by Farmers trying to recover from a series of setbacks – just as the value of their land peaks, according to experts.
Confidence in the agricultural sector has improved as farmers look to recover from one of the wettest winters on record/
To add to their woes, commodity prices have fallen and the Basic Payment Scheme (BPS) has ended – which has helped many remain in the dark until now.
With farm subsidy amounts shrinking to sustain them through the highs and lows of weather and prices, they face a tough year, land agents admit.
Clarke and Simpson’s Oliver Holloway said the weather is still a big factor.
“It is no wonder that one of the wettest winters on record, together with the fall in commodity prices and the phasing out of the Basic Payment, has dented the confidence of even the most optimistic of farmers,” he said.
“For a farmer to drill sugar beet before the previous crop was harvested was – until this year – unheard of.”
Due to the many new legislations coming into effect regarding sustainability and the environment and an upcoming election further changes are to come, he said.
“The phasing out of the Basic Payment Scheme (BPS) is now in full swing with 2024 being the first year of disconnected payments,” he said.
The now decoupled BPS payments will reduce until they are completely abolished in 2017, with the Department for Environment, Food and Rural Affairs (DEFRA) starting to offer increased payment rates through the Sustainable Farming Incentive (SFI) and Rural Stewardship ( CS). to fill the funding gap, he said.
“Farmers are a resilient bunch and history shows that short-term fluctuations in weather, commodity prices and policy tend to have little impact on land values,” he said.
“However, it appears that we may have seen the farmland market peak and I expect 2024 to be a period of consolidation as supply and demand become more balanced.”
Strutt and Parker’s Giles Allen predicted that the trials faced by farmers over the past few months would exacerbate the volatility in profitability that has emerged in recent years.
“While most arable farmers in East Anglia made reasonable profits in 2021 and 2022, they fell in 2023 and the expectation for 2024 is that profits will fall further,” he said.
“The wet conditions have reduced the yield potential of winter crops and increased the acreage of spring crops – so growers are having a low output year, at a time when Basic Payments are also falling more.”
Growers were now focused on finding ways to reduce risk – with many using one or more of the grant schemes available such as the SFI and the Farming Equipment and Technology Fund – as part of their strategy, which he said.
“Some are also looking for ways to reduce debt, given higher interest rates, and this is encouraging some land sales, although retirement and profit-taking remain the most common reasons for selling at the moment.”
Although there has been a significant increase in the supply of farmland reaching the market in the East of England, this has mainly been due to the launch of a few farms and large estates, rather than an increase in the total number of farms available, said he.
“We expect supply to continue to rise during the summer months, but things could slow down again before the general election.”
Demand has softened – but there was still an “active pool” of buyers, he said. These were coming from a wider base as farmers dropped out and were replaced by environmental buyers, city-based investors and development roll-over buyers.
“There can be big differences in the strength of demand depending on the location,” he said.
“Probably the bigger caveat shown by farm buyers is higher interest rates for anyone needing a mortgage, rather than the weather.”
The terrible weather hasn’t affected supply, demand or price – yet, he said.
“Values have leveled off significantly over the past 12 months, with average arable land values across England around £11,000/acre, although average values in the East tend to be slightly lower.
Brown & Co’s Louise Grant said the recent floods had had a “significant” impact on farmer morale.
“There is more stress and frustration among farmers because of the ongoing challenges and difficulties caused by the floods,” she said.
“The damage to farmland, crops and infrastructure has put financial pressure and uncertainty on many farmers.
“The ongoing floods have disrupted farming operations – delaying planting, harvesting and other essential activities.
“Farmers had to deal with crop losses, which affected not only their income but also their long-term planning and investment decisions.”
Some may be looking at ways to mitigate future flooding events — including improving drainage systems or adjusting their planting and harvesting schedules, she said.
“However, these strategies require additional resources and may not be feasible for all farmers, especially those with limited financial resources.”
The floods may also affect farmland coming to market, and farmers who have suffered significant damage may be reluctant to sell their land until they can recover or receive adequate compensation , she suggested.
“In the long term, the overall perception of farmland as a stable and reliable investment may be affected,” she said.
“Potential buyers and investors could become more cautious and assess the flood risk associated with specific areas before making purchase decisions.
“This could lead to a reduction in demand for farmland in flood-prone regions and could impact the overall farmland market.”
Oliver Carr, associate director of the rural agency team for Savills covering West Suffolk, admitted it had been a tough start to the year for farmers.
“The decline in the basic payment scheme has been exacerbated by lower margins as costs have risen and commodity prices have fallen,” he said.
“This was not helped by the extremely wet weather which delayed many preparations for the harvest.”
Some were starting to think about their options and change the way they farm and manage their land, he said.
“Many of our teams have been busy helping clients explore additional income streams through the likes of Sustainable Farming Incentives and stewardship schemes, peatland rewetting, flood mitigation, nutrient neutrality, reforestation, biodiversity net gain and more active management of rising water meadow. raise the agenda and offer a financial alternative.”
Others were making the difficult decision to leave the industry, he said. They had already seen more farmland come on the market in the first three months of this year compared to the same period last year – and they expected that to continue.
“Higher supply allows buyers to be more selective and focus on best-in-class properties.
“The quality of farm infrastructure, for example, has a strong impact on values. Farms with high-quality buildings suited to modern agriculture are more attractive and competitive.”
Because of the floods, buyers are also looking more carefully at drainage, he said.
“Free-draining land is generally preferred if yields are not greatly affected in drier weather.
“Where productivity is dependent on underdrainage, the records and quality of this system are increasingly important and will be factored into bids given the cost of investing in new systems.
“Similarly, the security of the water supply for special irrigated crops in the summer months is also being increasingly scrutinized.”
