WITH UK grain prices at a six-year low and direct support payments to arable producers being cut by typically 20-30% under CAP reform, many farm businesses have been taking a long hard look at what they grow and why they grow it.

Faced with the urgent need to cut costs and stabilise farm incomes, arable businesses looking for a dependable customer upon which to rely in a volatile world could now be tempted by the simplicity of growing crops as feedstock for anaerobic digestion.

With a growing network of AD plants either planned, in construction or in operation around Scotland, there is increasing demand for farmers to grow energy crops under contract. To highlight this opportunity, SAC Consulting recently ran two free events - near Inverness and Aberdeen - where experts discussed the energy crop market, assessed different crop types and looked at the incentive payments under the revised feed-in tariff and the renewables heat incentive.

Anaerobic digestion works by breaking down biodegradable material - waste and/or specifically grown energy crops - in the absence of oxygen to produce methane, which can then be burnt in a CHP turbine to produce both electricity and heat, or sold straight to the grid.

But like all renewable energy sources, it not only has to make sense financially - it has to be genuinely sustainable and offer a 'carbon balance' that meets the regulations governing the sector and its incentives.

SAC Consulting's renewables team leader explained: "SRUC has initiated energy crop trials at a number of sites across Scotland and these events allow us to share information gained from the crop trials and also to deliver the necessary skills which allow farmers to assess which crops will be best for their business."

Making a joint presentation at the Inverness event, held at Mid Coul Farms' under-construction AD plant at Wester Kerrowgair, Dalcross, were SRUC researcher David Lawson, and SAC consultant Julian Bell, who laid out the mechanics of growing for AD.

Starting with crop selection, they stated: "In choosing crops for anaerobic digestion, a number of considerations need to be made with regard to likely crop yield per hectare; methane yield per tonne of harvested crop; capabilities for crop harvesting /processing, and storage.

"Other agronomic factors such as fertiliser and pesticide requirement will also need to be taken into account. These factors will have a major impact on the financial viability of the operation.

"For many of the higher yielding agricultural crops, a considerable amount of research has been carried out to measure the amounts of methane produced under anaerobic digestion.

"These are often carried out under varying conditions of temperature, vessel size, and bacterial inoculant. This has led to a wide range in methane potential reported for any one particular crop," they reported.

"And, indeed, in large scale operations there is likely to be variation among systems and even within a particular AD unit with regard to methane production.

"The potential yield of methane per tonne does not actually vary greatly among crops," they noted. "The main effect on methane production per hectare is derived from the crop yield. Taking this into account it can be seen from the table above that the highest methane yields per hectare are derived from maize, hybrid winter rye and energy (fodder) beet.

"In general crops are managed to produce greatest yield, but stage of growth does have an impact on methane productivity. For instance methane yield from pasture grasses decreases in the later stages of growth."

Yields are based on crops grown in southern and central Scotland, assuming average weather conditions and SRUC experience from up to two years of trials. The team cautioned that actual yields will vary widely and are much less certain in the north, with maize not recommended out with south west Scotland.

Several more years of trial results are required to build greater confidence in the yields of energy beet, hybrid rye and maize. Harvest of winter hybrid rye is typically around the middle to end of July with maize and energy beet harvests in late October.

Full rates of artificial fertiliser have been calculated to match crop offtake. Where digestate from an AD plant is applied, fertiliser rates should be adjusted accordingly. In practice digestate use is likely to reduce but not entirely replace the requirement for artificial fertiliser due to mismatches in nutrient availability and timing between crops.

Machinery and labour costs should take account of the cost of specialist contractors for harvesting and transporting the roots or silage produced to a nearby (within three miles) AD plant.

Transport costs should be adjusted accordingly to the distances involved.

On the upside, such energy crops offer the potential to spread the workload, reducing farm labour and machinery costs; wholecrop cereals enable an earlier harvest (mid July), taking the pressure off combine and grain drying capacity, and allowing early entry for cultivation and sowing of winter crops particularly oilseed rape; and moving to perennial forage grasses and legumes in place of conventional arable crops reduces the workload at spring or autumn sowing periods.

"As a relatively new market with only a small number of plants operating at present, there is not a clearly defined marketplace for energy crop feedstocks," said Mr Bell. "It is known that the price available in the market and the conditions of supply for AD feedstock vary widely from plant to plant around the country.

"The contract price will reflect the basis of the sale; standing crop, ex-farm or delivered plant. It will also reflect the method agreed to share other costs such as specialist machinery and the value and costs assigned to any digestate applied to the land."

Two of the most common types of supply contracts on offer are as follows:

BLOB Standing sales - feedstock is purchased at a flat price per tonne of fresh matter adjusted for an agreed dry matter content. The farmer undertakes the growing of the crop up until harvest when the AD operator completes the harvesting and transport to the AD site.

BLOB Land leasing - a flat payment per ha of crop grown is paid, with the rate linked to the duration of the commitment whether it be annual, five or 10-year duration. There are options to simply lease the land for the AD operator to then complete all the cultivation and harvesting.

Alternatively, the farm can undertake the establishment and maintenance work on contract at machinery ring rates. Some contracts include a further payment per tonne of fresh matter produced again adjusted to an agreed dry matter content.

It is down to each farmer to negotiate the terms of any contract to ensure that it meets their objectives and is competitive with their alternative land uses - their existing arable enterprises; and rental payments available for other crops such as grass lets, vegetables and potatoes.

"Where two or more AD plants are within transport distance producers may have a choice of buyers with whom to negotiate," he added. "Proximity to the AD plant is one of the most important factors as this determines feedstock and digestate transport costs.

"Understanding how growing energy crops will affect the farm's costs and labour requirement is a vital element for farmers to consider when viewing different crop and contract options."

All that said, AD energy crops currently look attractive for many arable growers in part due to the low prices for conventional cereals.

"With world grain stocks to use ratios at a 15 year high, global grain demand growth slowing and local demand weak due to a downturn in the whisky cycle there is no immediate sign of relief from poor grain prices," said the SRUC team. "However it must be recognised that the future situation could be very different.

For example, a rise of £20-£30/t in grain prices would make conventional cropping relatively profitable for many growers. Therefore each farmer needs to be happy with the share of their output being committed to any particular enterprise given differences in their risk and reward.

"AD plant operators appear to be unique in offering such long contracts to farmers. Each farm business needs to decide what proportion of their land to commit to these contracts and for how long. Some farmers may feel that long term commitments to supply could prevent them from benefitting from future commodity price rises that may occur while others will be comfortable knowing they have a secure income in place for an appropriate share of their output.

"For most growers a mix of enterprises and contract durations will deliver the most secure income stream with some flexibility to benefit from any commodity price rises whilst sheltering the business from the worst effects of any further price falls."