Government seeks to reduce emissions from urea fertilisers

The government has launched a consultation today seeking views on reducing ammonia emissions from solid urea fertilisers used for growing plants and crops.

Ammonia emissions are harmful to natural habitats and our rivers and lakes, as well as to human health, with 87% of the UK’s ammonia emissions coming from farming. The Government has committed to reducing ammonia emissions by 8% of 2005 levels by 2020, and a 16% reduction by 2030.

Taking action on solid urea fertilisers has the potential to reduce pollution caused by:

• Ammonia reacting with other pollutants – nitrogen oxides and sulphur dioxide – to form particulate matter (PM2.5) which is harmful to cardiovascular and respiratory health.
• Nitrogen deposited on sensitive habitats such as peat bogs. This leads to excess nitrogen in soils that damages the growth of certain plant species.
• Nitrogen leaching through the soil and surface run-off which pollutes water courses, causing harm to plants and animals and impacting on water quality.

The consultation presents three cost effective options:

• A total ban on solid urea fertilisers
• A requirement to stabilise solid urea fertilisers with the addition of a urease inhibitor - a chemical that helps slow the conversion of urea to ammonium
• A requirement to restrict the spreading of solid urea fertilisers so they can only be used from 15 January to 31 March While each of these options will support the Government’s commitment to reducing ammonia emissions, a ban on solid urea fertilisers would achieve around 31% of the ammonia reduction target by 2030.

Reducing ammonia emissions will significantly reduce nitrogen deposition to land and in turn help reduce damage to peat bogs, which are an important carbon sink, thereby helping to tackle climate change.

Up to half of the fertiliser evaporates, causing ammonia emissions that react with other pollutants to produce fine particles whose microscopic size allows them to penetrate the lungs and enter the bloodstream, making them the most dangerous form of air pollution.

Public Health England attributed the serious smog episode in London in April 2014 partly to agricultural ammonia emissions.

The fertiliser also causes excess nitrogen in soil which promotes growth of brambles, nettles and hogweed that then crowd out wild flowers like harebell and bird's-foot trefoil. Almost nine out of ten designated wildlife sites in England are damaged by excessive nitrogen.

Defra expects farmers to switch to using more ammonium nitrate fertiliser, which is dearer but causes less evaporation and which crops absorb more efficiently.

The ban is expected to cost farmers £132 million up to 2030 and result in an additional 388,000 tonnes of ammonium nitrate being required per year, according to Defra’s impact assessment.

Clear Air in London stated: 'Many more technical measures and lifestyle changes will be needed if we are to reduce ammonia emissions from cattle and agriculture generally which are a major cause of particle air pollution episodes in spring.'

Vertical farming can be over hyped

The coronavirus pandemic has stimulated interest in vertical farming given supply change disruptions and labour shortages.  Crops are grown in stacked indoor systems without soil and under artificial light.

About $1.8bn in investment has flowed into the sector since 2014, according to Dealroom.  However, as with anything that is proclaimed the next big thing, some caution is necessary among the hype and boosterism.

The sector remains largely unprofitable and tiny.   According to Rabobank analyst Cindy van Rijswick it occupies the equivalent of 30 hectares of land worldwide compared to half a million hectares for greenhouses and 50m hectares of outdoor cultivation.

High initial capital investment and running costs make it hard to make a profit.   Electricity bills for lighting and ventilation can be high and specialised labour is required.   This leads to a focus on higher value leafy greens, salad greens and herbs.  Vertical farming won't be used for commodities like wheat and rice.

Even so, Nordic Harvest has linked up with Taiwan's YesHealth group to Europe's biggest vertical farm in Copenhagen.   They claim they will be profitable in their first year, although I doubt whether there are significant economies of scale.

Because production can take place in urban areas food can be produced close to consumers improving freshness at point of sale.  However, consumers can be resistant to change in food production and may believe that produce grown with soil and sunlight tastes better or is even healthier.   There has been a history of yield being placed ahead of taste in greenhouses as in the tomato 'water bomb' scandal.

It is very much a niche method of production, albeit it one with growth potential.

