Johnny Wake: I'm Johnny Wake, I'm managing partner here at Courteenhall Estate. We are a roughly 2,500-acre estate in South Northamptonshire, just on the south side of Northampton farming on the urban fringe. We're arable farmers as well as poultry farmers, and we have a number of other diversifications, which I suspect we'll end up talking about later. How clear am I about the future direction of agricultural policy?
At the moment, not as clear as I would like to be. We know that come the 1st of January that Common Agricultural Policy ends. We know that over the next seven years, BPS is going to be gradually phased out. We know the ELMS, Environmental Land Management Scheme, is coming in, in 2024. We know, as of very recently that something called the Sustainable Farming Incentive is coming in as a bridge or a stepping stone if you like, between 1st of January and 2024, but we're still very unclear as to what that's going to look like. We currently think that's going to be probably a fairly basic entry-level for farmers, which is encouraging for some and discouraging for others.
ELMS is the big question. We don't know as much as we would like to know about ELMS. We know that it's going to be in three tiers. Tier 1 is going to be that relatively basic entry-level. We know that the government wants the vast majority of farmers to join at tier 1. We know that tier 3 at the other end is going to be on a landscape scale for big institutions and things like that. Tier 2 is something in between. We would desperately like more detail on these and indeed on the SFI that I mentioned earlier so that we can start preparing and gearing up for these things.
I think also the current debate around food security and whether we can get through this without talking about coronavirus is about to shoot because whether the government now feels differently about food security, having had coronavirus, I think is a very interesting debate. Whether we have indeed the money to do the plans that they originally set out is going to be interesting.
How is this going to affect our business? Clearly, it's going to affect the arable side, and it's going to take away significant parts of the income stream over those seven years. We, like many of the farming estates, have been trying to think ahead for quite some time now as to how we're going to compensate for that. In some ways, it, sure as hell, ain't rocket science. We're just trying to do the same things everyone else is trying to do. You can probably break those down into two things; one is diversifying and improving our income stream, and the other is making greater efficiencies.
I like talking about the sexy stuff, so we'll do that one first. In terms of what have we done to diversify our income stream? Well, I mentioned poultry farming earlier. We've become poultry farmers. That's been a great diversification of income because it's subsidy-free, it's an onsite market for our wheat, and it's a hedge against the price of wheat. Obviously, we get the muck from there. It's great for cash flow.
Like a lot of other farms, particularly in our area, we've been converting redundant farm bonds into commercial units, and that's been a really good thing for us to do. Indeed, we've made some efficiencies so we can do that more. We've also bought into some central storage, which has been great for doing that, too. We've got an increasingly large-renewables portfolio. Again, like lots of other farms, we've majored not just on solar, but also on ground source heat pumps, which has been fantastic.
We've been gradually growing our weddings and event business over the last few years, which has been challenging, but again, a useful diversifier. We've increased our stewardship, which I'm sure we'll come on to talk about later. Last but not least, we've been using our land as security to gear up, borrow from the banks, and then invest in things that are completely off-estate, off-farm so that not only is that a diversification of income, but it also means if one day, we want to liquidate and have some cash, we can sell stuff without it being a core estate asset, which I think is really useful. That's the diversification.
Then on the making efficiency side, this is really teaching your grandma to suck eggs. Obviously, we're trying to make efficiencies wherever we can on the farm and on the estate. On the farm, particularly that means making our kit last longer. It means cutting costs where we can, and so bringing in things like chicken muck is a really useful way of saving on fertiliser. It means innovating wherever we can. One example of that would be that we're doing a permanent understory of clover at the moment.
I'm quite obsessed with the fact that traditionally, I think as an industry, we've tended to grow what we want to grow whereas I think we need to grow what people want to pay us to grow. We've been really focusing on where the best contracts are and growing what people want us to grow things for them. I think overall our attitude, when it comes to this question is we have changed from being a farming business that does a few other things on the side to being a rural business that does multiple different things.
How are we going to move more in the future towards the paying of public goods and paying for the environment that the government is bringing in? One of the major things that we've done is help set up and be strong members of a local cluster farm. I'm a big fan of cluster farms, and it's been great for us as a local group of farmers to get together, work together, increase our cooperation, and do things for local biodiversity, which has been fantastic.
More than that, I'd like to think it puts us in a good position when ELMS kicks in. Whether that's for tier 2 or tier 3 is yet to be seen, but I think there's a strong argument to say be in a well-established cluster group when ELMS happens, and you should be in a good position.
In terms of our own stewardship, we are currently in mid-tier but we are quite far down the road in discussions with Natural England who've been really, really helpful in bumping us up to high-tier. In a year and a bit, we'll be changing into high-tier, and that's going to be really interesting for us. I know there's a big debate around whether we're being foolish because people are worried that when ELMS kicks in, it may kick in at the baseline, going to measure from the baseline in 2024.
Defra have continually said, that's not the case, that it's an outcomes-based payment, outcomes-based rewards. We're bravely taking them at their word. We're going to have our baseline as high as we can possibly get it when we come to ELMS. I know others are doing the opposite.
The last thing that we're doing to really gear up for this is from an educational point of view. One aspect of ELMS that has certainly been mentioned in writing by Defra, is that they want to see more education. Here at Courteenhall, we're really, really keen and have been keen for quite a while to engage with local schools more.
We already work with Country Trust and Royal Forestry Society, but we now also have a couple of local schools, one in particular, that are really putting a big program of work so that they're going to be coming on to the estate throughout the year, and all the children from the school. We're hoping to set that up as a model that then other local schools can follow and become a real educational hub for all things rural.
What opportunities do I see for land managers in terms of government policy at the moment? Sometimes it can feel difficult to look at opportunities because the threats seem quite overwhelming at times, but I think there definitely are opportunities from the current direction of travel. The previous way of us farming as an industry, I think it's generally been accepted as not being particularly sustainable in the long-term. An interest in soil health was marginal even just five years ago. Now as an industry, we're obsessed with soil health, to give you one example. I think it's a question of embracing that.
BPS, one of the things I do not like about it, is that it does not encourage innovation in any way. This hopefully, will make people and us as an industry really focus on how can we do this better? How can we make it more environmentally sustainable, but also more financially sustainable? Hopefully, there'll be a focus on cover crops, on runoff reduction, on integrated pest management, and increasing beneficial insects, all these things. I think there'll now be a focus on how we can do that better. I think that's where the real opportunity in ELMS lies.
I think overall, I'm optimistic. I think there's going to be short-term pain but hopefully, long-term gain. The current system, as I mentioned briefly earlier, I just don't see it sustainable. It's not sustainable politically because when we come out of the EU, the government will not, under any party, be able to justify the sums of money we've seen on rural policy being spent on our industry alone.
Politically change has to come. We have to embrace that whether we like it or not. It's not sustainable financially to carry on as we are. 42% of farms at the moment make a loss before BPS. BPS is going. If you're in the top 25% of farms, the figures seem to show that actually maybe you're okay. I think it's generally accepted that we can't keep farming to the degree that we have been up to the very field edge, wheat rate, and things to carry on for the next 50 years as they were. Change is coming. Whether you're optimistic or pessimistic about it, you've got to do something. We've got to grab it and run with it because otherwise you get left behind.