"If farming is not profitable, then nature is not at its best."

Chris Clark, NFFN England Chair Tweet

Right now, farm businesses are facing a multitude of challenges: climate change, unpredictable weather patterns, changes to future farm payment schemes and adjusting to new consumer demands. But as research shows, farm businesses can improve resilience by utilising the most powerful asset at our disposal: nature.

Post-war, the focus was on the volume of food production and a “dig for victory” mindset saw decades of farming intensification sweep the UK. Since then, it has been encouraged that higher levels of production can be linked to improved farm profitability, but often the role of nature has not been examined in the context of the wider farm system. In many ways, farming became divorced from the natural assets it relies on. As a result, nature has been viewed as an additional burden to be managed rather than brought in as an integral partner in business.

Now, in the throes of a climate and nature emergency, there is a call on farming to work with nature so it can secure profitability, resilience and a thriving natural environment.

Nature Means Business is a farming approach based on recent studies that have shown how farm business profitability could be inextricably linked to nature. This research has shown that farmers continuously working with high-input high-output systems often experience less profit or are unable to break even financially.

If we get the balance between food production and nature right, then we get the best value from our landscape and farm business can be more profitable as a result.

Chris Clark, farmer and Chair of NFFN England, has been conducting business research along with colleagues at Nethergill Associates. The study involved analyses of 43 farm businesses, by examining business incomes and accounts at current output levels, with further adjusted calculations where support payments were decreased or removed totally. The resulting ‘Less is More’ report funded by RSPB, National Trust and The Wildlife Trusts used results based on findings from upland and marginal farms.

Since then, further studies in 2020 by Nethergill Associates have taken place with different types of farm businesses in other areas of the UK. The results from the latter studies have still produced the same conclusions as the original report.

Nature provides farmers with ‘natural capital’ for their businesses in the form of soils, grass, water and geology, which farm businesses work with for crop or livestock production. Where these natural assets are not managed correctly, farm productivity will reduce.

Taken beyond their natural production limit – for example by increasing stocking levels to more than the grass can cope with or cropping more than the soil can naturally support – the farming business will need to adapt to maintain production. This is achieved via additional inputs, such as fertilisers or the requirement to purchase additional feed to maintain productivity. This increases the overall costs of production and potentially reduces the profitability of the farm business.

While natural resources are free and essential for all farming to take place, the subsequent impact of farming on nature is often overlooked. When farmers work with nature to protect and restore in its optimum health, then farm business will benefit.

All farm businesses have their related running costs subdivided into two areas:

  1. Fixed costs to the farm business which are unavoidable – e.g. rent, rates, insurance, land charges, labour, machinery depreciation
  2. Variable costs – e.g. fuel, seed, fertiliser, animal feed, pesticides, contract labour

The ‘Less is More’ report has subdivided theses variable costs into two further categories:

  1. Productive Variable Costs (PVC’s) – such as contract labour and home-grown feeds
  2. Corrective Variable Costs (CVC’s) – such as grass substitute feed, artificial fertilisers, vet medicine

There is a point at which Productive Variable Costs turn into added Corrective Variable Costs showing that variable costs as a whole are non-linear.

This point where PVC’s turn into CVC’s is shown as the Maximum Sustainable Output (MSO).

MSO shows the volume of outputs that can be achieved before they need to be corrected with additional inputs to maintain production, meaning profitability can deteriorate as outputs are introduced beyond MSO.

By establishing the MSO point of a business, nature management and the role it plays in the farm business becomes evident.

Topline learnings:

  • The aim should be to farm to the MSO line to get maximum returns both for nature & business
  • The MSO point can vary year to year
  • For those farming to the right of the MSO line, income could increase if the system were less reliant on other non-nature input
  • If farmers farm with nature, then natural productivity should be increased to the maximum sustainable output (MSO) level. Beyond this, farmers will degrade the natural asset and reduce profitability as additional inputs are required.

Farm business mindset needs to move from “high productivity at all costs” to “a balance of farming with natural assets” to achieve careful management of our countryside. The long-term benefits from this approach are not only for farmers, but for nature, too.

Read our Nature Means Business report.

More case studies coming very soon.