Farm income regeneration falls as market volatility rises

High yields and soaring commodity prices have created a financial “blow” for regenerative farming systems, with margins lower than conventional farms in such an unusual year.

Speaking to Groundswell, Gary Markham, director of Land Family Business, revealed that four-year average results from benchmarking group Groundswell showed that their costs and output were lower, but margins were slightly higher, from £23/ha.

See also: Regenerative agriculture: what to avoid and where to start

However, the very high yields achieved in the 2021 harvest have changed that picture in favor of conventional farming, he added, while the currently very high wheat prices are pushing people further apart.

Groundswell Benchmarking Group – four-year average

  • Variable costs £112/ha less
  • Work and machines £155/ha less
  • Production £244/ha less
  • Margin £23/ha more

Margins from the regenerative system could be nearly £500/ha adrift with wheat prices at £300/t, he warned.

“After five years of benchmarking, the story is that regenerative agriculture – if you do it right – is pretty much the same financially,” he said.

“In general, yields have been lower, but that also applies to costs, especially the principal on farms, labor and machinery.”

High commodity prices

With regard to the current high commodity prices, Mr Markham pointed out that a wheat price of £300/t means that margins in most regeneration systems are further reduced, down to £500/ha of less.

“This should not be seen in isolation,” he stressed. “Growers who have switched to regenerative systems have less capital tied up in machinery, reduced input and fuel costs, and use less nitrogen fertilizer in kg/tonne terms.”

Margins with wheat at £300/t

  • Groundswell Benchmarking Group: £1,536/ha
  • Land Family Business Benchmarking Group: £2,035/ha

Farming is a long-term game that has always had its ups and downs, he added.

“Growers who haven’t implemented any changes should be asking themselves how long they can chase the money, given the increasing risks of delivering good results.”

Roger Davis, of independent agronomics group Indigro, stressed that any approach that builds resilience, reduces reliance on expensive inputs and helps reduce risk is a good business strategy, especially as reductions in basic payment scheme and climate change are beginning to take their toll.

“As with all farming systems, the rewards are greater for those who do it well,” he said.

“Given the challenges facing agriculture, it makes sense to opt for an approach that will yield more reliable and consistent profits over time.

“There are also additional rewards likely to be gained from a regenerative system – public and private financing options, carbon payments, and bounty-earning opportunities, to name a few.”

An Indigro survey of 40 client farmers with an average wheat yield of 8.6 t/ha showed higher yields of 9.3 t/ha from regenerative practices, compared to 8.2 t/ha for the rest of the group, he reported.

“Where the attention to detail is good and there’s an understanding of where things are going, the results are good.”

A bigger picture: Mike Purnell, Whitbread Farms

Mike Purnell © Mark Lord Photography

Whole-farm turnover gross margin has increased as Whitbread Farms shifted to regenerative agriculture, reported farm manager Mike Purnell, who challenged the assumption that crop yields are always lower.

Aiming to grow 10 t/ha of milling wheat, he pointed out that the farm’s soil improvement efforts over the past three years are paying off and have earned him the right to start reducing inputs, without compromising the performance.

“I don’t accept that there is a performance gap,” he remarked.

“Yields will always go up and down – 2020 has been a horrible year for us – but now we’re seeing more headroom on the rotation, with the usual hiccups that have always been associated with farming.”

Mr. Purnell pointed out that the only thing he can sell is wheat.

“There may come a time when we can also sell carbon and biodiversity, but right now it’s all about grains. Too much focus on cost reduction is not always appropriate.

His agrochemical expenses have fallen as the rotation has widened and more spring crops have been introduced, he added.

“Nitrogen use is also decreasing, even on our milling wheats,” he noted.

“This was achieved by improving the soil, growing some of our own nitrogen and using it more efficiently.”

He also pointed out that the chances of delivering good results from a high throughput and high throughput system are very different from reality.

“You have to spend more on inputs, which is not sustainable.”