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Can the Sustainable Farming Scheme (SFS) deliver for farmers in Wales?

Can the Sustainable Farming Scheme (SFS) deliver for farmers in Wales?

"Enough is enough". 

That's the message being sent to the Welsh Government from well-attended protest meetings across the country. The proposed Sustainable Farming Scheme (SFS) has become a focus of anger for many farmers, fuelled by pent-up frustrations and fears about the sector's future.

The spark came from the Welsh Government's impact assessment of the SFS. It suggested that farms entering the base layer of the SFS would need to cut livestock numbers and labour to meet the scheme requirement to hold a minimum 10% cover of trees/woodland and 10% cover of managed habitats.

The impact assessment was based on a previous, stricter set of SFS proposals for trees and habitats, and it didn't take into account two critical issues - the impact of climate change on agricultural production, and, how farmers might maintain viability and employment using trees and habitats on their farms. Crucially, the impact assessment didn't consider a 'no change to farm support' scenario and the failure of markets to provide a fair return and share the risks of a transition to sustainable farming – more on this later. 

What does the Sustainable Farming Scheme actually say about trees?

Nevertheless, farming unions are warning of broader social and economic damage through the knock-on impacts on rural businesses and subsequent employment levels, positioning the SFS as a direct threat to the future of rural communities in Wales. Contrary to a growing body of evidence, the row has entrenched a view that habitats and trees are incompatible with food production. It hasn't helped that the SFS proposals for trees and woodlands have been widely misreported as a requirement to plant trees on 10% of the farm area rather than a requirement to hold a minimum cover of 10% trees or woodland and receive payment for all of the wooded area. The average tree cover on Welsh farms is currently 6-7%.

But the scale of the protest can't be easily dismissed by a Welsh Labour government that prides itself on social justice. Whether economically small or large, Welsh farmers are caught between trading conditions that fail to provide a viable or fair return - pushing them to intensify production - and policies that demand that they farm more sustainably to address the associated environmental damage. Being mostly livestock farmers, many feel unfairly targeted in climate-related opinion and policy, adding insult to injury and contributing to a feeling that the sector is undervalued and under siege. 

If farmers are to be custodians of the environment, they must receive adequate compensation.

The public wants governments to act decisively to address the climate and nature crisis and are increasingly resorting to disruptive action. Yet, the farmer protests are a reminder that a meaningful 'just transition' to sustainable farming has yet to emerge and that trust between farmers and government is in short supply.  

What does this mean for the future of nature and farming in Wales? Let's look at the bigger picture first. Farming is a family affair, entwined in rural communities, landscapes and the Welsh language. The concerns and fears voiced at the farmers' protest gatherings tap into a deeply held sense of cultural identity. Most farms here are small, both in terms of farmed area (on average half that of England) and output. Around two-thirds are economically 'small' and 'very small', meaning they don't provide enough work for one full-time worker. These small, family farms manage more than half of the farmland in Wales.

The statistics reveal some plain truths. Good agricultural land is in short supply. Half of Wales' agricultural turnover is produced by a small number (6%) of farms using just 20% of the agricultural land. Faced with diminishing returns from livestock production, most farms have intensified production. Current farm support arrangements have kept the majority of Welsh farms afloat while propping up the system that continues to extract an unfair share of the reward from food producers. Alongside the drive to intensify production, farms have amalgamated as smaller farms struggle to remain viable. Current farm support arrangements under the Common Agricultural Policy have not prevented the loss of thousands of farmsteads from the Welsh landscape in recent decades. It has also distorted the land market, pushing up the price of agricultural land for rent and purchase and raising the costs of entry for new farmers and those seeking the expansion of existing farm businesses. Maintaining the status quo in farm support won't prevent further losses as the impacts of climate change become more frequent and severe. 

Maintaining the status quo is not an option for Welsh farming. There is another way.

Intensification brings more risk – the financial reward can be fragile. Dairy farming is now largely tied to a business model that requires high levels of borrowing to pay for the new sheds, equipment and technology necessary to run larger, high-yielding milking herds. These systems need high fuel, feed and fertiliser inputs to maintain yields sufficient to fulfil their dairy contracts and generate the returns to repay their bank loans. 

Regenerative farming practices, increasingly adopted by dairy producer groups in Wales, can help reduce costly inputs, but, notably, dairy farmers were the first to voice their opposition to the SFS 10% tree and woodland proposals. These businesses are highly geared around the amount of land available for manure spreading. Additional trees would reduce the area available for spreading, requiring the farm to either hold fewer livestock or purchase/rent additional land for spreading. 

Farming with trees provides value by shading and sheltering animals, reducing heat stress and milk yield loss, and simultaneously brings down net-emissions at the farm level. A nature-based future that benefits farmers and society will involve more in-field trees and taller, thicker hedgerows. As extreme heat becomes more frequent and intense, does the future of intensive livestock production in Wales involve air-conditioned livestock sheds and more energy consumption? The business case for nature-friendly farming is clear. 

The prize is a fairer market and a raft of financial support and incentives that enables these farms to reduce their stocking, hold more trees and farm in a way that generates a good income whilst reducing farm emissions and restoring nature. Without this, we're heading in the wrong direction, with government farm support schemes singled out for problems the market must address.

How must Welsh Government respond to the consultation?

The SFS consultation closes in March, and a final decision on scheme design is due this summer. Meanwhile, agriculture is on track to become Wales's biggest emitter by the 2030s and nature in Wales is in decline, primarily driven by overgrazing and the intensification of agriculture. The next First Minister for Wales, due to take office this spring, must get to grips with this. The Rural Affairs department will only be able to defend its budget if it delivers against targets for climate and nature. 

It would be socially, economically and environmentally reckless to continue on the current trajectory with a support system that enables an ongoing spiral of diminishing farm viability, broader intensification, greater regulatory constraint and creeping farm amalgamation to continue. Farms, farming jobs and nature will continue to be lost under the status quo.