This incentive package proposal for an alley cropping grant was written by Charles Tebbutt, Director of Food&Forest, which supplies agroforestry produce to London’s Borough Market Monday to Saturday. For more information view their website here. A PDF of the proposal is attached below.
Agroforestry Incentive Package: A Framework for Future Arable Farming
This proposal outlines the plan to establish alley cropping as a viable farming method in the UK. It specifies the obstacles and demonstrates how they can be overcome. The aim of the proposal is to start an engagement with Defra on the creation of an alley cropping grant. The proposal outlines the contribution of private enterprise to facilitate this change in farming method, through futures contracts and a specific timber equity release scheme.
The idea is to improve the environmental credentials of intensive arable farming whilst maintaining productivity by converting to ‘alley cropping’ systems. The three point incentive package is as follows;
1. The development of a specific alley cropping grant
2. A futures contract for future nut purchase at point of planting
3. An equity release system to liquify the timber value before harvest.
The package is driven by a desire to use market mechanisms to improve the environmental credentials of current farming methods. The proposed public money is not market distorting, rather a payment for the production of public goods; clean water, air and soil organic carbon. The package is designed to cohere with the new ‘public money for public goods’ paradigm described in the recent ‘Health and Harmony’ Defra consultation paper. The proposal is for this initial payment to be enhanced by future financial reward based on the activity of private enterprise.
Point one: An Alley Cropping Grant
The creation of an alley cropping grant is designed to cover the relatively high cost of starting a plantation. At present, the guards, the trees themselves and the labour to plant these, along with the lost acreage and opportunity cost, make alley cropping an unappealing short-term financial prospect. The grant is proposed to cover these costs and is justified on the basis of the public goods that alley cropping provides.
What is Alley Cropping?
Alley Cropping is the combination of fruit, nut or timber trees with cereal farming. This means planting rows of trees across a field with an alley of crop in between, as shown in the photos below with walnut and barley. Most applicable for the UK, and the most suitable for this package, is the combination of walnut and hazelnut trees with cereal farming. The specific cultivar will vary based on site specifics.
Alley cropping systems have been studied in-depth in France, Canada, the USA and China. The evidence from sites with similar climate and topography to the UK have shown the following results;
i. Drastic reductions in top soil loss and nitrate run-off1
Alley cropping research undertaken at the University of Guelph in Canada showed that nutrient utilisation is more efficient in agroforestry systems, with farmland nitrogen losses reduced by 50% in agroforestry compared to monoculture, as trees take up any nitrogen not utilised by alley crops2.
ii. Maintaining soil fertility by reducing wind erosion
Chinese research has demonstrated that paulownia trees intercropped with wheat can cut wind speeds by 30-50% depending on the spacing of the trees3. This is an important part of decreasing the wind erosion so prevalent to East Anglia4.
The effects on the microclimate also help foster the growth and development of crops, creating better growing conditions than in open fields.
Microclimatic studies have been on-going at the French INRA Restinclières & Vézénobres research sites since 1995. With agroforestry trees reducing wind speed, 30% reductions in evapotranspiration from the reduced wind speed has been recorded compared to monoculture5.
iii. Making available and utilising resources not available to shallow rooting annual cereal crop
Agroforestry improves nutrient cycling. Tree roots grow deeper in the soil and access phosphorous and other minerals that would not normally be available to arable crop roots. Through the process of leaf litter fall and incorporation back into topsoil, these nutrients are made available to arable crops in the alleys.
iv. Increased productivity
In terms of cereal yield and overall business case, evidence from INRA Vézénobres research site in France provides for a strong commercial argument for alley cropping systems. Alley crops’ performance between north-south orientated tree rows has been comparable to that of adjacent control plot monoculture systems from 1995 until 2008-11, when there was a slight decline in yield as a result from shading of the 15 year old walnut trees. The team in France believe that the thinning of the trees in 2011 will result in any differences being reduced until the next 10-15 years when alley crop performance reductions will be experienced prior to the estimated walnut tree harvest at year 30-40 at an estimated value, using today’s prices, of up to €8,000 per tree (€800,000 per ha) from timber sales6.
