If you read your way through the farming pages of the broadsheets and indeed the agricultural industry papers you will notice that, yet again, land prices are on the up. In fact, Knight Frank’s review of the final quarter of 2012 says that average farmland values in England rose by almost three per cent in the whole year to £15,348/ha (£6,214/acre). It appears the rise in prices is partly due to the demand that comes from an army of commercially minded arable farmers keen to expand production in a climate that is offering currently high commodity prices. Of course prices in some areas of the country with the most productive soils, such as East Anglia, can reach up to £8,500 per acre. If you’re not part of the arable brigade, the picture isn’t quite so rosy. According to the latest figures from the Department for Environment, Food and Rural Affairs (DEFRA), although cereal prices increased by 38 per cent in 2012, sheep and lamb prices have fallen by 28 per cent since November 2011. Many livestock farmers are facing serious problems in an industry that is famous for its state of flux.
Another reason behind the high prices is that insufficient amounts of land are coming onto the market in a time of high demand. Savills have announced that 134,000 acres of land was marketed across Britain in 2012 compared with 155,000 the year before, a 14 per cent decline. The land experts believe that the trend will continue for at least the next five years. In fact, Savills estimate that a 40 per cent increase in the value of better quality British farmland is possible over the next five years. It appears that farm land will remain an attractive investment both for city investors and for farmers looking to expand their businesses. Indeed it seems very likely that the projections would ring true if we were to discuss this topic five years down the line.
What of new entrants to the agricultural sector? Is it really possible for a start-up farmer to do anything other than rent his land for the duration of his career? It remains an aspiration of many farmers at the start of their careers to own the land they work but with prices seeming to be continually rising, a prospective purchase seems to realistically be only in reach of either established farm owners looking to expand their businesses or investors looking for a sound return. This is simple supply and demand economics which is combined with current buoyant commodity prices and a widespread knowledge that land is a good investment. There are of course several schemes about that help the newcomer to the business. For example, Forestry Commission Scotland has an effective start up scheme for farmers who have some experience but who lack the land, enabling them to develop a viable business. The French, who have a completely different approach to owning and renting anyway, seem to get it right when it comes to start ups, or at least this is what the Scots seem to think. The French offer direct financial support to young farmers both from Département funds and from national governmental funds, part of which are funded from EU payments. The young French farmer must fulfil a selection of criteria and is subject to a number of stipulations. However, benefits, including a fifty per cent reduction in the rate of income and land tax, as well as in stamp duty, seem to make this worthwhile.
Would this system work in the UK? I think probably not. The industry needs to be incentivised but I do not believe that we are realistically in a position to overturn the system and for the governmental purse to fully fund young start-ups. Support should come from within the industry. This is said not just in the context of a major economic crisis but in the context of a society that has become increasingly divided. We are told that HS2, the high speed rail link that will run from London to Birmingham, is required because it is in the interests of ‘the majority’. This I agree with. However, it will also turn the lives of many rural residents and businesses upside-down. We live in the age of the majority and it is an urban majority. The prospect of a reducing green belt, a rising population and an increasing number of people ignorant of the origins of the food they eat, is very real. Education and social cooperation is the key. Schemes such as Open Farm Sunday, schools starting vegetable gardens and an increasing number of farms opening their doors to the public have enabled the beginning of a greater understanding, but there remains a problem.
High land prices can be used as a metaphor for a wider social and cultural misunderstanding. With complaints that there are not enough young people entering the industry it is exactly these people we should be doing our best to help. Yes, it is possible to gain a foothold in the industry and through various tenant schemes prospective farmers are able to develop good businesses. However, when it comes to owning the land they work this remains a dim hope. Land has become a commodity like anything else, something to be traded on the world stage. Indeed, the Germans are a very popular buyer of East Anglian land today and likewise Brits go abroad to buy up African, Asian and Eastern European acres. In conclusion, therefore, we find ourselves facing not just an economic crisis but the prospect of an acute social and generational crisis also.
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