How Renewable Energy Finance Powers Sustainable Farm Diversification
In today’s environmentally conscious world, renewable energy finance plays a pivotal role in shaping the future of agriculture. Here at UK Agricultural Finance, we take immense pride in supporting projects that champion green innovation in the farming sector. We recently funded a product at a farm near Reading, which exemplifies how renewable energy finance can aid in seamlessly integrating an Anaerobic Digestion (AD) plant into traditional farming practices.
Overview of the Renewable Energy Finance Project
A multi-generational farming family was directed to UK Agricultural Finance through one of our introducers with a vision to supercharge their AD plant operations. The borrower needed a loan of around £350,000 to be able to make improvements to their logging operations, which in turn would increase their farm market sales and the efficiency of their AD Plant.
Historical Challenges and the Rise Through Renewable Energy Finance
The 2001 foot-and-mouth outbreak was an extremely difficult and challenging time for many farmers, reshaping the agricultural landscape. The outbreak was devastating for many, leading many farmers to leave the sector altogether. However, our borrower was able to pivot their farming activities away from sheep and beef farming. Instead of conceding to the crisis, they transitioned to egg production, demonstrating adaptability and business acumen.
Prior to foot-and-mouth, the borrowers farmed up to 2000 acres, but had to reduce their holding significantly after the outbreak. However, as their diverse income streams have expanded in recent years they have now taken on tenanted land of around 450 acres in additional to their main holding which forms our security for the loan. These tenanted acres will be seeded for maize production to further support the AD plant.
What Farm Diversification Had The Borrowers Done?
All our borrowers benefit from a personal on-farm visit from the lead team member on their loan application. This renewable energy loan was handled by our BDM Tracey, and she visited the farm to gain a better understanding of the diverse range of farm operations.
The main farm consisted of just under 35 acres, with most of the land being used to grow maize as fuel for the AD plant. Additionally, there was paddock and a delightful pumpkin patch for the family’s ponies. The farm’s newest addition, the AD plant, was well constructed and rather imposing, but it clearly highlighted the commitment the family had to renewable energy.
Farm Operations and the Impact of Renewable Energy Finance
The farm benefited from a diverse range of income streams, including the AD plant, as well as egg production and logging. Tracey took the time to consider each of these income streams while visiting the farm.
Maize: The farm currently has its arable land planted as mazie to supply the AD plant which in turn provides both income and energy for many of the other operations on the farm.
Eggs: The family boasted a pullet flock of 700, with their eggs finding eager customers at a local farmer’s market in Wokingham. The direct sale model allowed them to tap into premium prices, bypassing the traditional supermarket chains. This is a reflection of the larger trend in farming, where direct sales offer a win-win for both producers and consumers.
Meat: Despite the family’s move away from sheep and beef farming following the foot-and-mouth outbreak. They did return to livestock farming with a much smaller flock of sheep and a few cows. Their own on-site butchery unit meant they were able to process their own livestock, keeping food miles low to address the increasing concern from consumers.
The meat was sold at their stall at the weekly farmer’s market along with the egg sales. During the pandemic, they cleverly tapped into the meat box trend, delivering freshly processed meat directly to consumers. This direct-to-doorstep model was successful and profitable during the pandemic, and they may consider offering this service again in the future. By sidestepping mainstream distributors, farmers can harness better value for their produce.
Wood: With the energy crises in the backdrop, their wood sales resonated more than ever. When Tracey completed her site visit, the family was already gearing up for the impending winter, with preparations in full swing and large stores of logs seasoning ready for customer use. The logs are sold at the local market and via direct delivery, and used by consumers in wood burners to heat their homes.
Firewood is still used as a supplementary form of heating for many in rural areas. The new legislation surrounding the sale of firewood and logs is likely to push out less established and poorer quality producers, but the borrowers were confident that their processes would match up to the new legislation, and so they saw this as a positive introduction for their sales rather than a concern.
Borrowers’ Vision and Business Acumen in Renewable Energy Finance
Their journey through the decades illustrated adaptability. Beyond the AD plant, the family has diversified income streams, ensuring stability even in turbulent times. With a stockpile of maize for the AD plant, consistent revenue from egg sales, and the projected rise in wood sales, they have created a robust business model.
At UK Agricultural Finance, we always want to ensure our borrowers have a clear exit plan for their loan and that they have a couple of alternative options should challenges arise. Tracey discussed the exit plans with the borrowers taking into consideration the increased acreage and yield forecasts. All of which was very positive, and offered plenty of wiggle room should challenges arise. The borrowers also intend to build a new agricultural building to increase their beef and sheep livestock to sell at the farmer’s market. This would provide additional income each month.
Our renewable energy loan is to be repaid by refinancing to a high street lender, supported by the increased income from the AD plant, the increased farm sales including beef, lamb, eggs, and wood sales within the next three years.
Every venture, no matter how promising, has its own set of challenges. For the AD plant, the main challenge is ensuring a consistent maize supply, especially during inclement weather. However, given the family’s dedication, the multiple income streams and the immense potential of the AD plant in the renewable energy landscape, UK Agricultural Finance was thrilled to approve the loan.
Supporting innovative farmers with their sustainable initiatives aligns perfectly with UKAF’s mission. As this case study demonstrates, the integration of traditional farming with forward-thinking renewable energy finance paves the way for a greener, more sustainable farming future.