Farming businesses in the UK are currently facing a wealth of challenges.
As BPS payments are progressively reduced, new policies focussed on rewarding farmers who prioritise the environment alongside food production are being phased in.
With input and labour costs also rising steeply, squeezing profit margins, it’s a pivotal time for farmers to be making the most of their assets.
“The movement away from BPS means that there’s effectively going to be a gap in farmers’ balance sheets that needs filling,” explains Harriet Henrick, NFU livestock adviser.
“This gap in funding, along with society’s desire to improve our environmental impact, has created a perfect storm for investment in natural resources. As one of the biggest land-based sectors, there’s a huge opportunity for farmers.
“Notably, farmers should also be aware of the conditions of entering into natural capital agreements and we hope that proper guidance and advice will be available for anyone wanting to participate.”
Including natural assets in a farm business plan
It’s important for farmers to view natural capital as an asset, as with any other form of capital in their business inventory – for example, reserves in the bank (financial capital) or buildings and machinery (physical capital).
“This will be a new way of thinking for many, because the market for natural capital is still in its infancy ,” says Harriet.
“But actually, a lot of farmers out there have been doing this for years already, taking care of the land and giving back to nature. When you live and work in the countryside/natural environment, you want to help protect these spaces.
"Viewing natural elements such as clean water, fertile soil, and plants that are able to capture or store carbon as an asset, is just a new perspective on what farmers have always done.”
Benefits for farm businesses and the environment
By routinely including ‘natural capital’ in their business plans, farmers can capitalise on business benefits from an economic and social point of view.
“Sustainable farming is about nature and agriculture working cohesively, it doesn’t have to be one or the other.
“It involves working out where there are opportunities to ‘share land’ with nature, as opposed to seeing it as ‘spare land’ – natural capital can be harnessed alongside what you’re already doing.
“In the long-term, what’s good for the environment and soil health is also good for farming, helping to futureproof your business and leave a positive legacy for future generations on the land,” says Harriet.
Natural capital as an income source
“The most appropriate strategy for harnessing natural capital depends very much on where you are, your climate, and what you have on-farm,” says Harriet.
“Woodland and water are probably the easiest and most straightforward places to start when looking at your farm’s opportunities as there are several policies and schemes already well under-way that support activity in these areas.
“For example, the Forestry Commission is offering grants to farmers who are creating woodland, planting trees and increasing biodiversity. It’s not just about enhancing the environment – schemes such as these are rewarding farmers for maintaining habitats, which is just as important for the future of our countryside.
“Working within a cluster of farms is another good option to start with. There are some great examples of collaborative schemes working well, such as water companies joining up with groups of farmers to work on phosphorous reduction projects.
“By working together on natural capital projects, farmers can have a greater impact on the environment and really make a difference for the future,” she adds.
Understanding your farm’s natural capital
To establish exactly which natural assets farmers have at their disposal, a baseline assessment is crucial.
Fera’s LAND360 Mapping+ package can solve the challenges of measuring natural capital on-farm, using the latest software and the expertise of multidisciplinary scientists to give farmers an accurate picture of their natural assets.
Mapping+ indicates areas of biodiversity value, carbon storage and carbon flux on a holding, providing farmers with the insight needed to make sustainable and profitable land management decisions.
Find out more about the LAND360 package and how it could identify new income streams for your farming business here.