Despite the challenges facing the agricultural industry, it remains remarkably resilient with strong demand for whole farms and bare blocks of farmland not only from larger established farming enterprises, but also new entrants or those looking to grow smaller businesses.
As a result market evidence shows rents currently being tendered for farms and land offered on the open market being surprisingly stronger than anticipated, partly due perhaps to the shortage of supply with some trying to “get their foot in the door” for the longer term and those looking to spread fixed costs with an increased acreage.
According to the most recent data available (from Department of Environment, Food and Rural Affairs – DEFRA), for Farm Business Tenancies (FBT) the average for open market rents for bare land was £96/acre in 2020, whereas tenancies under the Agricultural Holdings Act (AHA), were significantly lower at £74/acre. Additionally, seasonal rents were sitting at £61/acre.
Stuart Hext, Director at Luscombe Maye commented “our experience on a more local level however indicates that there are more significant variations for not only open market rents, but also those negotiated privately, where for examples tenants are keen to retain the land for future use.”
Brexit has already encouraged many to be more analytical about their business and with the Basic Payment Scheme due to be phased out over the next few years and the inflationary pressures on inputs and running costs, it is anticipated that an increase in rents might be difficult to justify in the future.
However at the time of writing it has been rumoured that the new government under the leadership of Liz Truss might be considering a review of the Environmental Land Management Scheme (ELMS), so that there is a shift to some kind of support to encourage food production and less emphasis on the environment. As a country we are 60% self sufficient and there is no doubt that the effects of the Russia Ukraine war has brought self sufficiency into sharp focus.
If there is a scheme introduced to food production in the future (subject to the finer detail) it would lead one to think that rents could remain static or possibly increase as a result of the demand for producers to rent farms and land increases.
Until such time that the government gives some further direction on the future and assuming the supply of farms and land remain low there will be producers who will be keen to expand, grow and start farming businesses and this will determine the market rental value of agricultural land.