The next stage following this introductory proposal is to collate the available quantitative research on the capacity of alley cropping to prevent soil erosion, nitrate run-off and then link these figures accurately to the provision of ecosystem services and then the amount of public money made available in this proposed grant. To add weight to this, a proposed area for research is to link alley cropping, because of its ability to substantially decrease end nitrogen loss and run-off rates, to reducing costs for utilities companies in their purification system.
Further arguments for grant creation; overcoming current confusion.
Providing a specific alley cropping grant would overcome the current lack of clarity under the two pillar CAP system. Alley cropping exists in a legal grey area between the Forestry Commission and Defra. It is unclear, for example, whether farmers would be eligible for agricultural subsidies if there were over 100 trees per hectare. In this case, they would be officially classed as forestry. However, if there was any farming, the land would be classed as agriculture and ineligible for Forestry Commission grants. The proposal for this specific grant is an opportunity to overcome this hindrance.
Point two: Futures Contracts
The creation of the social enterprise Fiat Vita CIC was with the specific objective of establishing more agroforestry systems here in the UK. To that end, the enterprise offers futures contracts to farmers as part of this incentive package. This is an offer to privately shoulder the risk involved with taking on a new farming method and a new nut crop. The principle is to externalise the risk for farmers to make the creation of alley cropping an attractive option as possible.
Fiat Vita produces a range of high quality nut brittles and roasted nuts using three primary raw ingredients from agroforestry farms; walnuts, hazelnuts and almonds. This creates a commercial outlet for agroforestry produce. The next two years will focus on continuing to build demand for walnut and hazelnut-based product to enable futures contracts to be offered with previous sale volumes offered as security. The futures contracts will be issued in 2020 to farmers adopting alley cropping systems with first substantial nut crops ready for harvest 2027/28.
Mitigating the risk entailed by long term futures contracts is not a new problem and there are applicable models under consultation. The complexity of the financial models on our doorstep in London is a boon for this project, and should be harnessed. There is potential for the future timber value to act as collateral which links with the third point in the incentive package. This is currently in development and input from Defra is welcome.
Point three: Equity Release Package
The third element of the incentive package is the development of a timber equity release system. This is the sale of the timber with the tree still in the ground. This involves a partnership with a pension fund or sovereign wealth fund who typically search for relatively secure, long term, low yield investments7. The fund will offer a one-off payment equal to a portion of the projected final timber value to the farm owner, or tenant, 10 years after plantation. The fund will then own the timber as it matures and will be free to use this asset as collateral, or manufacture derivatives based on this.
The demand for stable, long term, comparatively low yielding assets is evidenced from the surge in demand for agricultural commodities post 20088. The degree to which agricultural commodities have become a haven for such investors seeking security since 2008 is widely evidenced9. Timber is one such asset.
This system has been developed with walnut timber already in France with Mr Claude Jollet and there is great scope to replicate a similar system here in the UK. There are discussions underway at present.
Overcoming the barriers to agroforestry
This proposal is designed as a key to overcome two specific barriers to alley cropping. Those are; the typically short length of UK farm tenancy agreements, and the length of time between expenditure and return. The desire to see a return on investment within the tenancy agreement and the lifetime of the owner is self-evident. This system enables a medium-term reward for the farmers, and in combination with the alley cropping grant, overcomes the cashflow obstacle i.e. the large time gap between investment and return typically associated with timber.
The three point package set out in this document provides a starting point for engagement with Defra. The evidence for the ecosystem services produced by alley cropping will form the evidence base for grant creation. This evidence base is presented in a separate document. Alongside this will be the engagement with private partners to administer the equity release system and a call for 10 pilot farms to test this package in situ.
Charles Tebbutt BSc MSc Landscape Ecology – email@example.com
Fiat Vita CIC 11063308