Changes in EU climate change targets will affect agriculture

 Alan Matthews discusses the implications of the EU's 2030 climate target plan for agriculture: http://capreform.eu/commissions-2030-climate-target-plan-proposes-radical-changes-in-the-rules-governing-agricultural-and-land-ghg-emissions/

He notes, 'For the EU27, agricultural emissions are currently 18% of Effort Sharing Reglulation (ESR) emissions; this share would increase to 40% under the second option in the Commission’s Impact Assessment. As such, the national ESR reduction target would become almost a de facto reduction target for agriculture as it would no longer be possible to avoid reductions in agricultural emissions if the national reduction target were to be met. It would also have very different consequences for individual Member States.'

There are some complex issues and a short window of opportunity to influence policy.

Farmers leaving is not necessarily bad news

Economist Sean Rickard has warned that one in three farms could be driven out of business in five years in the event of a no deal Brexit.   Those most at risk were smaller, full time producers.

One has to be careful about the distinction between farmers and farms going out of business.  Some farmers could switch to part-time farming by taking on off farm work, although the way in which they farmed might change.

Other farmers might decide to leave farming.  Their farms might be taken on by new entrants or absorbed into larger existing farms.

Individual farmer decisions will be influenced by such factors as their debt load and whether they have a successor.   However, there is a case for enhancing early retirement schemes for an ageing farmer population.

Replacing older farmers by younger ones could boost innovation and productivity.

New form of help for farmers

The Government is trying to devise a system of temporary subsidy payments for farmers to meet the gap between the phasing out of the Basic Payment and the arrival of the new Environmental Land Management Scheme.   That is going to be piloted in 2021 and rolled out nationally in 2024.

An interim system of payments called the Sustainable Farming Incentive is to be made available from 2022.  This will include help to improve productivity as well as to farm sustainably.

Defra research shows that subsidies make up 61 per cent of profit for the average English farm.   Some of the biggest sums go to large scale farmers.  Sir James Dyson revealed in an interview over the weekend that he receives £2.9m in Basic Payment subsidies for his farms.

Farmers are concerned that multiple schemes may be administratively complex leading to delays in payments as has happened with Countryside Stewardship.

Big banks pull out of commodity trade financing

In Monday's Financial Times Rana Foroohar discusses changes in financing in the food chain.  She emphasises the possible implications for food prices, but I am more concerned about the potential for greater concentration and domination by big corporates.

Big banks are pulling out of commodity trade financing or scaling it back.  There have been a variety of scandals involving financial fraud.   Leverage and volatility in the commodities sector make it a particularly risky area for large banks do business (providing finance to farmers is another matter altogether as land is a very secure and asset that can be cashed in if the need arises).

The retreat of the big banks may hit agricultural producers and distributors, as well as grocery chains and SMEs that form a crucial part of the global food supply chain.   Professor Michael Greenberger of the University of Maryland is worried that if second or third tier producers cannot get funding or are forced to pay higher rates to shadow lenders we could see a food price surge.  (To some extent, certainly in the UK, this would be offset by the fierceness of retail competition).

Already, after Covid-19, the big companies were getting bigger.   There could now be bigger gains for big global commodities traders such as Vitol Group or Ametican agricultural giants including the secretive Cargill.

Monopoly power in the food chain can create supply gluts in some areas (forcing down producer prices) and shortages and higher prices in others (hitting the consumer).  A handful of large companies have controlled areas such as meat packing and grain production.   It may look economically efficient, but it is potentially fragile in terms of food security.

What is real food security?

The terms 'food security' and 'self-sufficiency' are often used interchangeably, particularly by farm union leaders arguing for high levels of domestic production underpinned by government subsidies.

But as agribusiness consultant Carl Atkins notes in Farmers Weekly food security and self-sufficiency are two very separate things and should not be confused.  'Food security is the state of having reliable access to a sufficient quantity of affordable and nutritious food,' he said.

Being 100 per cent self-sufficient in a particular foodstuff could actually be risky if there was an interruption to domestic production. 

The current self-sufficiency figure for the UK is 64 per cent, having peaked at 78 per cent in 1985.  However, that figure does not take account of tropical foods we cannot produce in the UK like bananas.  If we take account of them, the figure is 77 per cent.

Part One of the National Food Strategy points out that the UK has been a net importer of food since the 1830.  Part Two will examine whether there is an optimal level of self-sufficiency the UK should target, whether in aggregate or for a particular sector.   Hopefully not: for me, it looks too much like Soviet style planning.

There was also an outbreak of level-headed thinking in the correspondence columns of Farmers Weekly.  A correspondent notes that for many years there has been talk of value added production, but the industry focuses on commodities.   The obsession with benchmarking and least-cost production emphasises this point.