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 12 September 2012 12:20 AM                                                                               59

				
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