Regenerative agriculture can achieve similar financial results to traditional arable systems and benchmarking your business can help to manage the change.
Farming is embarking on a period of huge change that most growers and livestock producers have never experienced, says farm consultant Gary Markham, who helped initiate the Groundswell Benchmarking Group.
This will see the industry move away from the comfort of area payments – which make up around 84% of income on many arable farms. Instead, farms will have to apply for specific funding for environmental work.
“This will inevitably put farming business in financial strain as there will be a funding gap over the forthcoming few years,” says Mr Markham. “Farming has become very capital intensive.”
Mr Markham, of the Land Family Business farm consultancy group, will explain his thinking further at Groundswell 2021. “Change is inevitable – but managing the change is where the difficulty comes,” he says.
The economic production value of arable land is about £4,000 per acre and the additional £4-6,000 has no bearing on production capacity. Added to this is the increase in the capital cost of machinery over the past few years to over £300 per acre.
Many farmers have quite correctly attempted to expand as a means of dealing with these pressures, says Mr Markham. But this has normally meant tendering for contract farming agreements and losing about £40-60 per acre on the extra land.
This results in many arable farms becoming increasingly unviable as businesses. The margin from arable farming before direct payments and income from other enterprises has been minimal over the past two years.
“One of the best tools to monitor the change and provide achievable targets is to benchmark against farming businesses that have already made these changes,” says Mr Markham, who set up the Groundswell Benchmarking Group.
The group has been benchmarking a number of regenerative agriculture farming businesses for the 2017 to 2020 harvests – to identify if regenerative agricultural production systems can be financially viable.
Key findings for the performance of regenerative systems include:
• Average output 25% lower
• Variable costs 24% lower
• Gross margin 28% lower
• Labour and machinery costs which are 30% lower
This results in an average margin very similar for both systems of production. But the range of results within the group is wide with the top performers achieving results well above conventional top 25% group.
In addition to margins, there are savings in working capital of around £148 per acre which can have a large impact on a farming business.
Lack of profitability in arable farms is mainly driven by high machinery costs and in particular depreciation which represents the capital per acre. Mr Markham has therefore developed a key indicator of machinery capital per tonne.
The average machinery cost among the Groundswell group of regenerative farmers is £74 per tonne of wheat. This compares with an average cost of about £91/t for arable farmers employing a conventional production system.
“The difference has been around £20 to £30 per tonne over the past four harvests.” says Mr Markham, who says it shows that the traditional ‘yield is king’ philosophy does not work.
It also shows that expanding the area farmed is not feasible by using traditional contract farming structures he adds. Furthermore, Mr Markham says benchmarking data proves that there is a different approach that is economically viable.
Five principles of regenerative agriculture
1. Don’t disturb the soil
Soil supports a complex network of worm-holes, fungal hyphae and a labyrinth of microscopic air pockets surrounded by aggregates of soil particles. Disturbing this, by ploughing or heavy doses of fertiliser or sprays, will set the system back.
2. Keep soil surface covered
The impact of rain drops or burning rays of sun or frost can all harm the soil. A duvet of growing crops, or stubble residues, will protect it.
3. Keep living roots in the soil
In an arable rotation there will be times when this is hard to do but living roots in the soil are vital for feeding the bacteria and fungi that provide food for the protozoa, arthropods and higher creatures further up the chain.
4. Grow diverse range of crops
Ideally at the same time, like in a meadow. Monocultures do not happen in nature and soil thrives on variety. Companion cropping (two crops are grown at once and separated after harvest) can be successful.
Cover cropping – growing a crop which is not taken to harvest but helps protect and feed the soil – will also have the happy effect of capturing sunlight and feeding that energy to the subterranean world, at a time when traditionally the land would have been bare.
5. Bring back grazing animals
This is more than a nod to the permanent pasture analogy, it allows arable farmers to rest their land for one, two or more years and then graze multispecies leys – great in themselves for feeding the soil and for mob-grazed livestock.